HELP SAVE A COMPANY

[flight planner jim]

The commentators on this board, or any other board for that matter, have lots of opinions.

None of us knows who reads this board.

Those who read this board may do it for many reasons.

I challenge you to make your ideas heard.

Take the fictional position of a CEO of an airline in bankruptcy and tell all of the readers what YOU would do to make this airline emerge from bankruptcy and become a profitable company once again.

Please make positive suggestions as opposed to "get rid of XXX".

Or, if your idea is to "get rid of XXX" tell who should replace that person and WHY.

Also, please don't make subjective ideas like "make everybody happy". Give CONCRETE ideas and for those ideas, tell what is wrong now and how your idea would change it.

Again, please don't make "feel good" suggestions. Make "real" suggestions. Suggestions with results that can be measured. Tell how they can be measured.

As CEO of that company, what EXACTLY would you do?

And remember that you are not the company owner, the owner is the stockholder who employs the Board of Directors who employs you.

Let's be constructive. Give it a try.

THANKS IN ADVANCE. Who knows who might be watching.

 

[FWAAA]

Accept AA's first offer!

 

[Red Tail Bear]

Get rid of the scabs. Bring back AMFA with a reasonable offer.

 

[robbedagain]

I would do the AA thing and sit and talk with the unions. Get rid of the SCABS and bring back the AMFA people. Give them a reasonable offer. Let the unions come up with ideas and suggestions. cut ceo pay and all of mgmts pay down from the triples digits to single pay such as no mre than 20 bucks an hr and no stock option unless the employees are in on it as well

 

[local 12 proud]

Well Jim Here is a Good Starting Point...

A company is stronger if it is bound by love rather than by fear.â€￾

Herb Kelleher

...And another

If the employees come first, then they're happy, ... A motivated employee treats the customer well. The customer is happy so they keep coming back, which pleases the shareholders. It's not one of the enduring Green mysteries of all time, it is just the way it works.â€￾

Herb Kelleher

...And another

Most people think of us as this flamboyant airline, ... but we're really very conservative from the fiscal standpoint. . . . We never got dangerously in debt and never let costs get out of hand

Herb Kelleher

Perhaps Old Chain Smokin, Whiskey Drinkin Herb Knows more about how to Run a successful Airline more than all the other CEO's combined. I Say start by sending all the other CEO's to ...Herb Kelleher School of Basics 101.......

 

[finman]

Get rid of the scabs. Bring back AMFA with a reasonable offer.

How does that help to save money? I think FPJ was referring to suggestions that would help lead to revenues exceeding costs, and bringing AMFA back does not increase revenues or reduce costs. It would actually increase costs significantly.

Unfortunately, I don't have any significant suggestions that differ too greatly from what is already being attempted.

I would like to see some more creative marketing as it relates to amenities and service, but it's been pretty well established that the customer only selects based on price and convenience, so the capital and operational costs to implement service enhancements would probably not be covered by the incremental fare revenue.

In addition, hopefully some enhanced pricing strategies are implemented in the near future, such as charging extra for more desirable seat locations within coach, not unlike the upgrade fee currently in place. I'm not sure how it would be implemented, but it seems like a possible untapped revenue source from those that are willing to spend $20 to make sure they have that aisle or window seat on a full flight. I realize there are already a myriad of fare classes for each flight, so this is probably already captured somewhat in the pricing structure.

These are both pretty minor things. Obviously the most important issues are renegotiation aircraft leases and restructuring the fleet, reducing labor expenses, and shedding a mountain of debt from the balance sheet. Once those monumental tasks are accomplished, then there will be financing available to run the airline and the flexibility to adapt to the what a modern day airline needs to look like.

 

[finman]

Accept AA's first offer!

Sorry for my ignorance, but what or who is AA? The only AA I'm familiar with is American Airlines.

 

[finman]

Perhaps Old Chain Smokin, Whiskey Drinkin Herb Knows more about how to Run a successful Airline more than all the other CEO's combined. I Say start by sending all the other CEO's to ...Herb Kelleher School of Basics 101.......

I like Herb as much as the next guy, and have a great deal of respect for the way Southwest runs its operation.

It should be noted, though, that SWA would be losing money right now if not for the fuel hedge contracts. They saved about $150M in Q4 on fuel prices compared to those airlines paying market rates, and also realized about $20M in revenue on those same contracts. As such, with their $75M profit in Q4, they would have lost about $100M without the fuel hedge contracts.

Since NWA and other cash-strapped airlines don't have the ability to hedge fuel, and thus must pay market rates, you have to exclude the fuel hedge impact from SWA's financials to come to an apples to apples comparison of current operating profit.

That being said, SWA is losing less money per RSM than the majors, which is a testament to their operating efficiency relative to their competitors. But to those that say that NWA just needs to be like SWA, it must be aknowledged that that still results in an operating loss, because NWA will never see that kind of fuel hedge benefit.

 

[local 12 proud]

It should be noted, though, that SWA would be losing money right now if not for the fuel hedge contracts.

Yea If SWA did'nt have fuel hedges they would be losing money...Blah..Blah...Blah!

well Guess what, they do have fuel hedges because they were smart enough to plan ahead. If we were to take the fuel hedge factor out of this scenario, You can rest assured SWA would have made the changes required to stay on top of their Game.

Finman is it so hard for you to Recognize that just Maybe someone understands the very basics of growing a successful company without raping its employees?

 

[local 12 proud]

here finman read it again and let it S L O W L Y...S I N K... I N!


Most people think of us as this flamboyant airline, ... but we're really very conservative from the fiscal standpoint. . . . We never got dangerously in debt and never let costs get out of hand

Herb Kelleher

 

[finman]

Yea If SWA did'nt have fuel hedges they would be losing money...Blah..Blah...Blah!

well Guess what, they do have fuel hedges because they were smart enough to plan ahead. If we were to take the fuel hedge factor out of this scenario, You can rest assured SWA would have made the changes required to stay on top of their Game.

Finman is it so hard for you to Recognize that just Maybe someone understands the very basics of growing a successful company without raping its employees?

I think the topic related to what should be done now. As has been explained before on this board, you can't enter into long-year hedge contracts without a significant amount of unencumbered cash, which SWA had and NWA and the other majors did not have. I commend SWA for taking the risk and purchasing those contracts, but you can't fault the NWA decision to not buy, because there was no decision to be made. No lender was going to extend credit to an airline for the purchase of hedge contracts.

I think the analysis is relevant, because it gets down to the current fuel adjusted operating margin comparison. NWA currently has no control over the price it pays for fuel, so you have to exclude that from the company comparitive.

Are you suggesting that SWA has been taking it easy on running an efficient airline because they were profitable from the hedge contracts? That is a riduculous notion. Smart companies like SWA are continuously trying to improve their company, regardless of how profitable they are at the time.

 

[finman]

here finman read it again and let it S L O W L Y...S I N K... I N!
Most people think of us as this flamboyant airline, ... but we're really very conservative from the fiscal standpoint. . . . We never got dangerously in debt and never let costs get out of hand

Herb Kelleher

Not sure what your point is? The topic is what should NWA do NOW to become profitable. If you're saying NWA should be for conservative fiscally going forward, then I don't think anyone would disagree. If you're saying that NWA should not have gotten into signficant debt, well that also would have been very nice, but irrelevant at this point, because the debt is there and needs to be dealt with. Can you take Herb's words and turn them into something actionable in the current situation? If so, then please do.

I think FPJ is getting what he wanted out of you guys. He's showing that all you guys can do is dwell on the past and fingerpoint, and really have no constructive financially justifiable suggestions as to how to turn NWA into a profitable airline. If your entire logic is that SWA can do it so NWA should be able to, then that leads to my other post concerning their fuel adjusted operating loss in Q4.

 

[finman]

IF, IF, IF

If the hare hadn't stopped to take a crap he would have won the race! but he didn't did he?

This is such a Bull Feces Argument. Ask yourself WHY NWA is cash strapped and SWA isn't?

I think you're missing the point I was trying to make. Obviously, SWA has been more consistently profitable over the years, which gave them the ability to buy fuel hedges. My point was that even with their superior business model, they are currently losing money on operations. As I'm sure you're well aware, you don't build hedge gains into your long-term business model, because, by definition, they are designed to avoid the peaks and (and thus lose the benefits of the valleys) of your costs.

Again, it gets back to the point of the discussion as to what should be done now. SWA made a brilliant move by betting on the rise in oil prices. I'm not sure why you'd poo poo the hard fact that without that move, they'd be losing money even with their great business model that's worked so well through the years. Please explain to me how that is irrelevant in a discussion of the current situation in which the SWA model (excluding 40% lower fuel costs) gets brought up so much as the great saviour.

 

[local 12 proud]

you can't enter into long-year hedge contracts without a significant amount of unencumbered cash, which SWA had and NWA and the other majors did not have.

Are you friggin dense or what, why did SWA have cash and the others did not?

ONE MORE TIME .......

Most people think of us as this flamboyant airline, ... but we're really very conservative from the fiscal standpoint. . . . We never got dangerously in debt and never let costs get out of hand

Herb Kelleher



[quote name='finman' date='Jan 24 2006, 06:05 PM' post='345 Smart companies like SWA are continuously trying to improve their company, regardless of how profitable they are at the time.
[/quote]

You just proved my point!

 

[ThirdSeatHero]

I think you're missing the point I was trying to make. Obviously, SWA has been more consistently profitable over the years, which gave them the ability to buy fuel hedges. My point was that even with their superior business model, they are currently losing money on operations. As I'm sure you're well aware, you don't build hedge gains into your long-term business model, because, by definition, they are designed to avoid the peaks and (and thus lose the benefits of the valleys) of your costs.

Again, it gets back to the point of the discussion as to what should be done now. SWA made a brilliant move by betting on the rise in oil prices. I'm not sure why you'd poo poo the hard fact that without that move, they'd be losing money even with their great business model that's worked so well through the years. Please explain to me how that is irrelevant in a discussion of the current situation in which the SWA model (excluding 40% lower fuel costs) gets brought up so much as the great saviour.

Maybe if you consider the fact that SWA has been profitable for the last 33 years, you might start to grasp what everyone else here is getting at.

Fuel hedging aside SWA is still run better as an airline, period.