OP
- Dec 5, 2003
- 21,709
- 10,721
- Thread Starter
- #31
yes, you are right.
WN's overall costs are still lower... but so is your load factor lower than that of your legacies, which means that you are spending money to produce seats which aren't sold.
The nature of WN's network is such that it is harder to fill point to point flights than it is to fill flights via a hub where a couple additional flights can add hundreds of passengers on dozens of flights.
but the absolute numbers are less relevant than the rate of change.... if WN's costs, including labor costs are growing faster than their peers, WN's cost advantage and profit is diminished.
Other carriers are managing to keep their costs from growing, again in large part because they are aggressively growing. WN used that strategy beautifully for years to add lower paid employees at the bottom of the pay scale. That aggressive growth has now stopped; you'll recall that Kelly said it was because WN had to reach its ROIC goals. Perhaps the growth will restart but often growth is slowed down during difficult labor negotiations because the company simply doesn't know what kind of cost base it will have to work with in the future.
I still believe that WN will grow, will stay one step ahead of at least some of its competitors, and will succeed at many of its new initiatives.
But WN is at a crossroads strategically now that it is harder to differentiate WN from the legacies (yes, there are still noticeable differences but there are more similarities than ever).
I wish you and your peers well in the negotiation process but I have a feeling that some of the labor angst that has been part of the rest of the industry and which WN employees have looked at "across the fence" might become more real to you all now.
WN's overall costs are still lower... but so is your load factor lower than that of your legacies, which means that you are spending money to produce seats which aren't sold.
The nature of WN's network is such that it is harder to fill point to point flights than it is to fill flights via a hub where a couple additional flights can add hundreds of passengers on dozens of flights.
but the absolute numbers are less relevant than the rate of change.... if WN's costs, including labor costs are growing faster than their peers, WN's cost advantage and profit is diminished.
Other carriers are managing to keep their costs from growing, again in large part because they are aggressively growing. WN used that strategy beautifully for years to add lower paid employees at the bottom of the pay scale. That aggressive growth has now stopped; you'll recall that Kelly said it was because WN had to reach its ROIC goals. Perhaps the growth will restart but often growth is slowed down during difficult labor negotiations because the company simply doesn't know what kind of cost base it will have to work with in the future.
I still believe that WN will grow, will stay one step ahead of at least some of its competitors, and will succeed at many of its new initiatives.
But WN is at a crossroads strategically now that it is harder to differentiate WN from the legacies (yes, there are still noticeable differences but there are more similarities than ever).
I wish you and your peers well in the negotiation process but I have a feeling that some of the labor angst that has been part of the rest of the industry and which WN employees have looked at "across the fence" might become more real to you all now.
