Swa Reports 1q05 Profit Of $76m

[NewHampshire Black Bears]

We are going to dominate the U.S. domestic market over the next 5 years. The legacy carriers are going down hard!!!

[post="262243"][/post]​

+++++++++++++++++++++++++++++++++++++++++++++++++
Ah, WNforlife,
A legacy carrier MEANS that they fly to places OUTSIDE of the good ol' USA, with REAL BIG Airplanes that have "2" aisle's and some with "3" levels

Perhaps you might have heard of places like HONG KONG, and NEW YORK, or REALLY BIG AIRPORTS, with 14,000'+ runways like JOHN FITZGERALD KENNEDY INTERNATIONAL AIRPORT ???

NH/BB's

 

[SVQLBA]

Comapred to 1Q04, this is true.

Compared to 4Q04, LUV's CASM ex-fuel increased .10cents to 6.32cents, and CASM w/ fuel increased .11cents to 7.70cents.

The profit was all fuel hedge. $76mil net profit and $155 benefit with the fuel hedge. Without the hedge, and all else equal, LUV would have lost $79mil. While LUV continues to use its excellent management to its advantage, I would think this cannot continue forever. Something in the industry has got to give.

[post="262275"][/post]​

This idea that the hedge is some sort of windfall and WN would have been screwed without it is utter tosh. The hedges give predictability to WN's fuel costs -- based on that, they get a very accurate view of where total costs will be, and therefore, what will be profitable flying or not. The predictability is as important as the hedge price itself. So -- next quarter the hedge price is higher? Routes will just have to generate more revenue in order to be profitable or they will be cut, or they will increase prices modestly. WN management will be planning very thoroughly for the (predictably) higher fuel costs.

Congrats to all at WN, from the boardroom to the ramp.

 

[Ch. 12]

We,re just riding out the storm KC, thats all we can do for now. Unlike WN we dont depend on just domestic revenue to survive. The ship-MSP/DTW/IND/NRT is'nt taking on much water- (Lcc's) And once fuel prices come back to earth there'll be smooth sailing on the horizon. The storm can't last forever.

[post="262256"][/post]​

The difference between those that are making money now and those that are losing ALOT of money are that the profitable carriers can tell the difference between a short-term storm and a long-term climate change. They have adapted to the climate change and many legacies are still waiting for the "storm" to pass and doing nothing.

And your statement on domestic revenue makes no sense. It is the domestic market that has horrible profits and the other majors are ONLY around b/c of international flights. Consider this hedging of routes b/c they have set up an international system as well that helps diversify the product and still creates profits on some routes (int'l) while others are losing more and more every day (domestic). So tell me again how WN is better off by only having domestic (the one that isn't profitable)?

 

[luv2fly]

The difference between those that are making money now and those that are losing ALOT of money are that the profitable carriers can tell the difference between a short-term storm and a long-term climate change. They have adapted to the climate change and many legacies are still waiting for the "storm" to pass and doing nothing.

[post="262369"][/post]​

I would argue that point. Most of the so called legacies have undergone a radical transformation in the way they operate. Simplifying fare structures and fleet types. Managements have been screaming for historic labor cost reductions, and to date, they have been extremely successful. The premium charged by the legacies for such perks as FF programs and international codeshares has dwindled.
As a result, so has the service and the perception has become that they are no longer worth any premium. That is arguable, but I don't believe most airlines are banking on the return of the high yield domestic business traveler.
I would offer that the line between LCC's and the legacy carriers is quickly becoming blurred.

 

[ngneer]

This idea that the hedge is some sort of windfall and WN would have been screwed without it is utter tosh. The hedges give predictability to WN's fuel costs -- based on that, they get a very accurate view of where total costs will be, and therefore, what will be profitable flying or not. The predictability is as important as the hedge price itself. So -- next quarter the hedge price is higher? Routes will just have to generate more revenue in order to be profitable or they will be cut, or they will increase prices modestly. WN management will be planning very thoroughly for the (predictably) higher fuel costs.

Congrats to all at WN, from the boardroom to the ramp.

[post="262340"][/post]​

Exactly. To say that WN would have lost money without the fuel hedge is to assume that WN would have stood pat and done nothing further to increase profits. But the truth is, if WN was holding different cards they would have played the game differently. WN plays very intelligently and shrewdly; that's why the fuel hedge is in place to begin with.

 

[SVQLBA]

I would argue that point. Most of the so called legacies have undergone a radical transformation in the way they operate. Simplifying fare structures and fleet types. Managements have been screaming for historic labor cost reductions, and to date, they have been extremely successful. The premium charged by the legacies for such perks as FF programs and international codeshares has dwindled.
As a result, so has the service and the perception has become that they are no longer worth any premium. That is arguable, but I don't believe most airlines are banking on the return of the high yield domestic business traveler.
I would offer that the line between LCC's and the legacy carriers is quickly becoming blurred.

[post="262372"][/post]​

I would argue that only HP has done a true "operating model transformation" -- they changed everything they did: network, schedule, Mx practices, fares, onboard product, pricing, distribution. Only DL has done something as comprehensive since but I don't think they've fixed their network issues. Other carriers have done elements of transformation, but not all of them. NW, specifically has not simplified fares (or only in reponse to DL and US), has not changed its network, and done precious little innovation on its product (though the new C seats look nice). As soon as the LCCs take serious interest in the NW heartland, you'll see a different picture (WN has only a small presence at DTW for now). Also, ATL and PAC won't be a haven for long. Lots of long-haul LCCs on both coasts in the planning stages. Most will fail but some will stick, and those transoceanic yields will come down.

 

[Red Tail Bear]

I would argue that only HP has done a true "operating model transformation" -- they changed everything they did: network, schedule, Mx practices, fares, onboard product, pricing, distribution. Only DL has done something as comprehensive since but I don't think they've fixed their network issues. Other carriers have done elements of transformation, but not all of them. NW, specifically has not simplified fares (or only in reponse to DL and US), has not changed its network, and done precious little innovation on its product (though the new C seats look nice). As soon as the LCCs take serious interest in the NW heartland, you'll see a different picture (WN has only a small presence at DTW for now). Also, ATL and PAC won't be a haven for long. Lots of long-haul LCCs on both coasts in the planning stages. Most will fail but some will stick, and those transoceanic yields will come down.

[post="262381"][/post]​

Let us know if/when they get some A/C that can actually fly transoceanic will ya. I'm sure there's gotta be some cheap used ones sitting in a desert somewhere.

 

[luv2fly]

edited.. duplicate post.

 

[KCFlyer]

Let us know if/when they get some A/C that can actually fly transoceanic will ya. I'm sure there's gotta be some cheap used ones sitting in a desert somewhere.

[post="262402"][/post]​

Now now Bear jr...what would Southwest do with aircraft capable of flying transoceanic - seems to me that one big reason SWA is successful is because the stick to doing what they do best. They'll be happy to bring some folks to Detroit who might want to catch one of YOUR red tailed planes across the ocean...

 

[luv2fly]

SVLQBA,
I disagree.  There are inherent costs with doing business across the pond.  It is not as easy as simply waking up one day and proclaiming you will become and international carrier.  With international routes come bigger, more expensive aircraft.  Diversified fleet types increase maintenance and training costs. Then there are slot restrictions.  I don't think WN or even JB will venture into this market anytime soon.  It would have been interesting to see what would have happened had ATA been able to start scheduled service.

 

[Red Tail Bear]

Now now Bear jr...what would Southwest do with aircraft capable of flying transoceanic - seems to me that one big reason SWA is successful is because the stick to doing what they do best. They'll be happy to bring some folks to Detroit who might want to catch one of YOUR red tailed planes across the ocean...

[post="262409"][/post]​

No problem there, we'd be happy to take them across the pond. But we'd also prefer to carry them to DTW on our own metal.

 

[WNrforlife]

+++++++++++++++++++++++++++++++++++++++++++++++++
Ah, WNforlife,
A legacy carrier MEANS that they fly to places OUTSIDE of the good ol' USA, with REAL BIG Airplanes that have "2" aisle's and some with "3" levels

Perhaps you might have heard of places like HONG KONG, and NEW YORK, or REALLY BIG AIRPORTS, with 14,000'+ runways like JOHN FITZGERALD KENNEDY INTERNATIONAL AIRPORT ???

NH/BB's

[post="262338"][/post]​

NHBB,

So what's your point? They're still going down the tubes.

 

[WNrforlife]

Wow!! What an insightful post as usual.

[post="262266"][/post]​

Thanks Luv2fly, I do my best.

 

[Ch. 12]

I would argue that point. Most of the so called legacies have undergone a radical transformation in the way they operate. Simplifying fare structures and fleet types. Managements have been screaming for historic labor cost reductions, and to date, they have been extremely successful. The premium charged by the legacies for such perks as FF programs and international codeshares has dwindled.
As a result, so has the service and the perception has become that they are no longer worth any premium. That is arguable, but I don't believe most airlines are banking on the return of the high yield domestic business traveler.
I would offer that the line between LCC's and the legacy carriers is quickly becoming blurred.

[post="262372"][/post]​

Don't confuse TACTICS with STRATEGY. These are the tactics of legacies but the strategy of the LCCs. The difference being that IF the industry's woes (fuel prices) were to change significantly for the better, the legacies would revert back to methods that produce higher revenues while the LCCs would not. And this is what mgmt of EVERY legacy is waiting for. Even HP seems to be hitting snags in their reformation and much of this is due to the constant hope for a brighter future for the industry.

 

[Ch. 12]

No problem there, we'd be happy to take them across the pond. But we'd also prefer to carry them to DTW on our own metal.

[post="262416"][/post]​

Why are you so stuck on the fact that WN doesn't go international? Is that a competitive advantage for them? If so, why don't the legacies stop flying international? Frankly I see it as the only stronghold left for the legacies.