Wn Could Replace Us Experts Say

[USAir757]

Southwest could replace US Airways, experts say
By Larry Rulison
Philadelphia Business Journal

Those who worry about US Airways' bleak financial condition and its impact on Philadelphia International Airport only need look south to Baltimore for temporary relief.

At Baltimore/Washington International Airport, low-cost carrier Southwest Airlines is the dominant airline. Southwest started service at BWI in 1993 with eight flights, and now has nearly 50 percent of the market share at the airport with 162 daily departures. Southwest became the No. 1 airline there within just six years.

If US Airways were to fall into financial dire straits and dramatically cut back on service in Philadelphia -- the Arlington, Va.-based airline emerged from Chapter 11 bankruptcy last year but is still struggling mightily -- airline experts say that Southwest could step in to fill the void at the airport, a city property with $1 billion in debt.

"Ultimately, I think that is the clear goal," said Ray Neidl, an analyst with Blaylock & Partners of New York who follows Southwest.

The outlook for US Airways has been negative lately. A recent report by Standard & Poor's said US Airways' long-term financial condition "remains uncertain," and its three hubs, including Philadelphia, are "vulnerable." US Airways announced July 20 it planned to reduce flights from its Pittsburgh hub by more than 35 percent. A week later the airline said it was expecting losses for the second half of the year unless it can dramatically cut costs, especially labor costs.

The stage has certainly been set for Southwest to take a more prominent role at Philadelphia International. Dallas-based Southwest, which started service from Philadelphia in May with 14 flights, has already leapfrogged many of the airlines at Philadelphia International, and it should become the No. 2 airline at the airport when it boosts its service level to 41 daily flights in October. US Airways has a total of 409 daily departures from Philadelphia. Frontier Airlines, another low-cost carrier based in Denver, also started service from Philadelphia International in May with three daily flights.

Brandy King, a regional spokeswoman for Southwest, said customer demand, not US Airways' fortunes, dictates its growth strategy in Philadelphia.

"If there was an absence of service, then that would play into customer demand," King said.

Anthony Cristello, an analyst with BB&T Capital Markets, said Southwest would have no problem growing in Philadelphia. One of the only barriers is getting additional gates. Southwest currently operates four gates.

"I would say that it would not be out of the question to see Southwest build [its Philadelphia operations] to the magnitude of a Baltimore," Cristello said. "There's a very big opportunity there."

The irony is that as a potential savior for the airport, Southwest is also contributing to the demise of its largest tenant. US Airways accounts for nearly 70 percent of the daily flights out of Philadelphia. US Airways has drastically slashed prices in Philadelphia and at BWI competitors Reagan National and Dulles airports to compete with Southwest. But the airline said that, under its current cost structure, it needs to get concessions from its unions to lower expenses.

"We have to get our costs down to survive," US Airways spokesman Dave Castelveter said.

Southwest couldn't replace everything that US Airways provides the city. US Airways has more than 5,600 employees in Philadelphia, and the airport is its primary international gateway in the United States.

Southwest, which does not fly internationally, would need to obtain the use of additional gates if it wanted to expand significantly more. It also has just 100 employees based in Philadelphia, although that could be changing. At BWI, which is where it has its third-largest market share, Southwest has slightly more than 2,500 employees.

"We will have to eventually add head count in Philadelphia," King said. "We will have to take a look at that come October."

Joseph J. Pezzimenti, the S&P analyst who wrote the report about the vulnerability of US Airways' hubs, said Southwest's presence in Philadelphia is largely positive because Southwest generally increases traffic to the markets it serves. Although it might take business away from other airlines, it boosts demand for non-aviation services such as parking, rental cars and concessions, all of which boosts revenue at the airport, which helps it pay down its debt. Although he calls Southwest a "positive factor" at Philadelphia International, "it would be a concern to us if US Airways was to drastically reduce their presence."

City officials will not disclose what contingency plans they have in the event US Airways dramatically reduces service.

"Generally, we don't comment on speculation," said airport spokesman Mark Pesce. "We continue, as we have in the past, to talk to airlines about new and expanded service. We consider the airport to be attractive to carriers who want to start service here. Perfect examples are Southwest and Frontier."

 

[ringmaruf]

Can't wait to see Southwest serve 20+ Caribbean destinations and 11 European destinations from PHL.

 

[local 12 proud]

no need to, they've found their niche and have'nt lost money since their inception.....as they say "why try and fix it when it ain't broke"

 

[cavalier]

If US Airways were to fall into financial dire straits and dramatically cut back on service in Philadelphia -- the Arlington, Va.-based airline emerged from Chapter 11 bankruptcy last year but is still struggling mightily -- airline experts say that Southwest could step in to fill the void at the airport, a city property with $1 billion in debt.

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This is laughable: I don't know about the rest of the labor groups at LUV but I do know as far as the mechanics are concerned, LUV mechanics blow away the U's mechanic wages and their future looks bright where U's future is looking dimmer and dimmer along with lower and lower wages. LUV even does HEAVY maintenance in Dallas with a few support shops, while we at U are closing everything or at least trying like hell to and still losing ground. Gee, something sorely is amiss. I wonder if that is the reason lots of employees are bailing, and the ones left find it hard to care anymore?


And then this:


PUBLIC RADIO'S MARKETPLACE COMMENTARIES:
Broadcast March 31, 2004
Why Are We Still Bailing Out the Airlines?

Immediately after 9/11, many Americans understandably cancelled their plans to fly. That put major airlines in a financial tailspin. So they asked the federal government to help them through the emergency. And the government obliged. Since then, Uncle Sam has doled out to airlines $1.7 billion in low-interest loans backed by the full faith and credit of the United States.

But the airlines still have their hands out. United Airlines, for example, is now applying for a new loan guarantee of $1.6 billion.

How long is the federal government going to keep bailing out the airline industry? Yes, much of the industry is still in the doldrums. Fuel costs have soared to record levels. Business travel still weak. And terrorism still threatens. But the real problem facing the major airlines is not any of these. It’s low-cost carriers like Southwest and JetBlue. They’re grabbing travelers away from the majors because they’re cheaper.
The dirty little secret is that the airline business has turned into a commodity. One seat is just like any other. And most travelers don’t care whose logo is on the outside of the airplane. They just want low prices. This spells trouble for the big old unionized airlines. They were in trouble even before 9/11. If they don’t cut costs and streamline operations, they’re never going to get off the ground again.

Besides, there are too many airline seats chasing too few customers – too much capacity and too many airlines. Inevitably, one or two airlines are not going to survive. The weakest will have to go out of business – selling their hubs and terminals and airplanes to the stronger. But no one is going out of business as long as the government keeps bailing them out.

So why continue with the bailouts? What possible public purpose is being served?

Not to save jobs. Even as it is, the airlines have been laying off thousands of workers.

Not to save wages. The high-cost carriers are all demanding wage and benefit cuts from their employees.

Not to protect shareholders. Major airline stocks are now trading as low as they were in November, 2001.

Not to maintain the public’s trust. The board that’s been handing out the guaranteed loans is now under investigation for possible corruption.

Earth to Washington, earth to Washington: There is no point to continuing to bailout the airline industry. End the bailouts. Now.

 

[local 12 proud]

cav the luv mechanics are now leading the industry in the passenger sector, i believe they are only second to the BIG BROWN mechanics. ironically after many years of outsourcing heavy maintenance LUV is starting to see the drawback and are currently bringing more work inhouse!.......cheaper is'nt always better

 

[Airmech737]

We at SWA are the top in the pax industry on mechanic pay. This month is our last contract raise which will take the 5 year topped out mechanic to $36.50.

And this month, we're to be voting on a 3% ($1.00 per/hour) increase each year for the next three years extension. That would put a mechanic at $40.00, if it passes.

And we have mechanics ranging from 0 to 500 hours to date of overtime!

 

[local 12 proud]

airmech737 kudos to my fellow a&p's at SWA you guys deserve every penny you can negotiate. its to bad the other airlines think the mechanics are over paid! we take thousands of lives into our hands every day and are held to the highest standards levied by the FAA yet we seem to lack the recognition until something bad goes wrong. we are second to none, even the pilots who have a enormous responsibility are relieved of all liability once the brakes are set and the aircraft is deplaned. we on the other hand can be held liable for years for that part we changed even though it had a serviceable tag attached. but yet we are classified as unskilled labor :huh: changing a JT8D on an md80 is not a skill but laying bricks is? :blink:

 

[nycbusdriver]

SWA will never replace USAirways at PHL. SWA only serves medium to large cities by skimming cream off the heavily travelled routes. They are good at what they do, but PHL would lose 80% of its international service and SWA would NOT replcae that. It's just NOT what they do. PHL would also lose hundreds of flights to smaller cities in the northeast now served by USAirways Express, and, conversely, many of those cities would lose vital air service altogether never to get it back.

 

[jimntx]

PHL would also lose hundreds of flights to smaller cities in the northeast now served by USAirways Express, and, conversely, many of those cities would lose vital air service altogether never to get it back.

[post="166722"][/post]​

Maybe so, but if NO airline moved in and picked up those routes then maybe that indicates that US Airways shouldn't be serving them either.

 

[SKY HIGH]

.....as they say "why try and fix it when it ain't broke"

REALLY?........WN is now the "highest cost" Low cost carrier.

 

[jimntx]

.....as they say "why try and fix it when it ain't broke"

REALLY?........WN is now the "highest cost" Low cost carrier.

[post="166733"][/post]​

And, your point would be? It doesn't matter whether they are the lowest or the highest cost airline period. What matters is that they are the highest profit making airline.

 

[ELP_WN_Psgr]

SWA will never replace USAirways at PHL. SWA only serves medium to large cities by skimming cream off the heavily travelled routes.

You know, a lot of folks say that, but that doesn't make it so.

"Skimming the cream" would be going in to places like LGA, DCA, BOS.

What WN does is generate a brand new herd of dairy cattle so they can all be milked and they can get some of the cream and a lot of the milk.

To wit: Two of those "cream to skim" markets in and out of Philadelphia are PVD and MHT.

Excuse me for saying so, but 99 and 87 O&D passengers per day, respectively, hardly constitute cream skimming.

What WN does is market development 101. They find overpriced or poorly served markets and make big markets out of inconsequential markets by changing the way people think of traveling.

Once upon a time everyone jumped on Interstate 45 to make the 4 hr haul from Dallas to Houston. Then somebody got the idea that late night flights at $10 a pop would beat ferrying a plane back for maintenance empty. When, without advertising other than word-of-mouth, the late night $10 flights started to always go full, the truth finally sunk in. The demand for air travel is very elastic, and once people start to fly, they get to where they really would prefer a 50 min plane ride in lieu of a 4 hr car trip.

Then these inconsequential markets turn into healthy sized markets and other people howl about them skimming the cream.

 

[leonides]

Lets make this simple:

Southwest $11,000,000,000 IN CAPTIAL YES THATS 11 BILLION
they may not have gates or international routes but they do have the one thing that kills all airlines eventually...Time.

I Love USAirways more than words can say, I hope its around so I can serve my time.!
I hope ALL the unions understand my first point..

 

[Light Years]

So will Southwest be launching regional, transatlantic, and carribbean service?

No, they'll fly to the top 20 destinations and you're f**ked if you want to go somewhere a 737 wont go. And on top of that, they might drop you off a few states away from where you want to be.

I guess they can just use the new International terminal and Express terminal as camping areas for passengers, and set up a few hot dog stands.

Southwest will have its day too, and after hearing about some of thier cutesy comments about US on thier cabin PAs, I can't say I'll be upset. I'll make fun of thier job loss too when the time comes.

 

[oldiebutgoody]

...I guess they can just use the new International terminal and Express terminal as camping areas for passengers, and set up a few hot dog stands.

[post="166778"][/post]​

That's exactly what happened at BWI. It was really a brilliant move to just up and leave the whole airport to your major competitor, like U did, with 2 of your major markets (DCA and PHL) less than 100 miles away. Absolutely brilliant.