WN's Philly Flights Barely 50% LF

[PHX PHLyer]

Article

While US is trying to secure gates in the international terminal at PHL for flights to places like ATH, ZUR, BRU, CPH, PVG, NRT, etc., they are being prevented by WN demanding more gates. You would think with the additional gates that WN is set to receive that they are making huge profits in PHL. Yet as this article shows, according to DOT numbers, PHL is barely running a 50% Load Factor for WN. Another article says that something like 65 out of the last 71 markets WN entered were unprofitable. And they want to expand in PHL, with probably more MDW, FLL, MCO, PVD, TPA flights...when PHL could be opening up new prestigious routes to Asia and Europe? Give me a break. While Load Factor is not a determinant of profitability, a 50% LF at the fares WN charges has got to be difficult to make a profit.

I have tried telling people before that WN (and airlines like jetBlue) had a failing business model in this day and age. This has been brought about by many factors, but mostly due to the legacies' costs being more in line after 9/11. But now WN has been downgraded by Prudential, saying that "their business model doesn't seem to be working any more." I have also noted that they have yet to add flights in PHX (and hardly any flights in LAS) since the merger has started rolling on, suggesting possibly that the new US/HP network is giving WN a run for its money. WN has been keeping profitable in the industry the last few years based on its cheap oil prices. While most companies, like US, count gains and losses on hedging contracts as "special items", WN does not do that and records them in their normal earnings statements. There have been several instances in the last years where there would have been quarterly losses minus the gains from their fuel hedges, instead of the profits they reported. But now they have less and less of their fuel hedged, and could start bleeding red ink if something isn't done.

So what should be made of this? US is doing a good job of keeping people off of WN's planes? WN is trying to put domestic carriers in the Int'l terminal to feed its growth in PHL, despite terrible LF's? What do you think will be the outcome of the gate dispute in PHL? I just can't imagine people need 5 more flights to the chicago area when there are already like 30 a day to ORD and MDW, when they could have access to nonstop flights to Asia.

 

[ClueByFour]

1. WN has always had lower LF's than the majors.

2. They (like everyone else) don't break out profitability on a market by market basis in public data. So, you did not read that anywhere because it's not public.

3. They have made money for 30+ years.

4. More people want to go to MDW and FLL on a daily basis than want to go to Asia. If US wants gates, bring cash and build them.

 

[FutureUScapt]

Here's another article, read it for it's worth:

WN Slide

Interesting quote:

"Until Southwest takes actions to make the last four year's new flights profitable, or exits some of these markets, or substantially slows the growth, we see little hope that the shares will do other than they have over the past four years," he said.

I don't think it's much surprise to hear that PIT and IAD weren't gangbusters. Hearing this about PHL is a little surprising though, especially since they want to add 30+ flights. I wonder how they will do in SFO this time around.

 

[PHX PHLyer]

1. WN has always had lower LF's than the majors.

I am aware of that. But their load factors are usually in the low 70 percentile (compared to high 70s and more recently low 80s for majors), and WN's have recently dipped to the high 60s. But barely breaking 50% is not just attributable to historically low load factors for WN. Barely 50% is not getting the butts in the seats like you want. No way around it.

2. They (like everyone else) don't break out profitability on a market by market basis in public data. So, you did not read that anywhere because it's not public.

This can be found out through market research. I am aware that it is not public information.

As quoted by Reuters:


" The airline continues to add aircraft at a rate of over 35 each year, even though 61 of the 73 markets added since early 2003 are consistent money-losers, the brokerage said.

Prudential said the company's substantial profits in California, West Coast, and Texas were supporting the money losers across the rest of the system and had almost solely been the source of the company's profitability for 34 years. "(Reporting by Nachiket Kelkar in Bangalore)

3. They have made money for 30+ years.

Yes, but the articles that are surfacing are about TODAY, and the fact that WN must do something quick or they are going to stop the 30+ years of profitability. One thing would be to do something about the 50% load factors in PHl and IAD. It's why I posted.

4. More people want to go to MDW and FLL on a daily basis than want to go to Asia. If US wants gates, bring cash and build them.

But was the international terminal not built for international flights? The fact of the matter is, money was spent (and US would have had to put some money into it)to build an international terminal to handle international flights. Now they want to restrict international flights by putting domestic flights in the international terminal when there is a PRESENT demand for international flights out of PHL. I can assure you that when the international terminal was built, WN did not have anything to do with the funding (they weren't even serving PHL at that point I believe). I can, however, assure you that when it was built that US did have a part in the funding.

 

[autofixer]

Now they want to restrict international flights by putting domestic flights in the international terminal when there is a PRESENT demand for international flights out of PHL. I can assure you that when the international terminal was built, WN did not have anything to do with the funding (they weren't even serving PHL at that point I believe). I can, however, assure you that when it was built that US did have a part in the funding.
[/quote]

Bingo! If I recall, U spent over 300 million on the new international terminal; I believe under Wolfe in the mid 90's ( Nearly 8 years before the AWA pilot senior to me was even hired, probably still in High School). But what do I know, I've only been given credit for 3 of my 20 years here.

 

[Mike]

Now they want to restrict international flights by putting domestic flights in the international terminal when there is a PRESENT demand for international flights out of PHL. I can assure you that when the international terminal was built, WN did not have anything to do with the funding (they weren't even serving PHL at that point I believe). I can, however, assure you that when it was built that US did have a part in the funding.
Bingo! If I recall, U spent over 300 million on the new international terminal. But what do I know, I've only been given credit for 3 of my 20 years here.

I was riding Jumpseat yesterday on SW PHL-PIT. They told me they are pulling out one or two PIT-PHL runs this Summer. Of course USAirways is doing the same.

 

[autofixer]

I was riding Jumpseat yesterday on SW PHL-PIT. They told me they are pulling out one or two PIT-PHL runs this Summer. Of course USAirways is doing the same.

I think I read that SWA was going to focus on BWI.

 

[BoeingBoy]

The Post seems to be making a common "layman's" mistake - equating load factor with percentage of seats filled. In Feb, WN has a little over 54% of seats filled for flights leaving PHL.

However, what the airlines report as load factor is actually the percentage of ASM's filled (RPM/ASM).

To illustrate the difference, consider two flights with a 100 seat aircraft. Filght A is 200 miles while flight B is 1000 miles. If flt A has 40 passengers and flt B has 60 passengers, a layman would say that the load factor is 50% - 200 total seats available and 100 total passengers.

However, when figured as the airlines report, flt A produces 8,000 RPM's and 20,000 ASM's. Flt B produces 60,000 RPM's and 100,000 ASM's. Adding them together yields 68,000 RPM's and 120,000 ASM's, or a 56.66% load factor - over 6 points higher than the "layman's" figure.

Calculated over an airline's entire system, the difference is probably minor. But the smaller the sample - like looking at one airport - the greater the difference. Especially when you look at the general pattern of passenger loads on WN's PHL flights - the longer flights generally have higher loads, just as in my example.

For flights departing PHL in Feb, WN had an actual load factor of 58.43% - still low (although Feb is a low travel month, especially for the leisure traveler) but better than the "just over half full" mentioned in the article and better than the 54% "layman's" number.

Jim

 

[FWAAA]

Heavens to Betsy! WN suffers from Low Load Factor Disease! Better sell my stock.

BoeingBoy points out that WN's actual PHL load factor for February was 58.43%; WN's systemwide load factor for February was 66.8%.

The reporter, Del Quentin Wilber, makes it sound like the end is near, without revealing that the spread between PHL and systemwide LF was a mere 8.4 points.

Sound the Alarms! Southwest is gonna go bankrupt if this keeps up!

Let's review: WN made money in the first quarter. UA did not. US, AA, CO and NW made money in the first quarter. B6 and DL did not. Doesn't seem to be any correlation between load factor and profitability.

I've sent an email to the reporter advising them that they must have turned off their critical thinking skills when they wrote that piece.

 

[ClueByFour]

I was riding Jumpseat yesterday on SW PHL-PIT. They told me they are pulling out one or two PIT-PHL runs this Summer. Of course USAirways is doing the same.

"They" apparently forgot to ask Dallas: LUV's schedule is already loaded thru the summer and seems to have the same number of PIT-PHL runs on 8-August as 8-June as 1-June.

 

[autofixer]

"They" apparently forgot to ask Dallas: LUV's schedule is already loaded thru the summer and seems to have the same number of PIT-PHL runs on 8-August as 8-June as 1-June.

Perhaps they are capitalizing (again) on LCC reducing its flights out of PIT?
I did read somewhere that they were going to focus on BWI. That being said, if LCC wants to hand them more PAX on a silver platter, why not take them?

 

[FutureUScapt]

4. More people want to go to MDW and FLL on a daily basis than want to go to Asia.

And Skybus is about to prove there is a market between CMH and Greensboro and Bellingham, WA. But if they only attract the people paying the $10 fares, they're going to lose their shorts. The reason that demand for flights to those FLL, MDW, etc has risen so much is because WN has come in to offer lower fares. But if this article is accurate, maybe they need to think about raising the fares instead if dumping more seats in an evidently already over-saturated market.




I looked on faremeasure and found some sample markets and looked at the average one-way fare WN collects for stage lengths of approximately 250 miles, roughly the distance from PHL-PIT. On all of the following routes, WN competes with atleast one other major carrier.

PHX-LAS = 256 mi / $91.71 / 78% of traffic
LAS-LAX = 236 mi / $96.28 / 56% of traffic
MDW-DTW = 235 mi / $95.23 / 24% of traffic
MDW-STL = 258 mi / $96.04 / 46% of traffic

Rough average for sample markets: $94.82

PHL-MHT = 290 mi / $84.52 / 74% of traffic
PHL-PIT = 267 mi / $77.13 / 52% of traffic
PHL-PVD = 238 mi / $85.96 / 72% of traffic

Rough average for PHL markets: $82.54

This is by no means conclusive, but I couldn't any significant route pairing that had a lower avg fare than the ones in PHL. I'm not sure how close those averages are to the true values, but based on these stats, it looks like WN is collecting anywhere from 10-20% (with PHL-PIT being near 20%) less on its short-haul PHL markets than it does elsewhere in it's system.

I'm not at all predicting WNs demise of anything of that nature, so don't flame me for that, but this might corroborate the article's point that the TX and CA runs are the routes that are really generating the money for WN.

 

[SharoninSAT]

"They" apparently forgot to ask Dallas: LUV's schedule is already loaded thru the summer and seems to have the same number of PIT-PHL runs on 8-August as 8-June as 1-June.

WN's schedule is loaded to sell through Nov 2 and no flts will be deleated from that schedule.

 

[BoeingBoy]

If those are the base fare before taxes/fees WN still makes money even with less than a 50% load factor. Even if you figure the CASM @ 10 cents on those short flights (about 50% higher than WN's system CASM), the yield is 28-30 cents.

If those are total fare including taxes/fees, you'd have to know the average base fare.

Jim

 

[FWAAA]

The walkup base fare right now for LAX-LAS is $108.84; I gotta think the $96.28 includes some taxes/fees, etc. Either that or WN is selling an awful lot of refundable walkup fares on that route, balancing out (canceling out) the $49 advance sale fares.