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SWA profits off 77%
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B737Dvr, I'm no better at you than doing quotes, but here are my thoughts:
"why are we the only bunch of dumbasses that dont pass on the costs to the consumer."
I don't know if you're speaking for Southwest, but I think WN has done something like four different fare increases this year. Of course, it's not like we go trumpeting that for the newpapers, so I sometimes wonder if many WN employees even realize that we have raised fares.
"If it is done on an industry level equally, where everyone does it, the public will just have to swallow it."
Therein lies the biggest misconception that people have about the airline market. It doesn't work that way. There comes a point where the fares get too high, and people WON'T fly. They'll teleconference for business or they'll find some workaround. The revenue management at most airlines has become so advanced that they can predict how many customers they'll lose with every fare increase. It's the risky game of revenue management...you raise fares, and you start losing some customers. The question is, will the fare increase offset those who don't fly you because you raised fares.
It's even more difficult for WN, I think, because we don't offer frills. Herb figured out what people really want: low fares. IFE and the other frills are secondary to low fares. If we raise our fares to the level of the other airlines, then we've essentially lost our competitive advantage. In other words, if we're not THE low fare carrier, then we won't be an airline at all. (Those were Herb's words, by the way, not mine.)
And no offense, but many of the other airlines have been just flat-out mismanaged. I'm not up for raising fares (and risk losing our own customers) just to subsidize management's mistakes at other airlines.
"Someone made a comment about WN buying an airplane for full cash and then taking that charge in 1 quarter as posturing......i am all ears as to why an airline would do this? other than true posturing come contract time, which isnt very herb-like.......what gives?"
I think during contract time, everybody tries to read something evil into management's intent. And usually they're basing it on nothing more than gossip. Sorry...I don't know much about Gary Kelly, but the guy doesn't strike me as that manipulative based on everything I've heard from him. I don't go reading too much into what others infer just because Gary bought an extra plane.
"why are we the only bunch of dumbasses that dont pass on the costs to the consumer."
I don't know if you're speaking for Southwest, but I think WN has done something like four different fare increases this year. Of course, it's not like we go trumpeting that for the newpapers, so I sometimes wonder if many WN employees even realize that we have raised fares.
"If it is done on an industry level equally, where everyone does it, the public will just have to swallow it."
Therein lies the biggest misconception that people have about the airline market. It doesn't work that way. There comes a point where the fares get too high, and people WON'T fly. They'll teleconference for business or they'll find some workaround. The revenue management at most airlines has become so advanced that they can predict how many customers they'll lose with every fare increase. It's the risky game of revenue management...you raise fares, and you start losing some customers. The question is, will the fare increase offset those who don't fly you because you raised fares.
It's even more difficult for WN, I think, because we don't offer frills. Herb figured out what people really want: low fares. IFE and the other frills are secondary to low fares. If we raise our fares to the level of the other airlines, then we've essentially lost our competitive advantage. In other words, if we're not THE low fare carrier, then we won't be an airline at all. (Those were Herb's words, by the way, not mine.)
And no offense, but many of the other airlines have been just flat-out mismanaged. I'm not up for raising fares (and risk losing our own customers) just to subsidize management's mistakes at other airlines.
"Someone made a comment about WN buying an airplane for full cash and then taking that charge in 1 quarter as posturing......i am all ears as to why an airline would do this? other than true posturing come contract time, which isnt very herb-like.......what gives?"
I think during contract time, everybody tries to read something evil into management's intent. And usually they're basing it on nothing more than gossip. Sorry...I don't know much about Gary Kelly, but the guy doesn't strike me as that manipulative based on everything I've heard from him. I don't go reading too much into what others infer just because Gary bought an extra plane.
2 cents
Yes, the quarter sucked. No, the sky is not falling. I honestly don't believe that Gary would play games with the numbers just to save a few bucks when it comes to negotiations. If this were true he would be playing with the numbers every year due to negotiations with different labor unions.
I get tired of hearing, "if it weren't for the fuel hedging". I think fuel hedging started in the late 80's went away for a while and came back in mid-late 90's. Hedging isn't our only advantage. Gas has cost us 600 million more than last year. If we weren't hedging we would raise ticket costs, we wouldn't be on an airplane buying spree (yes we buy Ford now). In numerous locations we are the Market Maker. Meaning we set the pricing and others match. We would raise fares to remain profitable. I will agree, there are routes that one dollar up can send people running but there are other markets where we run the pricing show.
I believe Gary said the Wright Amendment would generate 50 mil in REVENUES, very different than profit. Remember, that is a lowball figure - extremely conservative due to the "forward looking statement" of a CEO.
Perfect example of what the through ticketing will do for us. Friend of mine is going to Dallas on SWA after I told her about the through ticketing. Direhard SWA fan, frequent traveller to Dallas from Phoenix. She was always complaining about taking another airline to Dallas because of the ridiculous hassle of flying swa. $270 worth of revenues that we would have never seen.
My take, out
Yes, the quarter sucked. No, the sky is not falling. I honestly don't believe that Gary would play games with the numbers just to save a few bucks when it comes to negotiations. If this were true he would be playing with the numbers every year due to negotiations with different labor unions.
I get tired of hearing, "if it weren't for the fuel hedging". I think fuel hedging started in the late 80's went away for a while and came back in mid-late 90's. Hedging isn't our only advantage. Gas has cost us 600 million more than last year. If we weren't hedging we would raise ticket costs, we wouldn't be on an airplane buying spree (yes we buy Ford now). In numerous locations we are the Market Maker. Meaning we set the pricing and others match. We would raise fares to remain profitable. I will agree, there are routes that one dollar up can send people running but there are other markets where we run the pricing show.
I believe Gary said the Wright Amendment would generate 50 mil in REVENUES, very different than profit. Remember, that is a lowball figure - extremely conservative due to the "forward looking statement" of a CEO.
Perfect example of what the through ticketing will do for us. Friend of mine is going to Dallas on SWA after I told her about the through ticketing. Direhard SWA fan, frequent traveller to Dallas from Phoenix. She was always complaining about taking another airline to Dallas because of the ridiculous hassle of flying swa. $270 worth of revenues that we would have never seen.
My take, out
pretty straight talk......
And no offense, but many of the other airlines have been just flat-out mismanaged.
Amen to that brother! and the ex CEO's should not have been able to get out with Millions, ...its a part of what is wrong with this industry!
I'm not up for raising fares (and risk losing our own customers) just to subsidize management's mistakes at other airlines.
It's about raising fares to cover the rising costs of doing business is all.
Frills or no frills, there is something wrong with being able to go coast to coast for a $100 and then to add insult to injury to get crap from said pax when they complain about the lack of a meal or IFE at said price!
then again, if the prices weren't that low, then your sandle and pajama, wearing, non-bathing, wanting first class for peanut fares expecting trash wouldnt be on the airplane in the first place!
Goddamn, I bet the now retired guys who took out the shiny new DC-8's and B707's are shaking their heads at where this all is now......
(*&^%$#@!
And no offense, but many of the other airlines have been just flat-out mismanaged.
Amen to that brother! and the ex CEO's should not have been able to get out with Millions, ...its a part of what is wrong with this industry!
I'm not up for raising fares (and risk losing our own customers) just to subsidize management's mistakes at other airlines.
It's about raising fares to cover the rising costs of doing business is all.
Frills or no frills, there is something wrong with being able to go coast to coast for a $100 and then to add insult to injury to get crap from said pax when they complain about the lack of a meal or IFE at said price!
then again, if the prices weren't that low, then your sandle and pajama, wearing, non-bathing, wanting first class for peanut fares expecting trash wouldnt be on the airplane in the first place!
Goddamn, I bet the now retired guys who took out the shiny new DC-8's and B707's are shaking their heads at where this all is now......
(*&^%$#@!
Thanks. I figured with your vitrol towards LCC pilots/airlines, you should direct it towards some of your finest aviators at TED!
Look how far those highest payrates got you! Bankruptcy is a wonderful thing, look how your management team was able to shed your pensions and high pay. Maybe you could thank Goodwin by sending him more money!
What is there to focus on 32, you are hung up on all LCC's. You are obviously jealous of our higher pay rates, I can understand that, but you just can't leave it alone!
YourPilotFriend
YourPilotFriend
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Pilot's need to unify and move to fixed industry wide costs to protect their careers.
This topic is about SWA profits being off by 77%, not about UAL. As to the TED pilots, they are United pilots not TED pilots. One may fly a TED flight followed by a mainline flight.
Now back to your regular ramblings.
Ramblings??? Hardly. Your vitrol is with LCC pilots, along with your LCC Ted! Get over it man, you weren't hired! Deal with it, and get back to your miserable pay and the fact you were hired due to being an intern!
Sorry, YourPilotFriend...I haven't figured out how to do a quote from a quote yet. Here's my thoughts:
Wrong, fares are down 20% from 2000 not factoring in inflation. The reason people aren't flying is because of the security hassle. Flying has become more than a pain in the ass than ever, and the government's mass deception security plan is a complete failure. Furthermore, we are not talking raising fares $100, even 50 cents makes a huge difference.
Funny...last I heard, fares had finally recovered to above year 2000 levels - and that was taking inflation into account. Fares had to be dropped considerably after 9/11, and you know why - too many seats chasing too few butts.
I would agree that part of the reason people aren't flying is the security hassle. After August, every airline came out and told Wall Street that they weren't going to meet their estimates to due to the London terrorist threats and the security changes that followed. But when you add that to climbing fares, it causes an even bigger problem. Added security hassles AND higher fares?
To quote Cartman, most customers would say, "Screw you guys, I'm going home."
But you had proposed a $9 fare increase. I don't know if you realize that revenue management has become so advanced that they can pretty much predict how many customers they'll lose for every dollar they raise fares - thanks to the beauty of technology that tracks all this customer information for them. Many airlines have put in place fare increases, only to have to roll them back because the fare increase actually caused them to LOSE money.
Not exactly true either, DTW - DFW used to be over $700 on NWA, when SWA moved in, the fare was changed to about $150. That was years ago, now the fare is in the $200+ range, and NWA is cheaper and has less connections. This is happening all around us now, that's why SWA now has the lower capacity numbers, then most, if not all of the majors.
Now wait...you have me completely confused in your reasoning. You're telling me that NWA is cheaper than SWA, and has less connections, AND more amenities, but yet SWA should be the one raising fares?
So what you're essentially saying here is that although SWA is profitable at these fares, we should be the one to raise our fares. Why? So we can help NWA make a profit? Sounds to me like NWA needs to be doing the fare-raising, as you illustrated quite clearly.
SWA has not cut the pay of their employees, and they've continued to add jobs, and yet it's SWA that has to raise fares?
It seems to me that you should be singing your song to some of the other airlines rather than SWA. In a commodities market (which airline tickets generally are), the low cost producer generally wins. Southwest will raise their fares only when it will bear more revenue, and if Gary says that the market won't accept another fare increase, then I'm willing to bet he has more facts at hand than you.
For a Ph.D. of airplanes, your reasoning escapes me.
Wrong, fares are down 20% from 2000 not factoring in inflation. The reason people aren't flying is because of the security hassle. Flying has become more than a pain in the ass than ever, and the government's mass deception security plan is a complete failure. Furthermore, we are not talking raising fares $100, even 50 cents makes a huge difference.
Funny...last I heard, fares had finally recovered to above year 2000 levels - and that was taking inflation into account. Fares had to be dropped considerably after 9/11, and you know why - too many seats chasing too few butts.
I would agree that part of the reason people aren't flying is the security hassle. After August, every airline came out and told Wall Street that they weren't going to meet their estimates to due to the London terrorist threats and the security changes that followed. But when you add that to climbing fares, it causes an even bigger problem. Added security hassles AND higher fares?
To quote Cartman, most customers would say, "Screw you guys, I'm going home."
But you had proposed a $9 fare increase. I don't know if you realize that revenue management has become so advanced that they can pretty much predict how many customers they'll lose for every dollar they raise fares - thanks to the beauty of technology that tracks all this customer information for them. Many airlines have put in place fare increases, only to have to roll them back because the fare increase actually caused them to LOSE money.
Not exactly true either, DTW - DFW used to be over $700 on NWA, when SWA moved in, the fare was changed to about $150. That was years ago, now the fare is in the $200+ range, and NWA is cheaper and has less connections. This is happening all around us now, that's why SWA now has the lower capacity numbers, then most, if not all of the majors.
Now wait...you have me completely confused in your reasoning. You're telling me that NWA is cheaper than SWA, and has less connections, AND more amenities, but yet SWA should be the one raising fares?
So what you're essentially saying here is that although SWA is profitable at these fares, we should be the one to raise our fares. Why? So we can help NWA make a profit? Sounds to me like NWA needs to be doing the fare-raising, as you illustrated quite clearly.
SWA has not cut the pay of their employees, and they've continued to add jobs, and yet it's SWA that has to raise fares?
It seems to me that you should be singing your song to some of the other airlines rather than SWA. In a commodities market (which airline tickets generally are), the low cost producer generally wins. Southwest will raise their fares only when it will bear more revenue, and if Gary says that the market won't accept another fare increase, then I'm willing to bet he has more facts at hand than you.
For a Ph.D. of airplanes, your reasoning escapes me.
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YourPilotFriend
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It's also about public perception, since most people believe SWA is still cheaper. Also SWA has a major advertising campaign that other airlines do not. Furthermore, SWA has raised fares a few times over the past years and has seen capacity increases.
Why I caution everyone, is because in my opinion, SWA will be in bankruptcy without major labor cuts by 2009; in-so-far my timeline is holding up. This is based off the reasioning that when legacy carriers regained pricing power over the LCC's, the industry would spin out of control. Since deregulation, even though the graph has it's ups and downs, the general trend has been major fare decline. The difference now between major profit and major losses is as slim as 50 cents on a fare. It's much easier to cut fares and lose money then it is to keep fares at the same level and fall below break even capacity. In other words if SWA fuel hedges required a fare increase of $10 and the other airlines resisted, They would have to cut out that $10 and go into the red, and face a slow death like the other airlines have gone through. IF they keep the fare raise, and fall below break even capacity, it will take less than 6 months before the airline blows through its $3 billion in cash.
Now we are facing the further squeeze of the middle class in 2007 when arm loans are due as well as the manufacturing companies are going to increase unemployment across the US. The major revenue generators will be international packaging and business travel. The foreign airlines know this and are it current talks with the legacies about possible mergers. By that time either SWA will be merged into one of the major global airlines or it will be pieced off to either of the big three.
Well, let me be first to say ******************** off.:smash:
Second, it's negotiating time, so guess what everybody, Gary is gonna expense everything he can to write down even more debt, all the while making it look like doom and gloom. Please, we missed projection by 1 cent. You all need to be over on the other thread congratulating Continental, good job there.
For SWA, it's all a game of smoke and mirrors till a contract is signed, hang on for the ride.
Please tell me you are NOT on the NC committee. I have never read a more ridiculous post ever.
Irishav8r
shnufflehufflepuffngruff
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No offense but I've been fuloughed and dealt with a bankruptcy. Maybe it would be prudent to realize that this might be the last job for many, but it certainly hasn't been the first. I'll gladly take my chances here if you don't mind? Have a nice day....
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StopNTSing
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firstthird
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It will be interesting to see how the rest of the industry does. This whole bashing of SWA stock by the market seemed to be precipitated by CAL reporting 250 million while we reported 50 million. Which, excluding the one time gain for them and loss for us, 150 million each. Not our best quarter but hardly a sky is falling type of assessment. Boyd has been predicting the demise of the LCC model for years so he is only to happy to pile on.
I also thought that the CASM ex Fuel going down was significant, in a good way. We definitely still have some fighting left to do, and always will, but I'm pretty sanquine about it for now.
I also thought that the CASM ex Fuel going down was significant, in a good way. We definitely still have some fighting left to do, and always will, but I'm pretty sanquine about it for now.
Bummer. Guess I should quit now and save myself the hassle.
canyonblue
Everyone loves Southwest
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A Northwest pilot talking about raising fares, now that's a laugh. I thought you guys didn't understand the phrase.
uke:
FlyBoeingJets
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If I buy into your assumptions, I still can't come up with 2009 as a BK year for SWA.
It took much longer for Delta and NWA to go into BK after 9/11. They were both in trouble earlier in 2001 but didn't go into BK until 2005. I would start the clock the year SWA starts posting losses. Then I would assume at least 3-5 years until BK.
Why? Ability to get loans. That's how Delta stayed out of BK so long. They hocked everything. SWA starts out in MUCH better financial shape than an Legacy was in before 9/11.
As a side note, things fell apart about a year after they signed a very lucrative pilot contract. (late 00 or 01)
Could we compare SWA to UAL? I doubt it. UAL spent big bucks on a failed merger and stupid business jet (a la netjets) idea. They entered the post 9/11 world with one foot in the grave. They looked sick compared to AA and DAL. Not the case here.
My Prediction: Even with all the fears of collapse in years past, UAL is shaping up to be THE dominant legacy going forward. They want a merger so they can dominate another carrier and the entire industry. If anyone's management likes mergers I would be looking at UAL work rules and pay rates.
Now I don't particularly buy into your assumptions, but lets tell a more complete story here. 3 years from profitable quarters, low debt, fuel hedges, STILL lower CASM than the legacies, only 68 employees per airplane, new airplanes coming 3/month, and cheapness of one airplane operations to BK?? If JetBlue was still a profit machine and Virgin USA was operating it would make it more plausible. Now if oil were to plummet to $40 a barrel I could see some issues at SWA. That would be a story starter.
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