It has nothing to do with the employees, I think they are great people and are very lucky. The problem is the companies approach to business is absolute cost minimalism...Do not confuse this with profit maximization. In other words SWA analyzes routes for maximum capacity increase on a slim margin. It may be the best in terms of airlines but that's because of such controlled costs. This is called the Southwest effect. If an airline is charging 20 cents a mile, SWA will go into an area and charge 12 cents a mile.
The problem with this approach is that the model assumes exponential growth if you do not raise fares. Simply put SWA will have to raise fares considerably to remain profitable as other airlines match SW prices. This is why SWA load factors have remained consistent over the years. If SW is allowed to grow untamed this is a good thing for pilots, as they pay the best salaries now. However, such growth is physically impossible, which is why, I have said SW will be bankrupt by 2009 if it continues on its current course. They would need over 1000 737's by 2009 to avoid it. They could raise fares and risk the capacity drop if other airlines do not match. Fuel going up in price would also help SW.
Here's the rub that seems to be missing from most speculation. The industry never remains static. It's constantly changing.
Here's my case.
Boeing is selling airplanes hand over fist. Someone is buying them, and it's not all Asian carriers. DAL and NWA even in bankruptcy are taking deliveries. I know for a fact that B767-300's and B757's are impossible to find for all but the wealthiest. He!!, NWA is looking to buy another airline. How does a bankrupt carrier do that?
Most "experts" have concluded that the industry has probably hit bottom in 2006. Load factors and traffic are "good" to "great." Fares have been increasing over the last year or so. If this is the case, increasing revenues are the cause of profits, not so much decreasing costs if there are any. Oil is steady at between $55-65. Therefore, WN and others will be able to raise fares to some degree should they need to. This means that a 2009 BK is next to impossible. WN has too much cash. Yes, there will be future downturns in the industry, you can count on it, but not this time things are not remaining the same.
Labor contracts are coming due all over the industry in the next year or two, including WN. This means that costs will be increasing for many other carriers, but I think WN will not increase all that much. WN hasn't looked at work rules for years because this was a 10 year contract. That may be the lionshare of their contract changes. Other carriers entering Sec. 8 neg. want the concessions they gave up back.
History is replete with economic forecasters making millions off of doom and gloom projections. I remember some author/econ. professor forcasting the "Great Depression of 1989" (or some such year). Didn't happen. Many of them have disappearred, or come up with some excuse why their forecasts were wrong.
It seems that other LCC's are having a harder time remaining profitable than SWA. B6 and FL are two that come to mind. Should one or more carrier disappear, it could radically change the industry.
Consolidation. It's coming. Been saying that for years. We'll see, but if it happens, that could be great news for WN. They rest of the industry will be a mess.
Age 65 changes may have unpredicted ramifications.
I'm done forecasting who's staying and who's disappearing, who's winning who's losing. I've been wrong half the time. Like Jim Kramer.
Dancing on WN's grave is a little premature.
Good luck everyone.
