SWA operating expenses higher than competition

[Donald]

The thread also started by saying:
"Where do people see SWA in 5-10 years?"


Correct. In 5 to 10 years, I see SWA a larger yet still profitable company getting ready to take delivery of their first 787. Management and the individual work groups will continue to work together and make any necessary changes to stay profittable

 

[SWA/FO]

I see people prefering airlines with meals, movies and satellite radio instead of the no-frills Southwest flight. I also predict people will avoid Southwest because of the amount of stop-overs required to get to their destinations. Price will be about equal between the airlines, since all the legacies have cut costs.

Also, pilots will have other options with other airlines, so Southwest will have a tough time getting qualified applicants. Why fly a 737 for SW bouncing around Texas for 4 legs, when you can go to CAL and fly one leg to Rome?

Tough times ahead for Southwest. The business model is flawed.

"kids...uh, drugs are bad...marijuana bad....alcohol bad"
- Southpark

 

[ASADFW7]

The interesting part is people think SWA will stand still. They created the industry segment and other businesses are trying to match them. Leadership does make that much difference. People do make that much difference. Only when all the leadership and people who have made it what it is are gone will they be the same as everyone else. I do not see that happening soon.

 

[~~~^~~~]

What SWA has to counter its costs is real efficiency from its rational operation and productivity from its workers. (I'm wondering how efficient it is to have seven different management teams, maintenance departments, GO's, training departments and pilot groups flying Delta airplanes that range from 40 to 76 seats out of one hub - ATL)

I keep hearing rumors of SouthWest taking a 700, or perhaps a new type, across a large body of water. Any truth to that?

 

[puddlejumper101]

if anyone expects that SWA will just stand still and do nothing is absurd. SWA has made money in good and bad times. Right now times are decent...maybe even good for this industry...so SWA is not the focus...but when the cycle dumps on itself...we shall see who is still standing. I don't get how airlines in bankruptcy or just coming out of bankruptcy can do all of these things they plan on doing and expect to be ok. They might be ok in the short term...but it does not take much in an industry so heavily dependent on the world economy and current events for it all to come crashing down. Legacy carriers have never ever saved a buck for hard times...SWA will evolve for the times...no one said SWA will make the most money every time but they will find a way to make money. This industry is one bad day from a meltdown...we all know that...SWA knows that...but for some reason I don't think legacy carriers ever plan for that.

 

[JetFumes]

if anyone expects that SWA will just stand still and do nothing is absurd. SWA has made money in good and bad times. Right now times are decent...maybe even good for this industry...so SWA is not the focus...but when the cycle dumps on itself...we shall see who is still standing. I don't get how airlines in bankruptcy or just coming out of bankruptcy can do all of these things they plan on doing and expect to be ok. They might be ok in the short term...but it does not take much in an industry so heavily dependent on the world economy and current events for it all to come crashing down. Legacy carriers have never ever saved a buck for hard times...SWA will evolve for the times...no one said SWA will make the most money every time but they will find a way to make money. This industry is one bad day from a meltdown...we all know that...SWA knows that...but for some reason I don't think legacy carriers ever plan for that.

Exactly! When the house of cards falls, SWA will still be there, doing its thing, like it has been doing for years.

 

[captain dad]

New Swa Ad Will Bring In More Business

http://www.thatvideosite.com/video/4212

 

[My Man SMITH!]

I commend SWA for remaining profitable through all of these difficult times. A testament to the leadership's ability to adjust and make sound business decisions. Kudo's to you guys. I hope it continues to remain positive so we can all strive for better pay and benefits.

 

[pilotyip]

SWA has raised prices three times in the last year, and is looking at a fourth. Since 2000 the labor costs as a % percent of gross reciepts has gone from 36% to 42%. No intent to flame just a posting stats.

 

[HAZ-MAT]

Higher operating expenses... sure okay, but I'm still getting $59.00 tickets to where I need to go on SWA... and I don't have to connect thru ATL. And AirTran doesn't go to BDL. The meal service is just a hassle sometimes I think... SWA should do what Delta Express used to do... Have a lunch cart outside the plane at the gate, you want something, reach in there grab a snack and get onboard.

 

[EMBATP]

airtran

a comment was posted earlier that if atl is screwed up it impacts the entire airtran system...while there is some truth to this, we have a lot of point to point stuff that bypasses atl, and a lot of connections can be made without going thru atl by going thru cak,bos,bwi,dfw,mdw...etc

 

[PlaneDrvr]

SWA has raised prices three times in the last year, and is looking at a fourth. Since 2000 the labor costs as a % percent of gross reciepts has gone from 36% to 42%. No intent to flame just a posting stats.

I could be wrong, and if I am someone will surely correct me, but I believe SWA has at least 4 or 5 fare increases last year (2006). Each time as they stated in their press release, to adjust for rising cost, especially increases in fuel cost.

Just for 'what's it worth' now continue to rant away.

DA

 

[humuakalaka]

This thread started as a statement that airtran's costs are lower. Until someone finds some proof that their casm is indeed lower (especially adjusted for stage length) then most of this thread is spitting in the wind. Lots of airlines claim that their costs will be lower at some point in the future, but most have not followed through due to various reasons.

Firstthird, here you go: AirTran's non-fuel CASM is lower than SWA's.

If you look at the latest quarterly reports available for both AirTran and SWA, you will see that SWA still has the overall lead in CASM when fuel is included. SWA's total CASM for the three months ended Sep 30, 2006 was 8.75 cents per ASM and fuel made up 2.37 cents of that total. That means SWA's non-fuel CASM was 6.38 cents per ASM for 3Q 06.

On the other hand, AirTran's total CASM for the same period was 9.89 cents per ASM. Fuel made up 3.84 cents of that total. That means AirTran's non-fuel CASM was 6.05 cents per ASM.

Thus, SWA had lower overall CASM while AirTran had lower non-fuel CASM. I might add that AirTran did this while maintaining a two-aircraft fleet and a hub system. Both of those factors are considered critical things to avoid in SWA's low-cost formula. However, AirTran does not pay it's employees as well as SWA and AirTran lays much more of a burden on it's folks when it comes to medical insurance.

 

[puddlejumper101]

Firstthird, here you go: AirTran's non-fuel CASM is lower than SWA's.

If you look at the latest quarterly reports available for both AirTran and SWA, you will see that SWA still has the overall lead in CASM when fuel is included. SWA's total CASM for the three months ended Sep 30, 2006 was 8.75 cents per ASM and fuel made up 2.37 cents of that total. That means SWA's non-fuel CASM was 6.38 cents per ASM for 3Q 06.

On the other hand, AirTran's total CASM for the same period was 9.89 cents per ASM. Fuel made up 3.84 cents of that total. That means AirTran's non-fuel CASM was 6.05 cents per ASM.

Thus, SWA had lower overall CASM while AirTran had lower non-fuel CASM. I might add that AirTran did this while maintaining a two-aircraft fleet and a hub system. Both of those factors are considered critical things to avoid in SWA's low-cost formula. However, AirTran does not pay it's employees as well as SWA and AirTran lays much more of a burden on it's folks when it comes to medical insurance.

That says it all really. Starbucks charges a ridiculous amount for their latte's and mochas but they invest tons of that back on their employees. The CEO of Starbucks has been criticized by his shareholders for giving up profit to maintain loyalty and give his people decent pay and benefits. Starbucks coffee can be duplicated millions of time by millions of people...but what keeps people coming back is the brand...the convenience...and the exposure.
SWA is much the same...could you imagine the money SWA would be making if it had the cost structure Airtran had when it comes to labor? Yet...the differences in benefits and pay between both are pretty significant. SWA is willing to sacrifice earnings to keep their culture and people satisfied as best they could. How long they can do this is yet to be determined...but to think DAL, AA, UAL or any other carrier can match or beat their CASM or ASM while maintaining loyalty and peace with their labors is absurd. That's the trump card in this whole analysis and if any other carrier can bring their costs down to SWA levels without having a complete cataclysmic internal catastrophy then kudos to that carrier. It might happen...maybe one or two carriers can achieve this but for how long and under what terms is what I wonder about.

 

[chase]

This was through 2005:

Table 1: US airline unit costs on domestic US markets, 2005​

[FONT=Arial,Arial]

2005 $ cents per ASK​

​

[/FONT]​

Network Airlines​

​

​

JetBlue​

​

​

AirTran​

​

​

Southwest​

​

​

[FONT=Arial,Arial]

ACMI + Fuel​

​

​

[/FONT]​

[FONT=Arial,Arial]

3.69​

​

​

[/FONT]​

[FONT=Arial,Arial]

3.19​

​

​

[/FONT]​

[FONT=Arial,Arial]

3.41​

​

​

[/FONT]​

[FONT=Arial,Arial]

2.62​

​

​

[/FONT]​

[FONT=Arial,Arial]

Labour​

[/FONT]​

[FONT=Arial,Arial]

0.76​

[/FONT]​

[FONT=Arial,Arial]

0.66​

[/FONT]​

[FONT=Arial,Arial]

0.60​

[/FONT]​

[FONT=Arial,Arial]

0.76​

[/FONT]​

[FONT=Arial,Arial]

Fuel​

[/FONT]​

[FONT=Arial,Arial]

1.80​

[/FONT]​

[FONT=Arial,Arial]

1.48​

[/FONT]​

[FONT=Arial,Arial]

1.56​

[/FONT]​

[FONT=Arial,Arial]

1.00​

[/FONT]​

[FONT=Arial,Arial]

Aircraft Ownership​

[/FONT]​

[FONT=Arial,Arial]

0.54​

[/FONT]​

[FONT=Arial,Arial]

0.59​

[/FONT]​

[FONT=Arial,Arial]

0.82​

[/FONT]​

[FONT=Arial,Arial]

0.45​

[/FONT]​

[FONT=Arial,Arial]

Maintenance​

[/FONT]​

[FONT=Arial,Arial]

0.60​

[/FONT]​

[FONT=Arial,Arial]

0.46​

[/FONT]​

[FONT=Arial,Arial]

0.43​

[/FONT]​

[FONT=Arial,Arial]

0.42​

[/FONT]​

[FONT=Arial,Arial]

Infrastructure​

​

​

[/FONT]​

[FONT=Arial,Arial]

1.40​

​

​

[/FONT]​

[FONT=Arial,Arial]

1.09​

​

​

[/FONT]​

[FONT=Arial,Arial]

0.82​

​

​

[/FONT]​

[FONT=Arial,Arial]

1.02​

​

​

[/FONT]​

[FONT=Arial,Arial]

Landing Fees​

[/FONT]​

[FONT=Arial,Arial]

0.17​

[/FONT]​

[FONT=Arial,Arial]

0.20​

[/FONT]​

[FONT=Arial,Arial]

0.10​

[/FONT]​

[FONT=Arial,Arial]

0.10​

[/FONT]​

[FONT=Arial,Arial]

Other​

[/FONT]​

[FONT=Arial,Arial]

1.23​

[/FONT]​

[FONT=Arial,Arial]

0.89​

[/FONT]​

[FONT=Arial,Arial]

0.72​

[/FONT]​

[FONT=Arial,Arial]

0.91​

[/FONT]​

[FONT=Arial,Arial]

Product, Distribution​

​

​

[/FONT]​

[FONT=Arial,Arial]

1.79​

​

​

[/FONT]​

[FONT=Arial,Arial]

1.27​

​

​

[/FONT]​

[FONT=Arial,Arial]

1.03​

​

​

[/FONT]​

[FONT=Arial,Arial]

0.72​

​

​

[/FONT]​

[FONT=Arial,Arial]

Distribution​

[/FONT]​

[FONT=Arial,Arial]

1.17​

[/FONT]​

[FONT=Arial,Arial]

0.94​

[/FONT]​

[FONT=Arial,Arial]

0.63​

[/FONT]​

[FONT=Arial,Arial]

0.51​

[/FONT]​

[FONT=Arial,Arial]

Other​

[/FONT]​

[FONT=Arial,Arial]

0.62​

[/FONT]​

[FONT=Arial,Arial]

0.33​

[/FONT]​

[FONT=Arial,Arial]

0.41​

[/FONT]​

[FONT=Arial,Arial]

0.20​

[/FONT]​

[FONT=Arial,Arial]

All non-Fuel​

​

​

[/FONT]​

[FONT=Arial,Arial]

5.09​

​

​

[/FONT]​

[FONT=Arial,Arial]

4.07​

​

​

[/FONT]​

[FONT=Arial,Arial]

3.71​

​

​

[/FONT]​

[FONT=Arial,Arial]

3.36​

​

​

[/FONT]​

Total Operating Expenses​

​

​

[FONT=Arial,Arial]

Adjusted​

[/FONT]​

6.89​

​

​

5.55​

​

​

5.27​

​

​

4.36​

​

​

[FONT=Arial,Arial]

Unadjusted​

[/FONT]​

[FONT=Arial,Arial]

6.83​

[/FONT]​

[FONT=Arial,Arial]

4.43​

[/FONT]​

[FONT=Arial,Arial]

5.96​

[/FONT]​

[FONT=Arial,Arial]

5.07​

[/FONT]​

In looking at the following slides, according to data from 4Q06, adjusted stage length by AirTran shows slightly below SWA's. AirTran is slightly under 7, SWA's is slightly over 7 cents.
http://www.nbta.org/NR/rdonlyres/11217DB9-AB28-47EA-9995-A723153240DB/0/FF07BaggaleyPhilip.pdf​

​

​

[FONT=Times New Roman,Times New Roman]​

[/FONT]

 

[YourPilotFriend]

We'll have a better picture of the situation come Thursday. The company is going to have to explain why earnings are soft this quarter, we'll see what they say.

 

[walkthasky]

I could be wrong, and if I am someone will surely correct me, but I believe SWA has at least 4 or 5 fare increases last year (2006). Each time as they stated in their press release, to adjust for rising cost, especially increases in fuel cost.

Just for 'what's it worth' now continue to rant away.

DA

Those increases were separate increases to separate markets. So, all in all, the system wasnt raised 4 or 5 times as a whole.

And i love how everyone thinks we fly 10 legs a day. i flew more in the commuters a day. Just flew a 3 day that had 9 legs total and payed equivalent to 28 hours, yeah its so flawed, HA!!

 

[captain dad]

THe one thing I like about SWA

The leadership at SWA I think realizes that you don't screw with the people that are directly responsible for making the whole thing work. They have kept wages realatively high for the pilots because they know if you have pissed off pilots you aren't going to make money.

The rest of the airline like 6 to 8 legs a day, 20 minute turns, and being the "city bus" of the skys you can keep. It is proof that what works gets to servive.

The guy who decided to do massive fuel hedging was either lucky or one smart SOB. Let's see if they can keep going without it and not go after the crews for more money. Good luck.

 

[Skyboy722]

The rest of the airline like 6 to 8 legs a day,

What will it take to get people to realize that this just isn't true?

And the guy responsible for the fuel hedging? Gary Kelly. I'd put my bet on smart.

 

[flint4xx]

The rest of the airline like 6 to 8 legs a day, 20 minute turns, and being the "city bus" of the skys you can keep. It is proof that what works gets to servive.

Get your facts straight. In 6 years I have NEVER flown six legs or more in a day. I might fly 10 on an entire three day trip on average.