Consider Taking Off The Rose-Colored SWA Glasses For a Moment and Discuss...

[say again]

Honestly, the productivity at SWA is quite amazing. They fly the jets A LOT. Don't spend a lot of time on the ground, cause planes don't make money on the ground. Without a hub and spoke system you are not rushing folks to a hub to make the final connection.

Very true!! BUT on SW, to get from A-B you need stops at C and D with a connection at E. JK, but my east to west trip and vice versa certainly felt that way. :beer:

Productivity+great customer service goes a long way.

 

[skywdriver]

The fuel hedges never run out friend. Three guys at SWA buy and sell those contracts all day. Its their job. The only way they would work against us is if a new oil field was found somewhere, and the cost of oil dropped by a huge amount and stayed down.

SWA isn't saddled with huge overhead for airport lounges or first class seats that get given away more than sold, and they don't throw big bucks at lawyers to work on mergers that never happen.

SWA could stumble if we got bad leadership at the top, but I think they handle changing economic environments better than anyone.

I think that post is misleading. Although they may continue to hedge fuel, they are not hedging it at $60 a barrel any more. Futures contracts work like stocks or anything else that is sold, you have to have someone willing on the other end to sell for what you are willing to pay. Nobody is selling futures contracts for that cheap. Southwest locked in all of those cheap fuel contracts a long time ago. Each year they are less and less hedged. I think the fuels hedges are completely gone by 2012, however you can find that information in their annual report or even the quarterly 10Q's Point being, eventually the real environment will catch up to Southwest as well. And, for the health of the industry as a whole, the sooner that happens the better. They have a good business plan, but those fuel hedges were complete luck - no one saw fuel going where it did today when they locked in those contracts. However, now they are able to keep the ticket prices much lower than they should be based on such an advantageous cost structure. So, the public thinks it is their born right to fly in a commercial airliner for cheaper than they can drive their car. Totally ridiculous, and I think it will be hard for the industry to correct itself, while there are still companies that are able to underprice tickets.

In addition, you can't compare Southwest to a legacy carrier that feeds international flights. Apples to Oranges. Totally different business models. I for one can not wait until everyone is on a level playing field. I highly doubt the people working at Southwest realize how lucky they are that a couple of guys in the finance group took a huge chance on locking into oil prices 10 years into the future. Of course i guess its always better to be lucky than good.

 

[Tejas-Jet]

1000 hrs of block a year and 14 days off a month ... my how the dream has changed.

The good news is we get to do it until we turn 65!

Only if you want to...this guy's schedule is done that way by choice....his choice....some months I fly alot...some I don't fly so much...depends on what I've got going....

Cowboys game....wedding....Star Trek convention...

 

[JumpJetter]

Very true!! BUT on SW, to get from A-B you need stops at C and D with a connection at E. JK, but my east to west trip and vice versa certainly felt that way. :beer:

Productivity+great customer service goes a long way.

I agree with ya! Just a couple of things to remember, for the most part, SWA does not operate routes that do not make money. How can I know that? I don't. But they do make lots of stops to pick up more people, and FOR THE PRICE, peeps seem to be OK with it.

 

[JumpJetter]

I think that post is misleading. Although they may continue to hedge fuel, they are not hedging it at $60 a barrel any more.

True, it's $53/brl this year.

Each year they are less and less hedged. I think the fuels hedges are completely gone by 2012

It changes every quarter. I will find a couple of reports and post them chronologically for ya. As recently as the fourth qtr of 2007 we were 70% hedged at $53/brl in 2008. When the first qtr plan came out it was 75%.

real environment will catch up to Southwest as well.

At which point SWA will adjust the business plan

but those fuel hedges were complete luck - no one saw fuel going where it did today when they locked in those contracts.

Again, it's a continually adjusted thing. Not all of them were made in 2000. Plus I'd rather be lucky that good any day!

In addition, you can't compare Southwest to a legacy carrier that feeds international flights. Apples to Oranges.

In some ways I agree with you, but Pan Am eventually became an International ONLY airline. Is that where the legacys are going? Seems to me there would be a lot MORE domestic opportunity available for other airlines if that is the case.

Good discussion. Rare for FI

 

[say again]

True. Each of the legs were full or very close. I really don't mind multiple legs. Granted it wastes a day, but I find flying SW to be enjoyable (by myself, no family). The FA's and CSR are by far the most pleasant and seem to actually care about the customer. :beer:

 

[Tejas-Jet]

Southwest locked in all of those cheap fuel contracts a long time ago.--->The hedge contract are a work in progress. What you see today isn't want we had 3 or even 5 years ago....it is also not what we will be hedged in 2-3 or even 5 years from now. Each year they are less and less hedged.---> and that due to the changing fuel market. The final numbers are not yet done for 2009...negotiations are still in progress. I think the fuels hedges are completely gone by 2012,--->Take notes...the fuel hedges are part of the long term business strategy...they aren't going away They have a good business plan, but those fuel hedges were complete luck - no one saw fuel going where it did today when they locked in those contracts.--->I really don't think the CEO signed off on "luck" back then...I'm sure the Hedging presentation had some level of "facts" associated with it. The first Hedge contract prices are not the same as the hedge contracts in place today....sure, we are paying more today than we did then...but it's a much more lucrative business proposition today than it was back then...and it works for SWA...why? Because to get in the hedge game....you gotta pay up front....not too many airlines got that kind of "jack".

I for one can not wait until everyone is on a level playing field.--->We live in a capitalist society...no business is guaranteed a "level playing field" in this country I highly doubt the people working at Southwest realize how lucky they are that a couple of guys in the finance group took a huge chance on locking into oil prices 10 years into the future.--->I can't speak for everyone here, but your "Highly doubt" feeling is misplaced when it comes to me. Thats because I sure do realize how blessed we are to have top notch people working for us. And of course, that comes from having flown at a "legacy" carrier where our dim-witted management team couldn't see into the next month....much less 10 years in advance. BTW....lots of Pilots here share my feelings toward those who work in our fuel office.

Maybe some people need to work for an airline like that to realize how good we have it here.

 

[Whataburger]

So, if oil goes to $500 a barrel and SWA is hedged at $350, that's okay? Don't think so.

We pay $350. The other airlines pay $500. We can charge less for a ticket.

The other reasons include:
Great leadership, common goals, efficiency, teamwork, forward thinking mgmt., and luck. Luck is where timing and preparation come together. Was it Parker that said, "Southwest has predicted 10 out of the last 2 recessions."

 

[Mach 80]

>>>1000 hrs of block a year and 14 days off a month ... my how the dream has changed.<<<

Hey Bavarian,

You should check out a SWA pilot's line sometime. For the same relative seniority compared to any other narrow body major airline pilot's line, a SWA pilot's line will work fewer days a month. Instead of going out to a city then back to a hub only to get 2 hours for a plane swap, eat yogurt, and cruise the magazines at the airport store, the SWA pilot is doing 25 minute turns on a point to point route and rarely messes with swapping planes. Ergo, he can typically fly 7 to 7+55 each day he goes to work. It's called EFFICIENCY. Some guys pick up a lot, some don't ever. Some guys work hard for two months and then give away some trips the third, using the extra money from the hard working months pay for his boat, etc. There are even a couple of SWA Captains who make >$300,000 and one who made over $400,000 last year. Not unusual for some F/Os to make > $130,000.

 

[SDCFI]

Not all SWA tickets are "dirt cheap" either. I'm flying to Boston in August for a wedding. AAL DFW-BOS roundtrip: $718 for two non-stop each way. SWA DAL-MHT: $850 with 3! stops there and 2 coming back. Southwest makes money by pricing their product at a level that actually covers the cost of operating plus some profit. Their productivity and low-cost structure means they don't have to charge as much in most cases to meet that point. It's their efficiency that drives their success, the hedges are just icing on the cake if you ask me.

 

[ultrarunner]

...
What makes people think that SWA won't find itself in the same position as a UAL (recently the holy grail, now the polar opposite)? Yeah, maybe they have much better management than UAL...but HOW do they survive (and continue to survive) in these unprecedented conditions and remain "low cost"?

VOR, the issues are multi-faceted....

But as others have said, from a cost-structure standpoint, SWA is the leader...

First the obvious:

One plane type. Every bloody airframe is essentially the same. This keeps pilot training costs at a minimum, spares costs at a minimum, etc...

Think about UAL, DAL, AAL and the costs associated with maintaining spares for 6 or 8 fleet types. Sims, spares, crews...etc...it goes on and on.

Secondly, SWA, in some markets, utilizes some outlying airports. So at the time, they can get a massive bang for the buck by agreeing to serve that airport.

It's no secret SWA hits their vendors pretty hard, so that also makes a big difference in cost savings.

These are just a few examples...but big ones whe you start looking at costs.

Legacies like I mentioned above need hundreds of millions a day just to turn on the lights....

Massive international hubs, half a dozen or more fleet types....

REALLY big training centers..

HUNDREDS of sims....ever been to AAL training academy? I have...it can be seen from oribit!

So, with all that said, these legacies are burnded with day-to-day fixed costs that is not supported by current fare levels.

SWA, simply by its nature, avoids that type of burden.

Now, I admit, this is a very simplistic view, but I'm not that smart...so that's all I gots!

Ultra

 

[Voice Of Reason]

Now, I admit, this is a very simplistic view, but I'm not that smart...so that's all I gots!

Ultra

...But that's a lot! :beer:
Thanks Ultra, and everyone else who helped this non-economics major understand a bit!

 

[Skybus]

There are even a couple of SWA Captains who make >$300,000 and one who made over $400,000 last year. Not unusual for some F/Os to make > $130,000

And many F/As in the 120-130K range by WORKING HARD.

Instead of trying how to make as much as possible doing as little as possible we understand by working hard we can all prosper.

 

[Skyboy722]

but those fuel hedges were complete luck - no one saw fuel going where it did today when they locked in those contracts.

I GUARANTEE you, HUNDREDS of MILLIONS of dollars were NOT thrown into a hedging investment that was a shot in the dark. And Southwest was one of few that had (and continues to have) the kind of cash to make such investments.

I for one can not wait until everyone is on a level playing field.

Even ex-fuel, Southwest has the second lowest CASM in the business. (Second only to Airtran, and only by a little). So even on a "level playing field", SW still has a significant cost advantage, for alot of reasons mentioned above.

That being said, the reality is, we are one bad CEO away from a very different reality...

 

[BrokenWing]

We pay $350. The other airlines pay $500. We can charge less for a ticket.

The other reasons include:
Great leadership, common goals, efficiency, teamwork, forward thinking mgmt., and luck. Luck is where timing and preparation come together. Was it Parker that said, "Southwest has predicted 10 out of the last 2 recessions."

The point that you're missing is even if SWA is paying $350 and everyone else is paying $500, airline travel as we know it will not be the same. There will be massive consolidation and reduction because people won't be flying. So, even if you're hedged at $350, you will not be able to sell enough tickets at the price required to support your current schedule. You might be the only game in town, but people just aren't going to fly. Luck will only get you so far, it won't fill airplanes when americans are struggling to pay bills and feed ther families.

 

[jhill]

Considering that not too long ago UAL was the "holy grail set-for-life" pilot job, and most people thought that nothing could change that...I have a topic for discussion about SWA.

Please don't turn this into a SW hating thread, or a "we'll always be on top thread" from the opposite side.

I'd like to hear from some people who feel they might have a bit of financial sense (of which I have absolutely none) which might explain to me HOW SWA can succeed in THIS economic climate (and worsening), especially once the effects of no longer benefiting from smart fuel hedges kicks in.

The only rational-seeming way for airlines to survive, seems to be to clear out the negativity that makes them so hated in the eyes of the general public, AND raise prices and pass costs along to customers, not cheap tickets from employee subsidies....

Which brings me to SWA... just HOW will they be able to continue (in THIS economic env & worse) to pay employees the way they do (well) and keep tickets dirt cheap? I just don't see how people are talking one minute as if these low cost carriers will survive (in THIS climate) and then how fares need to raise exponentially another minute (which seems to be the solution I see).

I could understand if SWA was on a Wal-Mart type road (cheap/mass product/PITIFUL wages)...but I don't get how they can continue to be on top with their current model (as the economic climate worsens, and the effects of loss of great fuel hedges kicks in).

What makes people think that SWA won't find itself in the same position as a UAL (recently the holy grail, now the polar opposite)? Yeah, maybe they have much better management than UAL...but HOW do they survive (and continue to survive) in these unprecedented conditions and remain "low cost"?

Again...break it down for the financial knowledge impaired... I am genuinely curious as to how to gauge this and not get in the mode of jumping from ship to ship (remaining at the bottom at each ship) following a good job that may not exist anywhere transporting passengers in any venue (that doesn't involve the following : being away 7 or 8 days at a time for your entire careers, justifying your flight plans to some (fractional) CEO you're flying that think he knows it all, or
going to a foreign country and fly for an Emirates type operation)....

Someone else aready said productivity. It is one of the keys. Another is employee attitude. Most folks here care about the company and even each other. Most try very hard to save the company money when and where ever we can. Back to productivity. We have some ofthe highest paid mechanics in the industry but we only have 4 per A/C. If that many. Everone here is addicted to overtime. Hard work pays off around here. I have never had so much flexibility with my schedule or so many ways to make extra money. This place is not perfect and we bitch and moan but we also work hard and pitch in to help when needed. Another key is we know damn well we are not immune to this industies woes. Every year things seem to get tougher and tougher. We are lucky to have very smart, good people in management that we can trust. They are not over paid and they work hard. They keep coming up with better ways to do things and control cost.

This is a career of luck. Wether some of these guys will admit it or not we are just lucky, especially right now. Will it last? Who knows. I just hope we all keep trying like we do now. As long as that is the case I like our chances. If we get greedy and lazy it will surely go the way of many others. With Herb gone who knows what could happen. This place is woth a lot of money and we all know what can happen there.

PS. The emirates gig is a good deal for some of us.. I've got a buddy that loves it over there and he's making big bucks with a 3 year upgrade. Mega growth planned as well.

 

[Voice Of Reason]

Someone else aready said productivity. It is one of the keys. Another is employee attitude. Most folks here care about the company and even each other. Most try very hard to save the company money when and where ever we can.

That is so true...

I wish more of these aviation execs could get it through their skulls that employees will WILLINGLY be like that if paid well and treated well.

Honestly, that's all it takes for us to go the extra mile and SAVE these companies, MAKE them successful, yet so many execs just don't get it...or egos won't LET them get it.

I'll bet that behind every snarly F/A or unbearable CA at a legacy (or frac run into the ground), there was most likely once someone who DID give a ***t early on.

Also a lot of that attitude becomes the self-fulfilling prophecy of pax who have already decided they are ALL like that and make things hell for those still trying to do a good job....

 

[Jet41]

Smart management, employees that know the value of hard work, management that knows the value of said employees, productivity, employee and management groups that work truely toward the common good

 

[say again]

Smart management, employees that know the value of hard work, management that knows the value of said employees, productivity, employee and management groups that work truely toward the common good

What a concept!! To bad others cant fathom the idea.

 

[Benjamin Dover]

And like KaptainKiwi said, we are a productive group. By the end of June I will be close to 500 hours so far, and that is with between 14-17 days off each month. I'm ok with that because I have no problem earning my paycheck. When you are getting paid to stay home, deadhead, sit in your hotel, etc., its great for you, but not the group.

Work hard, play hard, go home. Works for me.

RDG,

You are are "poster tool" for guys that give SWA a bad name. Having worked at a two different "majors" before SWA I'm sorry to deliver the news that we have the same mix of pilots as anywhere else. Our "productivity" has nothing to do with us, but it is our business model. My buds at other airlines would love to have my duty days, length of layover and average days off. You are being a d0uchebag bragging on here about how much block you fly and how hard you work. You fly more block at SWA because you have to.

I used to have 12+ hour scheduled duty days and 10 hour scheduled layovers which often became 14+ and min 8 hour FAR rest. I have yet to see anything close to that at SWA. We fly more block but have far shorter duty days and much longer layovers than other airlines. You can thank our lack of "hub and spoke" and quick turns for this, or keep believing it is all because of you if it feels better.

Humility is a beautiful concept.

BD