Southwest to ‘trim headcount’ after growth in costs

[SIU 130]

The CEO of Southwest Airlines Co., Gary Kelly, announced that the airline plans to cut about $100 million in expenses by “trimming our total headcount complement overall,” as a result of higher fuel prices hampering the carrier’s growth.
In a conference call with Bloomberg News, Kelly said there are no immediate plans for layoffs but the company will be mindful of expenses as a result of “a reflection of concerns about high fuel prices and economic uncertainty.” He did not outline how a trim to employee numbers would be accomplished, Bloomberg said.
The company saw its costs grow by 13 percent in first nine months of 2012 while revenue grew by 12 percent, Bloomberg said.




.....................Gary, I have about 717 good ideas for you.

 

[dalad]

The beginning of the end. There GL, I beat you to it. SWA guys and gals , that was TIC.

 

[jonjuan]

The beginning of the end. There GL, I beat you to it. SWA guys and gals , that was TIK.

What's TIK?

 

[Donald]

Southwest offers an exit bonus plan every few years to reduce man power in various work groups. It sounds like they will be doing another one soon. I not sure when the last one was that was offered to pilots though.

 

[BILL LUMBERG]

nothing to see here people......

 

[General Lee]

These aren't the droids we're looking for. Move along. Move along.


No, seriously, I hope nobody gets laid off or furloughed. That would be bad, and I hope the SWA/AT guys do not have to go through that, ever.



Bye Bye---General Lee

 

[Lear70]

Some of the bigwigs had JUST flown back in from Dallas as we were finishing recurrent ground yesterday and they stopped by class. Of course, that's the first question I asked, what the heck does he mean by that?

The answer was pretty simple: there is a LOT of overlap in ground operations personnel throughout the entire system now, especially in cities where we both had a lot of presence but may trim back slightly and re-deploy the assets other places, for instance, MCO-BWI where we overlap quite a bit of traffic and don't need to.

The big spotlight is on Dallas... with the training center personnel combined, schedulers, dispatchers, I.T. (although a LOT of our I.T. people have been bailing since they're non-unionized which is unfortunate since our I.T. dept has been pretty decent, all things considered), and other office administration, the overhead from all that is quite a bit higher than it really needs to be.

As a result, as more departments are incorporated to Dallas, those who don't want to make the move and resign will not be replaced. Additionally, people in Dallas who resign will not be replaced and if it shorts a department, they may offer incentives for people to switch from personnel-heavy departments into those that were deficient, thereby "lowering the total head count".

With SWA still quite profitable from a yearly Net income perspective and that only improving as we connect the dots via code share next year, continue combining operations, and reducing overhead as mentioned above, that profit is only going to improve, barring further increase in oil prices or a further downturn in the economy. (did anyone else appreciate his comments aimed at the Presidential election regarding the worsening economy? got a chuckle out of me...)

Therefore, with profits in a livable range and only improving, no one should be worried about furloughs. We also asked how the they intended on getting all of us through training by 1/1/15, and they stated that they can train 1,096 pilots per year. I then asked how they planned on doing that when the most they had ever taken in one month was 48 and which we heard was running the sims non-stop between those and recurrent people and stressing the check airman program. They simply said those were the numbers the training dept said they could handle.

We also asked what the exact fleet numbers were over the next two years, including the 717's being sub-leased to Delta. We are sub-leasing 88 717's to Delta. SWA is taking delivery of 36 replacement aircraft this year, 20 next year, and 30 in 2014, bringing the hull numbers to 86 replacement 737's by 1/1/15, which coincides with "flat" fleet growth. In addition, attrition will drive around 300 retirements in 2013 and 2014 which corresponds to about 1,000 total SWA pilot upgrades in the 3 year period of the transition, or about 1/3 of the pre-merger SWA F/O's, over half of those upgrades were not planned before the acquisition.

After that, the list will "normalize" over a 2-3 year period, re-upgrading all our displaced CA's that can hold it by seniority (which by 2017 is close to 450), and then (2017-2018) the fleet will be re-evaluated (retirements/replacements of aircraft). They also said they are starting to put the new seats in the -300's, indicating that the airplane will be around at least as long as it takes to recoup that investment (5-7 years is what we heard before on that).

All this in the FWIW files.

 

[BILL LUMBERG]

Without the fine level commentary of wave or SwaBubba or Canyon......IMHO I think this is not a big deal.

Nobody is going to get laid off.....all the naysayers are circling wagons, but its not gonna happen.

 

[humveedriver]

In addition, attrition will drive around 300 retirements in 2013 and 2014 which corresponds to about 1,000 total SWA pilot upgrades in the 3 year period of the transition, or about 1/3 of the pre-merger SWA F/O's, over half of those upgrades were not planned before the acquisition.

After that, the list will "normalize" over a 2-3 year period, re-upgrading all our displaced CA's that can hold it by seniority (which by 2017 is close to 450), and then (2017-2018) the fleet will be re-evaluated (retirements/replacements)

Lear,

Good post. Something I don't understand is where 1000 upgrades occur from 300 retirements. I know using Jamie's calculator I look at upgrade in 2018 as a high 400 AT pilot, so the other numbers make sense, I just don't get the formula.

It would be impressive to see SWA train everyone by 1/2015. Sometimes I think George McClellan is running the airline.

 

[Lear70]

Lear,

Good post. Something I don't understand is where 1000 upgrades occur from 300 retirements. I know using Jamie's calculator I look at upgrade in 2018 as a high 400 AT pilot, so the other numbers make sense, I just don't get the formula.

It's a combination of the CA seats they gain from our 737 CA's losing their seats plus the 86 new 737 deliveries during the integration, most of which they weren't expecting to take delivery of pre-acquisition announcement, (deliveries which were originally offset by -300 retirements and now they're keeping them since our 717's are going away), plus the attrition numbers.

All of that is 1,000 SWA F/O upgrades by 1/1/15 (round numbers give or take) during the integration.

It would be impressive to see SWA train everyone by 1/2015. Sometimes I think George McClellan is running the airline.

LOL - well, I still have my doubts, but we'll see...

 

[Capn Butthead]

How about we get rid of the VP of Toilet paper and the director of GO water fountains. Get rid of all of the bad middle management that we have. They are so out of touch and costing us millions....ie the moron that redesigned the flight attendant drink cart...at a cost of millions of dollars, and now they're spending millions of dollars to pull them out. Morons

 

[Dan Roman]

I must say it's refreshing that this didn't turn into some SWA bashfest. No one wants to see anyone lose a job anywhere. I think it's safe to say any merger is going to make some jobs redundant. Hardly a sign of anything ominous or indication of any trouble.

 

[GIZMONC]

SWA can not ride the bags fly free forever. Every carrier that is making money is doing so by extra fees. With the avg number of bags that SWA is carrying on a daily basis, it could easily just charge 10.00 for a checked bag. That would equate to about 1.25 million per day. So if you do the math that would bring in about $37.4 million per month or $150 Million per quarter. No bad if you ask me but no one did I just ran the numbers.

 

[jonjuan]

SWA can not ride the bags fly free forever. Every carrier that is making money is doing so by extra fees. With the avg number of bags that SWA is carrying on a daily basis, it could easily just charge 10.00 for a checked bag. That would equate to about 1.25 million per day. So if you do the math that would bring in about $37.4 million per month or $150 Million per quarter. No bad if you ask me but no one did I just ran the numbers.

Why do you think they already haven't do so if the "math" is just so darn easy? What are the unintended consequences?

 

[Lear70]

Had this exact discussion with Mike V and Chuck M a few months ago.

The short answer was, Southwest will never charge for bags until the money offset from customers choosing SWA so they don't have to pay those fees is SUBSTANTIALLY less than what they could make charging for bags.

Right now, it's estimated they make a lot more money with their "Bags Fly Free" policy (and the associated ad campaign bringing in people who have been burnt by bag fees, especially with Spirit and Allegiant) than they would if they charged for bags in their system.

There's also other ancillary fees that help make up for it. People paying the up-charge to get the first boarding passes, etc. Their response was more detailed than that and had some proprietary $$$ info to it that I can't put on here, but the impression that I got was that they review this topic on a regular basis, have detailed estimates on the exact dollar figures each way, and they believe they aren't even close on reaching a changing point yet.

They're certainly smarter than I am about a lot of things, including revenue management, so I'll just keep flyin' 'em.

 

[jonjuan]

The "free" bag policy is a smart way to train the consumer. Many consumers believe they are paying less overall by not having to pony up "exorbitant rip off fees" which seems a lot like a "penalty" when they check in. It's a great marketing ploy. Not only do most believe SWA has the lowest fares, they don't like the fees at check in when it's too late to do anything about them. SWA will lose gained "bags fly free" gained marketshare if they start charging for bags.

 

[humveedriver]

From an operational stand point, checking bags at SWA easily trims 10-15 minutes off of the boarding process. While SWA is certainly entering new markets that require longer turn times, they still have an extensive network that relies on quick turn around times. The boarding process at AirTran evolved after the baggage fees were introduced, as more customers brought baggage on board the aircraft, creating log jams at security and in the aisle. Gate agents now ask for volunteer bag checking for free (lost revenue, and customers catch on quickly) and the enforce tagging at the gate after the first 100 or so pax, in order to get an on time departure. Something SWA is doing that could lead to more bags in the cabin and potentially charging for checked bags, is the new evolve interior. Particularly on the classics it is impossible to load a standard 22 inch bag wheels first in the overhead. The new interiors allow this. Can't remember if the NG without evolve has the big or little overhead space. SWA mentioned in the 3rd quarter results that some (@100) classics are going to get the new SWA interiors. So looks like those A/C will be around for awhile. Hopefully one 2nd order effect of the larger overhead space with the evolve interior will be an improvement on SWA's Mis-handled bag report card.

 

[JT12345]

From an operational stand point, checking bags at SWA easily trims 10-15 minutes off of the boarding process.

+1 this

Utilization is what makes SWA great. Getting an extra leg out of those planes that other carriers just have not done. I have seen them turn 80% full airplane around with 2 wheelchairs in 16 minutes door open to door shut.

Their culture and their employee contracts motivate the employees to increase utilization.

I don't think anyone can deny SWA utilization on here.

I work like that now. I am just not being rewarded short term for it in my paycheck. If you don't think this affects you long term no matter who you work for you have never been furloughed yet. And if you are always milking it then you can not take anything away from the company.

 

[funnyman12]

Airtran can charge for bags, turn a full 737 in 25 minutes with only 1 gate agent. Sometimes that same gate agent drives the tug. I think SW has learned that Airtran was a lean machine. Problem is management is salivating at the potential costs savings. Now management has the carrot of a b scale. Oh an the Airtran b-scale hurts SWAPA more than us getting SW rates last year. Just like naybe ALPA sgould have looked at the history of SW acquisitions, SWAPA should have looked at the history of allowing a b-scale. Shame on us....

 

[thrasher]

In a few years SWA will start charging for bags because they will realize the potential for 500 Million extra dollars per year is far more than the extra passengers gained from not charging. It may have worked initially but now folks just book cheapest ticket online and expect fees at the airport. After we start charging, SWA will will be giddy over the bag fee money like they were the first to figure this out. Our problem is inability to say we F'd up.