Boyd's take on $4 jet fuel and AA's new fees

[coffeedog]

Except for Southwest... You are off the hook for having a hedge.

Not arguing, just pointing something out. Southwest IS a VERY well run airline, and has an advantage of about 20% CASM over the legacy airlines INDEPENDANT of any fuel hedge. Southwest clearly reports CASM excluding fuel, and they are an honest 18% to 20% lower cost than any legacy carrier. The fuel hedge is an additional advantage.

 

[cactusboy53]

I'm inclined to believe that WN and its management is one of the only major airlines that is running its airline like an airline. The others seem to be cash cows for leasing companies, vendors, etc. Who wins? Well the upper tier executives of course. Those guys and gals have suffered long enough!!

Time and time again we have seen these people reap huge paychecks and more importantly bonuses and stock options (that used to be worth something). These payouts and rewards were just plain obscene, especially when you compare them to WN executive pay packages.

Unfortunately, the airlines are not the only place that we are seeing this activity.

 

[AA717driver]

I'm tired of saying this but here goes: AA (and the rest of the airlines) have a shining example of how to operate an airline right across town.

The KNOW SWA runs a great operation. They KNOW how they do it. They REFUSE to adopt that style of management.

AND...They expect AA to turn around by treating their employees like two-year-olds and their passengers like prisoners. TC

 

[YourPilotFriend]

You want to know what is next Boyd....The government is about to fire up the printing presses to keep this system going. They will choose who gets to stay afloat, the ultimate form of regulation.

 

[RockyMnt1]

I recommend that the airlines start charging pax based on body weight. That, in addition to the $15 first bag charge, will certainly save the companies.....

 

[LJDRVR]

Not arguing, just pointing something out. Southwest IS a VERY well run airline, and has an advantage of about 20% CASM over the legacy airlines INDEPENDANT of any fuel hedge. Southwest clearly reports CASM excluding fuel, and they are an honest 18% to 20% lower cost than any legacy carrier. The fuel hedge is an additional advantage.

Not sure about your CASM number. I'm pretty sure us whipped dogs at CAL are cheaper than anybody, thanks to 25 years of concessionary negotiations.

An interesting thing about Southwest is that when compared to all other carriers, their percentage of labor cost per total revenue is higher than anybody, as is their pilot costs percentage of revenue. (34% and 12% respectively.)

You are correct though, very well run company.

Regarding Boyd, this is one of the occasions I'll agree with him. It never ceases to amaze me just how stupid some of these airline executives are.

 

[FlyinGuy]

Here is an idea that will make the airlines millions!!! Start charging passangers per pound. If you charge $3 per pound, the average round trip ticket would be about $600. Some of these heavyweights would break the bank (and the seat)!!!!

 

[Skank]

Boyd is a fun (if repetitive) read, but writing that there's a big problem and someone needs to come up with a radically new way to run airlines isn't particularly helpful.

Face it; if HE had a clue about the "silver bullet" he'd bottle it and sell it for millions. He doesn't have a strategy either.

I agree, long on whiny, cutting sarcasm, short on solutions.

 

[JumpJetter]

An interesting thing about Southwest is that when compared to all other carriers, their percentage of labor cost per total revenue is higher than anybody, as is their pilot costs percentage of revenue. (34% and 12% respectively.)

That's where most people make the mistake. Hour for hour, SWA pilots are paid more than comparable narrow body pilots. BUT, SWA pilots AS A GROUP are far more productive that comparable narrow body pilot groups. I do not mean this in the "ski nazi" fashion either. What I mean is the Company and the Union have devised a well run trip trade/drop/extra fly/volunteer overtime system that allows YOU THE PILOT to be your own best scheduler. INCENTIVE is an important aspect to success. SWAs system is in no way perfect, but it obviously works pretty well.

 

[coffeedog]

Not sure about your CASM number. I'm pretty sure us whipped dogs at CAL are cheaper than anybody, thanks to 25 years of concessionary negotiations.

Just a quick estimate for you, at the risk of some public math: Continental spent $509million more in Q1 '08 than if they had the same CASM as Southwest excluding fuel.

Total wages at CO were 729million for Q1, to put it in perspective. Pilots wages were only a fraction of that total wage figure.

http://www.continental.com/web/en-US/content/company/investor/docs/continental_10q_2008_q1.pdf

Statistical Information. Certain statistical information for our segments' operations for the three months
ended March 31 is as follows:
Increase
2008 2007 (Decrease)
Mainline Operations:
Available seat miles (millions)........................................................................... 25,278 24,124 4.8 %
Cost per available seat mile, including special charges (credits) (cents) (1) .... 11.79 10.56 11.6 %
Average price per gallon of fuel, including fuel taxes (cents) .......................... 279.65 189.48 47.6 %
Fuel gallons consumed (millions)...................................................................... 375 361 3.9 %

fuel price(279.65) x fuel consumed(375) / Available seat miles(25278) = 4.15cents fuel CASM

11.79 cents total CASM – 4.15 cents fuel CASM = 7.64 cents CASM excluding fuel

http://www.southwest.com/investor_relations/fs_quarterly_earnings.html
"Our first quarter 2008 unit costs, excluding fuel, increased 2.4 percent over last year, which was better than we anticipated. Based on current cost trends, we expect our second quarter 2008 unit costs, excluding fuel, to increase from first quarter 2008's 6.70 cents.”
CASM, GAAP excluding fuel (cents) 6.70
So, 7.64/6.7 = 1.14 or 14% greater CASM than Southwest
Operating Expenses 3,636 (millions) x 14% = $509 million more than if Continental had the same CASM(excluding fuel) as Southwest.