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Boyd's take on the F9/WN/UA showdown

Cardinal

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Good stuff. However this plays out will be fascinating.

Does WN participate in interline agrements? Or do they just rule those out...It kinda matters to our little slice of the DEN market, we get connectors from just about every airline on a regular basis.
 

firstthird

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The only interline SWA does is with ATA at certain airports (MDW, PHX, LAX, I think). Before a year ago we didn't do any (well, not counting a deal with Iceland Air back in the day). Who knows if we'll be doing any a year from now. As a rule though, I doubt we'll be getting into any kind of codeshare in Denver, then again, I wouldn't have put DEN in my top 10 of our next places to go.

as an aside, is it just me or has Mr. Boyd been pounding on the LCC a bunch lately and SWA in particular? Never really registered his name till about 6 months ago when he started piping up contrary the popular wisdom, saying the legacies are about to break out of the gate and go to town. Doesn't he have some kind of consulting deal with Embraer? Was he one of the "50 seat RJs are the future" guys 10 years ago? Anyone have any historical perspective on him?
 
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SirFlyALot

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I agree with almost everything that Boyd says in the article. I was talking to a SWA pilot friend of mine just today about this very same subject. He is a senior FO at SWA. He is just one example of SWA's high labor costs: he makes more than mid-level captains at many airlines. Basically it comes down to this: SWA's non-fuel costs are higher than just about every airline out there that matters to them in competitive terms. That places SWA in a race to grab enough market share (revenue) in the next three or four years so that when their fuel-cost advantage goes away, they have the market share to overcome their disadvantage in non-fuel costs. It's a race for SWA. If they win it, they're set. If they lose it, they're in for some tougher times.
 

race#53

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Here is one of Boyd's prev. predictions;

AIRLINES: Billions of dollars in cost-cutting by the U.S. airline industry should produce results in 2005 with a number of major carriers, including Northwest Airlines, generating profits.

The International Air Transport Association says that worldwide airlines probably will make a combined profit of $1.2 billion in 2005, after losing nearly $35 billion during the past four years.

The trump card is jet fuel costs. Profits depend on oil prices continuing to slide instead of moving up into record-breaking territory.

"Going forward, we think oil will fall into the mid-$30 a barrel range that will allow the major carriers to start making money," said Michael Boyd, president of The Boyd Group, aviation consultants in Evergreen, Co. "It should be a strong year for many airlines. But any little glitch in the fuel supply line could create a problem." __________________
 

G4G5

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This isn't rocket science folks.

According to UAL, they need fuel at $50 a barrel for their survival plan to work. Yesterday's NYMEX listed oil at $61.20. That is just 20%+ higher then what is required.

"In the current environment, Southwest has continued to outmaneuver everyone in the business. When crude-oil prices plowed past $60 a barrel, crushing every airline in its path, Southwest was paying $26 a barrel for 85 percent of its fuel, because of its prescient hedging strategy. And as long as oil prices remain high, this competitive advantage will extend into the next few years. Sixty-five percent of Southwest’s oil in 2006 will come at a cost of $32 a barrel. By 2008, it’ll still be getting 30 percent of its fuel at $33 a barrel."

Southwest has quite an advantage, they know it and they are out to destroy UAL at Denver.

Boyd needs to change the water in his bong if he thinks oils it going to cut in half over the winter. Their is barely enough heating oil to go around.
 
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crashpad

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"Southwest has quite an advantage, they know it and they are out to destroy UAL at Denver."

Pass the spleef, buddy.
Do you really think the government is going to let that happen? Haven't you paid attention to UALs' bankruptcy procedeings over the last 4 years? Yea, Go SWA! But just like New Orleans and FLL, somebodys' got to support those poor unfortunate and innocent survivors thirsting for a mere drink (of malt liquor) to sooth their parched throats.
Sorry, too many jobs at stake and too many politicians.
 
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skykid

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He is a senior FO at SWA. He is just one example of SWA's high labor costs: he makes more than mid-level captains at many airlines.

I have to disagree with the way you word that. I don't think he is an example of high labor costs, I think it points out that EVERYBODY in the pax carrying business but SWA has lousy compensation!

If you are in a position to move to the left seat after only a few years at an airline and make more money than you ever have, I'm sure it seems like you are really making out. Take a look at SWA and what some of the majors used to make (before 30% or greater paycuts to match your pay) and you'll see the level we ought to be getting back to.
 

FlyBoeingJets

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G4G5 said:
According to UAL, they need fuel at $50 a barrel for their survival plan to work. Yesterday's NYMEX listed oil at $61.20. That is just 20%+ higher then what is required.

Southwest has quite an advantage, they know it and they are out to destroy UAL at Denver.

The analysts are predicting oil to come down to $50 or less a barrel. The lower the better for those with no hedges.

Denver has been a glaring hole in SWA's route structure. That was stated by Gary Kelly after the announcement. Newhires would ask about C-springs so much they were told to quit asking about it. Denver was tops on my list of possible new airports after they announced the shutdown of the byzantine baggage system. I didn't buy the press that we would never go to Denver again. I also was hoping for Minneapolis. The Colorado market is one where RJ feed is not very efficient. A perfect market for an airline like SWA.

C-springs has accessibility issues on Powers blvd., so I'm told. I think it may have something to do with the Fort Collins, Greeley, Cheyenne and ski travelers wanting to fly into Denver. C-springs folks can Drive to Denver but Denver travelers are less likely to drive to C-springs. Then there is Castle Rock. They can go to either. Pueblo is just too small a market compared to areas North of Denver.

You be the judge on which airport makes more sense.

Destroy UAL? They have basically completed their transformation and have exit money. UAL is down to fighting weight. Much too healthy to be anything but a tough competitor. SWA has done just fine without Denver and does not need to destroy anyone to be happy. I know I'm happy USAir didn't implode. I know a bunch of people over there. No, UAL will not be destroyed. They and AA are well out of the woods. NWA will be out of the woods by next year too.

I'm not a big fan of Boyd, but his articles are coming across a little better written. He mixes up some obvious data this time and makes some plausible predictions. I don't think Frontier will "beat" SWA but it is possible they will hold their own. Southwest does have the challenge of being a mature LCC with tough LCCs right behind. It is easy to predict a Southwest stumble. Boyd makes his money by predicting changes. But it won't happen on my watch. ;)
 
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G4G5

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This isn't rocket science. SWA is 65% hedged at $32, if oil stays at $60 for the next 6 months. SWA is paying $47 a barrel and UAL is paying $60, with a business plan that requires $50 to survive. Now if UAL's CASM's are in line with SWA's, I would expect all things to be equal and this would be a fair/fare fight but all things are not equal.

It's real simple, because of their hedging SWA can afford a long drawn out fare war in DEN and UAL can't.

Oil will not see $30 for quite sometime, lets remember we are still in Iraq. Even if oil comes down to $40 a barrel, by 2008 SWA is still 33% hedged at $33. Think about it, when will their ever be a better time to attack UAL and F9 at DEN?

How long can UAL sustain a fare war on DEN-LAS, MDW, DAL, BWI, OAK, LAX, MCO flights? The yields on these routes are about to drop through the floor.

It's one thing to compete directly against a single LCC. DAL does it in ATL, AMR does it in JFK but how many legacies have two LCC's to go head to head with? Especially in an airport that they have dominated for so long ?

Let's face it winter is not even here and oil is at $60, it's not going down that quickly. This is the worst season for profits. UAL will not see a descent quater for profits until next summer. This is going to be ugly.
 
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FlyBoeingJets

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I see what you mean. I was thinking UAL's international ops would help subsidize domestic, but that isn't going to make up for much if oil stays high.
 

BeCareful!

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Boyd isn't always correct, but he does seem to see trends a few steps ahead of the typical "expert" on Wall St.

I recall everyone thinking US Air was history when SWA started in PHL. Now, looking back, it seems like a non-event.
 

mamba20

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I just think its sad that SWA is going to be tainting a beautiful city. GO AWAY!!!
 

G4G5

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BeCareful! said:
Boyd isn't always correct, but he does seem to see trends a few steps ahead of the typical "expert" on Wall St.

I recall everyone thinking US Air was history when SWA started in PHL. Now, looking back, it seems like a non-event.

USAir is history, they were purchased by AWA and will be run by Dave Parker. All that will remain in a few years is the paint job.
 

FlyBoeingJets

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mamba20 said:
I just think its sad that SWA is going to be tainting a beautiful city. GO AWAY!!!



You sound like some old dude with a long beard on the porch of a shotgun shack yelling at passersby. The straight jacket is on its way.
 

Skyrunner

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This is the Boyd Group bios right from their website. This says a lot about their intentions. Who is paying for their EXXXXXPERRRRRRTTT analysis?


Mike Boyd - Mike started his career with American Airlines in 1971. He joined Braniff International in 1977, attaining the position of Regional Director, and was responsible for opening the carrier's Far Eastern operations. In 1982 he moved to Bar Harbor Airlines as Vice President of Marketing and Planning.

William Oliver - [FONT=Tahoma, Verdana, Lucida]Subsequent to service in the Marine Corps., Mr. Oliver had a distinguished career with Braniff International Airways, attaining positions as Director - System Operations, Director - Customer Service Administration, and Vice President - Personnel & Labor Relations. Following his career at Braniff, Bill was Executive Vice President of a low-fare jet airline, and was responsible for the carrier's route planning, marketing, and daily operations. [/FONT]
[FONT=Tahoma, Verdana, Lucida][/FONT]
[FONT=Tahoma, Verdana, Lucida]Brian Streeval - is Director - Project Analysis, and works with client airports around the nation in developing new approaches to air service development and airline recruiting. Mr. Streeval joined The Boyd Group from the planning department of US Airways.[/FONT]
[FONT=Tahoma, Verdana, Lucida][/FONT]
[FONT=Tahoma, Verdana, Lucida]Capt Mike Baiada - A 777 captain at a major US airline, Mike has been a leader in projects to improve the nation's air traffic control system, and in 1994 co-authored the first study that brought Free Flight to the attention of aviation.
[/FONT]
 

GogglesPisano

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I think I'll start an aviation consulting group. I'll call it The Goggles Group. I can publish sarcastic editorials by pulling un-informed conjecture and opinions out of my arse once a week. Who's with me?
 

Marko Ramius

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I think I'll start a group too

It'll be called the, 'I'm a really smart pilot who really can't stand to hear anything even remotely negative about any company I may work or wish to work for, so I will dig feverishly to find any amount of information to discredit said opinion(s) or simply ignore them-unless they agree with me, than never mind it's obviously true everyone can see it' Group. I think that may not all fit on the groups charter message, and could possibly be a run-on sentence, I'll run it by a publisher whose work I like to be sure though.
 
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