Could Southwest's run of profitability be coming to an end?

[SWA GUY]

I just flew my last 3 day with a guy that is on the EFB development team. The current cost of Jepps is $1.8 milllion/annually and the cost of the EFB is $1.8. Right now they are a wash.

The bigger problems, as I'm told, is that:

A) Getting the Fed's to sign off on the program the way we want it.

B) Finding a vendor that will be around for a while, that can develop the EFB. Yes, Navaero is the ONLY pure EFB manufacturer. Some other Computer companies make an EFB, but not as their mainstay business.

C) Getting the data to the EFB. USB port/WiFi? Problems with both. The USB can be very finicky in terms of receiving data. And some airports won't lets us hang a transmitter near a gate so that we can update our EFBs. Nice....

D) Did I mention the Feds? They have all the same questions/concerns the pilots have... "I can't see my 10-2 and 10-9 at the same time. It's not safe!"

CAL is jumping into this with both feet, while we are more wary of putting something into the jets that we're not entirely satisfied/happy with.

While both schools of thought (CAL/SWA) have their merits, SWA is going to take the more conservative route on this. That is not to say CAL is wrong, sometimes you have to just get something rolling and go with it. And good for CAL, without taking a chance on something, how would anything get invented?

So, SWA is going to remain in the development stage(which is not the beginning stage) unitl costs offset, or until we're ready to roll out the signed/sealed delivered product.

 

[GuppyWN]

He just glared at me, and then he said something along the line of 'that can't be true, our company has already looked at it.'

I really wanted to hand the guy a napkin to wipe the orange stain off his lips. I have found over the years with some friends of mine who are flying at SW that it is better not to even suggest that they could do something wrong or if you do, watch out!!

Don't you know, we are all jealous.

I'm sure WN is no different in that we have a few guys that do/think/say whatever the company line is. To them it can't be a good idea because "we" didn't think of it. All in all if it saves money we usually do it so I'd expect to see the EFB sometime in the future. It's all about low hanging fruit.

Gup

 

[SWA/FO]

His ability to push some folks' buttons is nothing less than pure performance art. He is a rare and talented artist, and his handiwork creates long threads, angst, and grinding teeth.

Watching from afar, however, can be humorous...

Somebody "gets it".
We will get a raise with our new contract - Fact.

 

[tico]

"......no one runs, no one races around...."

are you kidding??? have you seen the way you guys taxi??? or yet burn the crap out of your brakes to make some short turn off the runway???

Dude, last time I checked, it is hard to wear out the brakes parked at the gate.....The beacon off(parked) to the beacon on(parked).......so I see that you fly a career killer.....When are you going to get a real job, with real pay and real benefits.....******************************bag!!!!!!

 

[Kugelblitz]

You must be a joy to fly with. You are basically poking the pilots who are giving you a ride home in the chest and saying, "well, your airline must be stupid." I'm not surprised the Captain didn't react all that well.

Although, pilots at SWA are plenty frustrated with the glacially slow pace of technology adaptation around here sometimes. Management was promising the electronic flight bag when I started 4 years ago and apparently 2 years before that. I think you are correct that the cost will invert soon if it hasn't already.

Apparently Gary Kelly won't buy off on anything if it can't be proven to save money, like now, not 5 years from now. Presumably the current upfront costs of equipping 500+ airplanes with computers swamps the subscription savings for not having to get 5000+ annual jepp paper subscriptions.

But frankly, we are overdue on getting the autothrottles connected and VNAV turned on. We keep getting more complicated RNAV departures and arrivals with the below, above, below altitudes on there. those can be flown w/o VNAV but they weren't really designed to be and people make mistakes, or so I've been told. joke.

Don't recollect where I mention that I was speaking to the Captain, I wasn't, just another jump seating off duty SW pilot. I also didn't say or imply anything about his company, in fact all I really did was supply him the standard good natured plattitudes due when you do get a free ride.

But the reaction to my statement that JEPs were getting more expensive was rejoined by the notion that your management said otherwise so I must be mistaken. I have friends, yes friends, who work at SW. Where they will not hesitate to say things about my workplace, CAL, I had better watch what I say about ole orange.

Yep, I think that is what I said and posted. You would probably quite the joy to fly with yourself old buddy.

 

[firstthird]

My bad. I assumed you were talking to the SWA pilots giving you a ride. Once again I learn of the dangers of assuming anything.

Mostly I agree with your sentiments that we're behind the curve on adopting the EFB.

And yes, I'm sure if the Captains had an avoidance bid I'd probably be right up there with the best of them.

Carl Sagan spoke at my college a few years ago. All I remember was the "billions and billions and billions." The acoustics sucked in the auditorium and he was a pretty crappy speaker to boot. I'm sure he's a smart man but his desirability as a lecturer left a lot to be desired.

 

[mule]

Carl Sagan spoke at my college a few years ago. All I remember was the "billions and billions and billions." The acoustics sucked in the auditorium and he was a pretty crappy speaker to boot. I'm sure he's a smart man but his desirability as a lecturer left a lot to be desired.

Sagan has been dead for over 11 years!!! I guess when you are talking about "billions and billions and billions," a few years could be considered 11...

 

[firstthird]

Okay, it was 17 or 18 years ago. You got me.

 

[Kugelblitz]

My bad. I assumed you were talking to the SWA pilots giving you a ride. Once again I learn of the dangers of assuming anything.

Mostly I agree with your sentiments that we're behind the curve on adopting the EFB.

And yes, I'm sure if the Captains had an avoidance bid I'd probably be right up there with the best of them.

Carl Sagan spoke at my college a few years ago. All I remember was the "billions and billions and billions." The acoustics sucked in the auditorium and he was a pretty crappy speaker to boot. I'm sure he's a smart man but his desirability as a lecturer left a lot to be desired.

Dang, he sure was good on TV. Are sure he didn't use a bunch of those $10,000 words and you just couldn't follow what he was saying?

Just kidding! Peace.

 

[Hamburger]

Somebody "gets it".
We will get a raise with our new contract - Fact.

We're going to hold you to that.
Your company is famous for running such a tight ship that the only thing there is left to cut is Salaries. You really think a RAISE is coming? Your company spent 20 years at the bottom of the heap and are only on top now because everyone else took a pay cut. Your pilot group has never negotiated an industry leading contract, yet you seem to think that because you are the default industry leaders that you will get a RAISE in the next round? I hope they don't charge you for the Kool-Aid, cause you're gonna need the money.

 

[whatitdoing?]

It's about time that there's a level playing field with the majors.......good luck Southwest.

 

[whymeworry?]

SW and their fuel hedging strategies have single-handedly undermined this industry. Why play on a level field when your competitors are paying 3-4 times the price you do for fuel?

Let the SW CEO start earning his salt by learning how to run an airline without the crutch of fuel hedging. If SW has to finally face the music, this will be good for us all. SW will be forced to charge for the true and current cost of an airline seat, instead of holding us all hostage by undercutting the market, while the weak (Skybus, VA and the like) die a slow death since they are paying the same fuel charges we all are (but are also undercutting). Gee, what a novel idea!

JBlu, AirTran, Frontier, VA, SkyBus had better wake up. Charging customers below the cost of the product will not make you grow and will most certainly destroy any dream of long-term viability you may have. Plain and simple, it's a really stupid way to run a business.

SW hasn't had to worry about their business model until now. They are still paying half the cost as we all are out to 2012 so we're not out of the woods yet. They could continue to undermine the market for another 4 years. But why do that when you can make money? Come on SW, get it together and start running a proper business. We know you won the hedge bets already. Now let's move on.

 

[bravodude]

SW and their fuel hedging strategies have single-handedly undermined this industry. Why play on a level field when your competitors are paying 3-4 times the price you do for fuel?

Let the SW CEO start earning his salt by learning how to run an airline without the crutch of fuel hedging. If SW has to finally face the music, this will be good for us all. SW will be forced to charge for the true and current cost of an airline seat, instead of holding us all hostage by undercutting the market, while the weak (Skybus, VA and the like) die a slow death since they are paying the same fuel charges we all are (but are also undercutting). Gee, what a novel idea!

JBlu, AirTran, Frontier, VA, SkyBus had better wake up. Charging customers below the cost of the product will not make you grow and will most certainly destroy any dream of long-term viability you may have. Plain and simple, it's a really stupid way to run a business.

SW hasn't had to worry about their business model until now. They are still paying half the cost as we all are out to 2012 so we're not out of the woods yet. They could continue to undermine the market for another 4 years. But why do that when you can make money? Come on SW, get it together and start running a proper business. We know you won the hedge bets already. Now let's move on.

You are a true fool, All the legacy ceo had to do when he came out of BK is buy the hedges but they didn't. Don't blame the sorry state of the majors on us.

 

[bravodude]

Cockiness and naivety are pilot attributes I do not admire. These are found in larger abundance at the aforementioned airlines than most others. I have friends at both these operations who are good, sophisticated, humble people. Unfortunately there are getting to be more and more of the other kind.

You mean the type of cockiness that the legacy pilots displayed durring their fat dumb and happy years when they would jumpseat on us and then proceed to convince us why we should leave SWA and go over to delta, ual etc.

 

[ivauir]

S But why do that when you can make money? Come on SW, get it together and start running a proper business. We know you won the hedge bets already. Now let's move on.

What you fail to recognize is that the fuel hedges are part of the business model. We do runa proper business, hence the profits.

 

[whymeworry?]

You are a true fool, All the legacy ceo had to do when he came out of BK is buy the hedges but they didn't. Don't blame the sorry state of the majors on us.

First, I completely agree that the legacy airlines should have hedged. It is outrageous they didn't. There is NO EXCUSE for it. All airlines should have used their high-priced exec teams to bone-up on commodities trends. IMO, our analysis and purchasing departments should be better than the traders and speculators on the floor. They didn't. Only ONE airline did. ONE. SW. SW continues to use that bet to run it's carrier. Then they complain (your CEO stating the carrier only made money due to it's hedging strategies) when they can't make money.

Guess what? This isn't just a "majors" thing. Nobody but SW hedged. AT didn't, FRNTR, JBLU, Spirit didn't. So it is not just majors that missed the hedge boat.

Second, Sorry state of majors? Look around, Bud. All airlines are hurting (Frontier and JBLU trading at all time lows, VA losing money for another 3 years). Most of the majors already shored up their balance sheets by debt renegotiation or ch11 but they all have in excess of $3 billion in cash. That is hardly a sorry state. In fact, it is because of their business model that they CAN MAKE MONEY WITH HIGH-PRICED FUEL (read: Int'l Routes). By contrast, SW CANNOT MAKE MONEY WITHOUT FUEL HEDGING. Well, Genius, eventually that hedging will expire. What are your plans then? Are you going to accept paycuts in order to subsidize the flying public? Wake up, smarten up. Demand your CEO get in the game and get competitive in the real world of running an airline. You can't hedge forever and high fuel isn't going away... ever. Eventually, even mighty SW will have to charge for the COST of an airline seat.

Last, you don't know me or my background. Tell me again why I am a fool? Wtf do you know about airline finance?

 

[whymeworry?]

What you fail to recognize is that the fuel hedges are part of the business model. We do runa proper business, hence the profits.

Great, then I can assume your guys are buying contracts at $111 this week? Since you are implying SW will always get it right on calling fuel prices?

You guys are advocating your management using hedging as the ONLY way to run a PROFITABLE business. Take the blinders off. You cannot make money on the prices you are charging for tickets WITHOUT HEDGING.

And no, I don't fail to recognize hedging as proper business. On the contrary, I am floored that US airline managements got away with NOT hedging. Headds should've rolled. Hedging is simply part of any risk management portfolio. And fuel costs are a huge business risk in any transportation business. Why every airline, except SW, missed the mark on something so rudimentary is beyond me. That said, hedging is simply commodities trading. You cannot win using that strategy forever. Do some research and you'll see the investment archives are littered with multi billionaires who lost it all by getting stuck on the wrong side of a commodities/ currency trade.

As I've said, you can't use hedging as the sole way to remain profitable forever. But if you want to, have at it. Don't start crying when your CEO asks for paycuts in 2 years though.

You can go back to drinking your SW kool-aid now. No need to chime back with some genius remark about what an idiot major driver I am or how great SW is. You'll all be fine. Nothing to worry about. I'm sure I've got it all wrong and you've got it all right.

Flame away biatchez!

 

[Quimby]

SW and their fuel hedging strategies have single-handedly undermined this industry. Why play on a level field when your competitors are paying 3-4 times the price you do for fuel?

Let the SW CEO start earning his salt by learning how to run an airline without the crutch of fuel hedging. If SW has to finally face the music, this will be good for us all. SW will be forced to charge for the true and current cost of an airline seat, instead of holding us all hostage by undercutting the market, while the weak (Skybus, VA and the like) die a slow death since they are paying the same fuel charges we all are (but are also undercutting). Gee, what a novel idea!

JBlu, AirTran, Frontier, VA, SkyBus had better wake up. Charging customers below the cost of the product will not make you grow and will most certainly destroy any dream of long-term viability you may have. Plain and simple, it's a really stupid way to run a business.

SW hasn't had to worry about their business model until now. They are still paying half the cost as we all are out to 2012 so we're not out of the woods yet. They could continue to undermine the market for another 4 years. But why do that when you can make money? Come on SW, get it together and start running a proper business. We know you won the hedge bets already. Now let's move on.

How level is the field when multiple BK's have propped up many airlines? Wipe those debts out.........does wonders, right?

Should an airline have liquidated in the last few years to "right size" the seating & pricing capacity?

 

[UALjan15]

Whymeworry--

You're simply throwing around some B.S. and mere tidbits of a much more complex story. I'm not going to claim to be an expert here, and I didn't even stay at a Holiday Inn Express last night, but here's some of the missing parts of your rant:

• It's not true that only SW hedged fuels. It is true that they did far better at it than everyone else. One reason why is that ratings of their corporate debt made it possible to do futures deals that no other airline could swing. All of the airlines with sick balance sheets (that would be most of the rest of them) didn't have access to those same hedges.
• When you claim that SW cannot earn money without these hedges, you are assuming that without them, they wouldn't raise fares to get to profitability. I believe that they absolutely would.
• We've been listening to guys like you that say "just wait until the hedges run out" since about 2004. It seems that they've practiced a consistent policy of hedging since then, and I doubt they are going to stop just to give all of the other airlines a break. True, they are not hedged at $25/bbl anymore, but they don't need to be. If they can use their good rating and expertise to consistently get a 40% discount on fuel over their rivals, then they've won the game before a wheel is ever turned.
• SW doesn't price its product to absolutely maximize fares and profits as you would seem to prefer. Instead, they choose to offer a lower fare that will give them a steady (almost boring) profit, quarter after quarter. Maybe that's why my LUV shares never budged in 4 years....
• I don't think SW has "won" on every hedge bet (I think I've read about write-downs they've taken for hedging losses). But there are lots of eggs, and lots of baskets, and as long as fuel trends up in the long run, they do well overall. I've heard it stated many times that the goal of the program is not only to secure lower prices, but mostly to define those prices well in advance so that they become more "fixed" than "variable."

 

[Quimby]

Great, then I can assume your guys are buying contracts at $111 this week? Since you are implying SW will always get it right on calling fuel prices?

You guys are advocating your management using hedging as the ONLY way to run a PROFITABLE business. Take the blinders off. You cannot make money on the prices you are charging for tickets WITHOUT HEDGING.

And no, I don't fail to recognize hedging as proper business. On the contrary, I am floored that US airline managements got away with NOT hedging. Headds should've rolled. Hedging is simply part of any risk management portfolio. And fuel costs are a huge business risk in any transportation business. Why every airline, except SW, missed the mark on something so rudimentary is beyond me. That said, hedging is simply commodities trading. You cannot win using that strategy forever. Do some research and you'll see the investment archives are littered with multi billionaires who lost it all by getting stuck on the wrong side of a commodities/ currency trade.

As I've said, you can't use hedging as the sole way to remain profitable forever. But if you want to, have at it. Don't start crying when your CEO asks for paycuts in 2 years though.

You can go back to drinking your SW kool-aid now. No need to chime back with some genius remark about what an idiot major driver I am or how great SW is. You'll all be fine. Nothing to worry about. I'm sure I've got it all wrong and you've got it all right.

Flame away biatchez!

is it safe to say you don't like SWA?