Wow!
Those were some of the most TORTURED assumptions imaginable. If that's what it takes to make the "SWA buys EMB's" idea fly, I think everything becomes pretty clear.
First assumption:
What can the EMB a/c do for WN? Let's take a gamble and assume that SWAPA agrees to let WN have a 2nd tier payroll structure for EMB a/c. If it's a pro-rated agreement based on seats, then a CA/FA should earn roughly 70%(I'm using the same rate for a 175 or 190) of what is paid on the 737. Through attrition over a period of 10 years, this will save the company a bundle on payroll costs.
"Let's take a gamble" is right! Jet Blue has said that they're NOT going to any such pay structure; why would SWAPA do so? Unless lowecur has some real, real inside info from SWAPA that he's not sharing, I'm here to tell you that it ain't gonna happen. People SAW what happened to United & Delta guys for giving up scope for high (short term) wages. SWAPA has no reason to do the same, especially when they have Jet Blue's contract to point to. As I said before (which lowecur failed to address), the precedent is there for SWAPA to negotiate compensation for the pilots who are flying less productive aircraft, rather than allowing them to suffer based on the jet that they're flying. (Or was my reference to the -200 override too obscure?)
That's wild assumption #1. Here's number two:
Now Gary Kelly is not looking out only one year. He's probably looking out 10 years. Let's say he and Parker agree to add 50 cities in the next 5 years(all medium to small markets).
Yeah, the most conservative airline in history, founded on cautious steady growth instead of wild leaps, is going to double the size of the route structure in 5 years, striking out in a completely new direction.
Right.
SWA hasn't added a city since 2001, but they're about to start adding 10/year?
RIGHT!
There needs to be another assumption here, that the management team at Southwest all go totally insane and forget everything that has made them successful. Abandon everything with a proven track record, go off on a completely new tangent, and then, sure, buying EMB-190's fits right in. As a logical consequence of insane assumptions.
Here's #3:
They buy 75 EMB 175's, and 25 EMB 190's.
One aircraft type worked well; two would be better, so why not three incompatible aircraft types? Nevermind that the current trend is toward every jet interchangable with every other (in terms of seat capacity & cargo space); why not add in jets that can't be swapped for each other on line without creating a serious oversell situation?
The 175 and 190 should run a CASM of 8.5 and 7.5 respectively. The medium to small markets generally favor short stage length service to focus cities.
Conveniently ignoring my earlier point (and current events) that the current trend at SWA is in LONG HAUL markets.
The small jets (of which the 100 seat EMB is the largest) do NOT have better CASM than the large jets when wages are held equal! If you assume a pax load that almost fills the small jet then yes, they're cheaper to operate, but I *bet* (going out on a limb here) that SWA is smart enough to go after markets where they can fill the 737's on a regular basis. Which means better revenue with the bigger jet.
The "cost advantage" of small jets is either based on an inability to fill a big jet, or low labor costs, or both. None of which are likely players here. The only reason SWA would go after thin markets is to fulfill the assumptions made by lowecur -- not a historic trend!
The beauty of the EMB a/c is you only need to put between 54 to 65 people in the seats to break even. Today, WN needs to put 85 people in the seats to break even with the 737 fleet.
The beauty of the 737 is that you can put up to 137 people into it, which you can never do with your EMB. SWA achieved break-even load factors through the worst travel market in aviation history. The gloom & doom forecasts don't jive with what the schedule planners at SWA foresee, and they have one
outstanding track record!
The small to medium sized market is an untapped market for LCC. FL does it on a limited basis, but the 717 will be no match for the 175 in these markets, and is too large for many of these cities to service with frequency.
They can have it. SWA has NEVER attempted to be "all things to all people," and they have no needs to pursue "global domination" of every market segment. You want your assigned first class seat with fine wine & a gormet meal? Great -- enjoy your flight on United/AA/Delta/etc. You want a frequent flyer program that will get you overseas reward trips? Same deal. You need to fly out of Podunk, AZ? Have a nice flight on Skywest!
To posit (without evidence) that SWA must go into a market they've never pursued, then determine what aircraft they "must" buy to go there, is an interesting leap of assumption!
The hang up for pilots will be the possibility that WN could engage in a long term replacement of all the 733's with 190's. This may be in the cards, but would take at least 7 to 8 years to consumate.
SWA is going to replace all 400 737's (including some just coming off the line at Boeing this year & next) within 7-8 years? Not in this reality! They're retiring -200's with virtually zero cycles remaining on them, after flying them 20-30 years! These guys get their full money's worth out of an airframe!
Replacing the entire fleet in a few years might make sense to the brain trust at United, but SWA marches to the beat of a VERY different drummer!
A big advantage would be the increase in stock value, as WN would again become a growth company. In addition, the company would put a ton of pilots back to work.
Before you go spouting off about "increasing stock value," how about addressing some of myearlier points about all the INCREASED COSTS associated with a new aircraft type? Currently, SWA doesn't project opening a new crew base next year so as to keep a tight rein on costs; you think that they're just going to take on all the costs I identified earlier by rushing headlong into a deal with Embraire?
Ask the poolies about SWA's priority when it comes to staying profitable & conservative vs putting pilots to work. I'm sure buying a bunch of jets DOES put more pilots back to work, but that as a goal per se doesn't seem to be high on the priority list at Southwest.
As much as that type of thinking is engrained with the LUV moonies, the talk is becoming louder and more frequent from mgt for a second airframe. The table is being set for an announcement in the near future.
"The LUV moonies," eh? How about the EMB moonies?
The talk is NOT becoming "louder & more frequent" from SWA management! Jim Parker was asked if they were looking at small jets, he said yes, of course. Not seriously, but casually. That's been explained several times (they look at lots of things that don't get pursued). Then Gary Kelly gets questions about it, and the tone of his answers is perfectly clear: we study it, but it's not like we're heading in that direction. All the chatter has been generated by the press asking questions.
I'd trade the problems at Southwest for the problems at any other airline in the world. Are there challenges? Certainly. But the fundamental business model is the healthiest in the industry, and to suggest that strategic changes are necessary to answer tactical challenges is to blow completely out of proportion the nature of the challenges ahead!
2004 margins will shrink noticeably.
Care to cite a source for that assertion?
As the RASM shrinks due to the additional frequency of coast to coast flights
The long haul flights are tremendous money-makers. Adding more of those INCREASES revenue, rather than diluting it!
I see SWAPA negotiating a second payroll structure for the EMB's, in exchange for continued superior hourly wages for the 737 group.
You see that, huh? Based on your intellect & insight, or on some verifiable source? Do you talk with SWAPA leaders? Have you seen that in the union paper? Where are you getting this stuff? 'Cause I'm here to tell you that NOBODY at SWA takes this seriously. NOBODY! Not the chief pilots, not the line pilots, not the SWAPA leaders, not the private Southwest Airlines pilot forums, NOBODY! I have access to all of the above, and I just don't see it.
Enough of this -- far too long. Torture the assumptions enough, they'll say anything you want. EMB's work for some models, but not SWA's; to suggest that SWA is going to "have to" change their entire model, so therefore they will "have to" buy all these jets, is about half a step away from unsupported supposition & fantasy.
Does anybody out there besides lowecur take this nonsense at all seriously? If not, I'll let this post be my last thoughts on the subject & leave lowecur to pontificate to his heart's content.
Cheers,
Snoopy
