Embraer and SWA

[Whirlwind]

Re: enigma

Apparently it was also over at Mercury Aviation at the Addison City Airport.

I don't know if it was parted at Mercury Air, but I can tell you it was parked in front of Addison Express last weekend.

Picked a friend up there and saw it parked out front. Experimental 0004 painted near the main door.

A pilot on another board was in STL, and he was asked if he wanted to go with them to Addison. The 170 pilot said they were showing it to SWA.

That makes sense, Addison is close to Love Field without actually being there, attracting attention.

In any case, I'm sure SWA looks at aircraft all the time, doesn't mean they'll buy any of them. If I were them, I'd do it just to get a first hand look at what everyone else is flying.

Fly Safe!

 

[Snoopy58]

In any case, I'm sure SWA looks at aircraft all the time, doesn't mean they'll buy any of them. If I were them, I'd do it just to get a first hand look at what everyone else is flying.

DING, DING DING!!! Yes, we have a winner!

SWA looks at all kinds of stuff, both for their own possible use and to gain insight into their competitors. Doesn't mean that they're about to do 1/10th of all the things they think about.

Small jets are fine for feeding hubs. SWA doesn't operate a hub/spoke system.

Small jets are fine for short haul, freeing up big jets for long haul. SWA's current expansions are connecting long haul dots, and has never had a problem making good $ with 737's on their short (intra TX and CA) routes.

All SWA equipment, training, spares, gates, training, EVERYTHING, is all designed for the 737. The first jet of a different type on the property will bring a huge marginal cost: training pilots and F/A's for it, equipping all MX bases with the necessary spare parts, reworking the schedule for fewer seats on whatever routes, etc. It would take far more than a slight ASM cost advantage to justify such a huge layout in costs, and all the traditional justifications for RJ's don't really apply. DL can get cheap ASM's out of ASA because the wage costs are so much lower; I strongly doubt SWAPA would allow a lower scale for a new jet. (The precedent is there: recently, there was an override for -200 flying, which is fewer seats & shorter routes.)

It's one thing for a hub & spoke carrier with several types of jets (50 of these, 70 of these, etc) to add one more type to feed the giant jets at their hubs; SWA has almost 400 737's; every pilot can fly every jet (okay, some would need a checkride to requal in the -200), and the system has been spectacularly successful with one type of aircraft and having automobiles & minivans feeding the passengers!

The easiest way for SWA to avoid being "last one through the door" getting EMB jets is to avoid said door altogether.

I haven't met ANYONE at SWA who takes the small jets rumor anything like seriously.

Nobody.

 

[lowecur]

dasmith

Here's the link. The Star Alliance has put alot of pressure on this deal happening. If they split an order between the two mfgs, the deal will not be as sweet for the Alliance. It's still not a done deal, but my money would be on Embraer, and it is.

http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20031015/RAIR15//?query=Embraer

 

[lowecur]

Snoopy

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.

All is not well at LUV. They have a large pilot payroll increase to deal with in 2004. They have unhappy FA's, that will cost more money and efficiency through arbitration. 2004 margins will shrink noticeably. As the RASM shrinks due to the additional frequency of coast to coast flights and competition, and the CASM rises or stays the same with higher expenses, this will lead to a rise in BELF probably in the neighborhood of 67%. With the addition of 10% more capacity, and notorious average LF's in the 60's on an annual basis, they need to make a change.

The answer will be the EMB a/c. I see SWAPA negotiating a second payroll structure for the EMB's, in exchange for continued superior hourly wages for the 737 group.

 

[Bill Nelson]

lowecur,

your emb stock will not rise solely on you "willing this to happen."

SWA is taken names and will continue to do so without straying from its proven business plan.

 

[Swerpipe]

Please enlighten me

lowecur,

Can you explain how will adding an Embraer 190 fix "Southwest troubles"? In other words, how is Southwest going to make more money, solve its "labor" problems and current crisis as you put it while becoming more efficient by lowering its unit cost with the addition of the 190? I really don't see it but maybe you do. Let me see it.

P.S. Does the 190 run on water? Does it ever need to be maintained? Are they free?

 

[lowecur]

swerpipe

PS: Yes to all of your questions

In all seriousness, I'll take a "readers digest" stab at your questions. The distance between RASM & CASM is how this business makes money. The wider the distance, the more you make. WN's gap is closing.

One solution is to increase RASM by charging more money per mile. With more coast to coast flying and the more airlines having the ability to match WN's pricing, that's not going to happen. The other solution is to hope traffic rebounds sharply in the next year or two, and LF's go up for everyone. That's going to be difficult with growth projections from B6, FL, and some of the other LCC's. Add to that WN's own projections of 10% capacity growth per year. If the economy expands rapidly, the legacy's have the advantage of bringing their mothballed a/c on-line quickly, thus adding more capacity to an already flooded market.

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.

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). They buy 75 EMB 175's, and 25 EMB 190's. 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. This should increase RASM by a few pennies to lets say 13-14. BELF for the EMB's would be at 65%. 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 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. ACA is attempting to start an LCC for these markets, but with CL-65's. Smart move as they will have no competition unless WN steps to the plate. The CL-65 is no match for the EMB 175.

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. Also, there will probably be another 2 TA's in that time frame to iron out any differences. In the interim, the 175's would be additional a/c to the fleet, and the 190's will replace the 500's through retirement. Compare the 500's with a BELF of probably 85 people, and the 190 at 65. Big difference in profit on identical routes.

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.

 

[CoopDog]

Embraer types

OK, let's say all this comes to pass.....

Let's get down to basics. Where does eveyone sign up for Embraer 190 school for the type? And will SWA hopefuls still get 6 months to obtain one.....could be a little difficult.

Hmmm.....this looks like a good business opportunity.

 

[zonker]

It's not a "small jet".

Period.

And those who think otherwise will do so at their own peril.

 

[Swerpipe]

Wow, that's some prediction

lowecur,


"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. "

OK, you had me going. Now, I know you are kidding. With all the orders, SWA is secretly conspiring to go to an all Embraer fleet. Yeah right... Do you sell any bridges in the New York area preferably? I'll buy...

BTW the BELF data that you come up with is brilliant. The same aircraft on different companies will have a different BELFs yet you can come up with the value like saying 2+2=4. Gary Kelly move over!

All kidding aside, I heard that during fly testing one the the test engineers decided to load the Embraers 190 with water and they still worked. Also, it is the only transport category aircraft to be certified for single pilot operations which for $12,542.00 per plane it sounds like a bargain, besides saving the cost of a crew member. Embraer also comitted to make modifications to all the 737 tools and make them suitable for the Embreaer 190s to save on maintenance costs. When you put it all together it does make a lot of sense. Doesn't it?