Embraer and SWA

[lowecur]

swerpipe

You're an arrogant little weasel, aren't you.

You asked me how WN was going to do it, so I gave you numbers that for all intents and purposes are ballpark estimates based on data from both Embraer and WN. For your little condescending mind, do you you have any idea how BELF is calculated? Probably not, otherwise you wouldn't be some corporate jockey running around in a used bi-plane.

Next time your in Oakland, try flying through the tunnel in Berkely. I hear the view is great.

 

[Swerpipe]

come on lowecur

lowecur,

I don't think you are serious. There is nothing in your argument that justifies changing a fleet that has proven itslef unless the answer is hidden somewhere. Also, why has there been a historical order to drop it all in 8 years, or the economic justification to change a business model that has worked for years. If you are serious then that's your opinion. Your argument sounds so ridiculous to me that it made me think you were kidding. Of course I was kidding. I know the 190 doesn't run on water.

 

[lowecur]

swerpipe

I'm quite serious.

I'm not saying they should change the fleet. I'm just speculating on what the fears would be from SWAPA in negotiations for a second type of airframe. SWAPA would not let WN substitute any part of the fleet of 733's with the lower paying jobs from the 190. The 737NG will replace the 733's as they come off lease or are retired. The 8 year figure is just a number using a retirement of 25 733's per year starting possibly in 2006.

The fact that Gary Kelly is entertaining the Embraer is proof enough that it is a viable possibility that WN is willing to change it's business model.

We agree to disagree on whether this will happen.

 

[LiveFreeorDie]

Failed a pee test lately?

Lowecur-


What have you been smoking? It is amazing you can see a fight at SWA similar to the SCOPE fights going on at Delta and AA. maybe you should buy a bong on the internet. I hear Cheech has some stuff to liquidate. If you are right, I'll eat my hat. Oh wait, SWA pilots don't have to wear hats...

Cheers,
LFD

 

[lowecur]

Wow man

I think that was Chong that has some periphenalia to sell. Besides, I've been hanging with Robert Downey lately. Guilty by association

 

[StopNTSing]

"Look for the order...."

 

[throttlejockey]

1. Those of you that think that SWA will not deviate from its business model are dead wrong. SWA is a very innovative company as it has shown in the past. If they believe a new aircraft type will be a profitable venture, they will certainly do it.

2. Lowecur - As stage lengths increase CASM will decrease. SWA flying longer legs will offset any marginal increase in Labor cost. Trouble is not brewing at SWA, just the opposite - they are ready to takeoff!

3. Using the current business model at SWA, there is very limited potential for growth beyond say another 20 cities (very rough hack). Bringing on a second aircraft type with revolutionary operating efficencies for its small size, would open SWA up to dozens of additional markets that the larger 737 would be unable to open effectively.

4. Yes, there are complexities to operating a completely new aircraft type. However, with modern information technologies being used in all segments of the business, it is not as hard as it used to be. Jetblue will undoubtedly prove this.

 

[throttlejockey]

I left out point 5:

5. Although we pilots want to believe that management makes fleet planning decisions based on our labor contracts, they don't! Labor contracts are only a small factor in the complete fleet planning cycle. I am sorry if I made anyone feel left out!

 

[StopNTSing]

3. Using the current business model at SWA, there is very limited potential for growth beyond say another 20 cities (very rough hack).

It seems a common misconception that the only way to "grow" is to open new cities. SWA has barely scratched the surface of the long-haul domestic market, and there is a LOT of dots that can still be connected (or added frequency) to the existing cities we serve.

ATC capacity issues WILL re-appear (sooner than many think...IMHO), and when they do smaller jets will suddenly seem a whole lot less attractive.

 

[Snoopy58]

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.

All is not well at LUV.

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

 

[YeOldeProp]

Woof!!!

Tell ya what Snoopy, if you've got that much of a grasp on the retail/enroute growth/feasibility arguments to come back with the above answer, I vote you for official Flightinfo Analyst for October. You tell us the Great Pumpkin is flying out of the pumpkin patch on Halloween night on Southwest (the old colors are about right), then I'll believe. Must of been those years on the Herkybird flying low and slow that gave you time to ponder the analysis stuff...good job.

 

[lowecur]

snoppy 58

You have got to learn to come out of your shell.

1. What may be one man's torture, is another man's nirvana.

2. Hey, this is my speculation not inside information from SWAPA.
I think Neeleman did say they were going to be paying less to
the 190 pilots. If you know the rate comparison between the
320 and 190, let's hear it. You can negotiate all you want with
me, but the final decision would be by vote of the membership.
Thank God SWAPA doesn't have an electorial college, or your
opinion might be the only one that counts.

3. We agree to disagree on adding that many cities. If WN buys
the EMB a/c, they will have to add lot's of new cities. Unless
of course you believe they will be used to replace the whole
fleet of 737's. If 50 doesn't sound right, how about 40?

4. What are you saying the 175 and 190 are two completely
different a/c? Explain your thinking?

5. I never said the 175 or 190 had better CASM's than all larger
jets. I would say the CASM for the 737NG is around 6.50, and
the 733 is closer to 8.5, thus the overall CASM of approx 7.5 for
WN. Lower CASM alone doesn't equal a profit.

6. You need to learn more about the EMB a/c. The 195 can hold
117 pax in an all coach layout of 31" pitch.

7. Again, you need to learn something about Embraer. The cost
advantage of the EMB a/c is engineering not payroll savings, or
the airlines inability to fill a large jet. This is very niave thinking,
even for a distinguished man such as youself.

8. I know the 737NG and the 733 can seat 137 pax. The problem
is the LF's will probably end up in the high sixties for the year.
That's probably around 90 pax average per flight. Now I'm
sure the route planners are very smart people, and they under-
stand that a good percentage of their flights are running thin.
How do you fix this problem? 100 seat a/c that can run a 7.5
CASM. It's much more profitable than a 137 seat a/c on thin
routes.

9. The nice thing about small markets is they receive no respect.
Yet, I think the legacy's are making a killing. Take a look at
the prospectus for ACA on the LCC deal. Look at some of the
comparisons as to what is being charged by the legacy's for
these small to mid sized markets. It's a goldmine waiting to be
tapped.

10. I never said WN was going to replace all 400 737's with 190's.
Check my explanation to swerpipe.

11. You didn't give me an arguement on the stock price. However,
you bring up the costs of adding a new a/c to the fleet. Yup,
their are costs, but Dave Neeleman thinks the economic's
favor the introduction of a 2nd airframe. You may think Jim
Parker, Gary Kelly, and Collette Barrett are a smarter mgt
team, but I think Neeleman knows more about this business
than you. In fact he has Parker and Kelly acknowledging that
they are looking "casually" at this a/c because the economics
make sense, where they didn't make sense with the RJ.

12. You want my source that margins will shrink noticeably? It's
all my speculation as an amateur airline analyst. Don't buy it
fine, that's your right also as an amateur airline analyst.

13. I'm talking about RASM, not total revenue. Long haul flights
decrease RASM. Do you understand what RASM is?

From one moonie to another, it's a good thing your a pilot. As an
amateur analyst, I got ya beat.

 

[T1bubba]

Lowecur,

I think you may find a more receptive audience on airliners.net. People there are always speculating on when we're going to start doing things like buying more types of aircraft, flying international, adding assigned seats and first class, etc.

If you haven't figured it out, our management luvs to drop little hints about what we "might" do to change our strategy. It keeps the competition guessing and keeps us in the news. I wouldn't be surprised if they have a little betting pool about how many headlines they can get.

T1

 

[lowecur]

T1

Moonies like Snoopy 58 are interesting to discus these things with. He is typical of the brainwashed mentality that if it ain't broke, why fix it. He doesn't give the management team at WN enough credit to look into the future and be flexible.

Is it a sure thing that WN is going to pick EMB? Of course not, but it's not sealed in cement either that it couldn't happen. The addition of Philadelphia to the stable this morning has someone throwing cold water in Snoppy's face to revive him. I'm gonna love hearing his rational for this decision.

I post on this board to try and bring some interesting discussion to the table. I try to be respectful and listen to everyone's opinion with an open mind. I've learned alot here, and I hope some readers have learned a little about EMB from me.

 

[T1bubba]

Re: T1

I've learned alot here, and I hope some readers have learned a little about EMB from me.

Just curious, what makes you qualified to teach anyone about the new EMB? Have you flown it? Do you work for them?

 

[CoopDog]

And just what exactly is a Moonie? All I can think of are those dudes who used to hand out propaganda in the terminal and ask you to buy their book.....wait, that might have been the Hari Krishna's.

Somebody call Robert Stack!

 

[lowecur]

Coopdog

Never heard of the Rev Moon? His church has been referred to as a cult of brainwashed followers. Moonies are fervant believers in anything Rev Moon has to say. They don't question, they just follow.

Of course this is a tongue in cheek expression that can be applied to anyone who gets insulted that someone would question their companies business model. They are fortunately a small minority with most companies, as most people in this world can still think for themselves.

 

[lowecur]

T1bubba

And what criteria do you use to pass judgement on who qualifies to teach someone about Embraer? Does a person have to work for the company or fly the a/c to know something about the company?

I invest in them, and I do quite a bit or D&D. When a person invests alot of money in something, he or she had better know what they are investing in. Do I learn something new about ERJ everyday? Absolutely, as I have any open mind. You should try and do the same.

 

[Bill Nelson]

The idea behind PHL you ask?

Phl is approx 110 miles from JFK. That means that it is 65 miles in either direction for all the folks that live inbetween the two.

Fly out of PHL and draw Jet Blue folks over to SWA. same ticket prices and same driving distance but SWA delivers many more destinations. At the same time put a major crunch on USAIR.

Sounds like good thinking to me!

 

[T1bubba]

Re: T1bubba

I invest in them...

Just trying to figure out the source of your extreme bias. I think I found it.

Not that the EMB isn't a great plane, but believe it or not it will be possible for some airlines to be successful without flying them.