Fool reiterates the falling SWA model

[YourPilotFriend]

Personally, I would not invest in SWA right now. The legacy cost structure is now on par with that of SWA even with fuel hedges. Competition is going to get very stiff as the legacy carriers offer business travels far more flexability; especially in the growing Global Economy. If Virgin America can find some way to feed its international carrier, look to this as the "Industry leading business model."

 

[Andy]

If Virgin America can find some way to feed its international carrier, look to this as the "Industry leading business model."

Virgin America is going to try to operate a quick turn high utilization model with SFO as their hub. It won't work. SFO was a terrible choice.

 

[K. Marx]

Virgin America is going to try to operate a quick turn high utilization model with SFO as their hub. It won't work. SFO was a terrible choice.

Yea, Branson must be an idiot. The only problems is he isn't. I hope you are right though and we all know more than he does.

 

[Longhorn]

I thought this headline was speaking of Lowecur.uke:

You have to admit, the comment was funny...

 

[canyonblue]

The legacy cost structure is now on par with that of SWA even with fuel hedges.

Then I guess their 1st Quarter results will match ours. We will see if you are correct in about 3 weeks. Be sure to come back and post at the profit party.

 

[lowecur]

A voice of reason

I hate to say it but I agree with you. Every other captain I fly with is all about greed. Every SWAPA negotiating newsletter touts how great profits have been in the past. That's exaclty it, the past. However, you know many pilots are 'know it alls' (that's about 90% around here) and they feel like they deserve a huge pay raise because we HAD great profits. Doesn't matter they can't see past their greedy fat belly.

It's going to be a sad day when SWAPA demands anything in the face of this industry and mounting competitive pressure. Then Gary is going to have to ask for pay cuts and either it will be an eye opener or furloughs will happen.

There are a lot of hard core unionists at SWAPA and they don't care what the company has done for them in the past, they want to know what are they doing for them now and in the future. What these people fail to realize is how good a job Gary & Co has done to keep the status quo going for much longer than it should have, and as a result they put a ton of cash in their pockets. Lets take a look:

• Non-payroll cost cuts & productivity
• Fuel Hedges
• Honest/Top notch mgt team that is worth every penny

Without the above:

• WN would have never agreed to FA demands
• Mgt would have come to the pilots a few years ago for givebacks
• New a/c would have been deferred

imp:

 

[Big Slick]

WhatABurger posted this earlier:
I don't believe the model is falling. It's evolving. Lets see if Jblue and AirTran's 35% annual growth or SWA's 10% growth over the next few years works out better. Hopefully both will work, but the proven horse is usually a good bet.

I agree that SWA is the safest bet. They have proven themselves in the past and they are sitting on a mountain of cash.

When you hear that Jetblue and Air Tran want to grow at 35%, it sounds like they are being super aggressive. Relative to their size, this is true. Southwest is, however, growing faster than Jetblue and Air Tran.

I'm not a math major, but here goes:
Southwest grows at 10% with 445 planes. Growth = 45 new planes.
Jetblue grows at 35% with 97 planes. Growth = 34 new planes.
Air Tran grows at 35% with 102 planes. Growth = 35 new planes.

Growth is like compound interest. Growing 10% annually is no big deal when you have 100 planes. Growing 10% annually when you have 500 planes is a different story. Maintaining 8-10% growth gets harder and harder each year.

In two years, the LCC market will be saturated and the fuel hedges will be gone. 8-10% growth will be a real challenge. To maintain 10% growth, Southwest will have to add 54 new planes in 2008.

The real question is - what happens to the LCCs when they stop growing at 8-10% or 35% annually? It's never happened, so no one really knows. The LCCs can expand at these rates for only so long.

HalinTexas - Whatever unit of measurement is used, continued growth will be tough.

Thanks for the correction rudderdog -I changed ATA to Air Tran. My bad.

 

[HalinTexas]

Growth doesn't necessarily mean "more airplanes." I more likely means RASM growth, more flights, more flying per plane per day.

ATA will not be growing any this year.

 

[rudderdog]

WhatABurger was talkin' Airtran...
Big Slick was talkin' ATA....

I think he ment Airtran, although they might just be the same company. Hard to tell.

 

[The Prussian]

rudderdog beat me to it.