lowecur said:
Motley Fool has been a staunch supporter of Jetblue, but really never a basher of WN. They take a swing at the incumbant king in this article, but do they really know what they are talking about?....a little.
Kelly knows that in order to continue their success they must grow by at least 10% per year. Gordon Bethune reiterated this many years ago. In other words they have to keep bringing in newbies to subsidize the bourgeoisie. Sounds a little like the Social Security System today. He hasn't sought to change the business model proactively, the system is dictating a new business model to him where he must seek high cost stations to place the expanding fleet in the next few years. Sound like a winner? :laugh: :laugh:
imp:
http://www.fool.com/news/commentary/2006/commentary06032104.htm?source=eptyholnk303100&logvisit=y&npu=y
Lowecur,
I agree with many that the 10% growth helped SWA in the past and WAS one of the elements of their success. How else could they attract top notch pilots (I know this is up for debate but many of them are very sharp) who were being promised a fraction of UAL and AA wages at the time?
Now the growth will slow. It would be bad if wages had not gone up. The 4 year upgrades to Captain are a thing of the past. But you forget that SWA pays its FO's well and does not depend on them subsidizing the growth or retirements.
Instead of big growth SWA now has economy of scale. Employees per aircraft are down and debt relative to assets is down. SWA has Walmart like power in negotiating for services.
You mention going into big markets as bad and indicative of high costs leaving smaller markets unreachable. This is bass ackward thinking. Every airline wants to enter a big market, but SWA couldn't before and had to settle for smaller markets instead. SWA is no longer settling for just smaller markets for growth. Not a failing model, a changing model. If a carrier does not change in America, it will not be around long.
The case against SWA is different than the model "failing". It is that the models elsewhere may actually start to bite--
When the legacies do start hiring off the street, they will see some benefits of hiring newbies at new, breathtakingly low rates. But until then they will not help. JetBlue is taking advantage of their 1st year rates and has hit a temporary bump in the road because the forecast for 2006 and 2007 is for robust airline industry revenue. All JetBlue has to do is get down the road to 2008 or 2009 and the good news will continue. I would rebuy JetBlue stock when the articles come at Motley fool giving up on JetBlue. It will signal a good base for future advances.
The -190 may be good, but will not hurt SWA significantly as some think. It would have hurt the SWA of 2000 or before. But not the SWA of 2007 and beyond. Don't understand that? SWA is almost a different airline compared to 2000. The routes lean toward long haul, high percentage of fleet is new, and the competitive landscape is completely different. And the SWA of 2012 will be different than today. The regionals, USAir, Newco, and JetBlue will duke it out for the 76 to 100 seat market. I predict much JetBlue success, but I know it will be hard fought.
Then there is Virgin USA. Who will they hurt if they get off the ground? I predict UAL and AA on international. Branson wants feed for their international flying. Virgin may inadvertantly hurt JetBlue if Jetblue is heavy in Virgin markets.
All these trends may reduce SWA flights into some markets. But the entry into new markets will offset it. More than offset it. In fact, I see very little SWA reduction in smaller markets at all. Something about frequency of service and all that jazz. Or so goes my crackpot theory.
I still think JetBlue will do o.k., but not at significant SWA expense.
When I agree with some of these analysts on company success or trouble it is almost always for totally different reasons than they offer.
