Some interesting insight into how things are going and what maybe in store for folks who watch Southwest from some interesting sources. Again my standard caveat is this makes for good speculation sport but don't sell the house/spouse or call your stockbroker based on any of these ramblings.
The following is no surprise....everybody & I mean everybody is energized with what Gary Kelly has done so far but more importantly what his vision is for the future of Southwest. Nothing is out of bounds when it comes to looking at future options so as they say, if you read it somewhere that Southwest is considering something; Southwest is probably considering it. if they aren't, they maybe by the end of the day when the story gets to Dallas....thinking outside of the box has never occurred as much as it is now at headquarters.
Kelly's buzzwords are COST, CULTURE, PRODUCTIVITY AND ACCOUNTABILITY. Those tenets are what is driving his team and what he is expecting of the employees and future employees also.
On the cost side, everything is up for review. Every attempt is being made to determine where money can be saved. From adding life perservers to aircraft to allow east coast and gulf coast direct routings (saving fuel) to looking at ways to minimize excessive sick leave by employees, health costs and other increasingly costly areas...everything is being looked at. For example, it will cost $36M to do the glass cockpit thing on the round dialed 737s (over half the fleet). This cost has been increasing since it was originally talked about due to the additional requirements that would be required of these older airplanes to have bigger batteries, more computers and other more costly items added than what was originally considered. Does it mean we won't do it? It will be come down to a cost analysis of expenditures vs. return on this investment to reducing costs. Live entertainment also...$275M to put that in all aircraft...our total net revenue in the past year has been around $200M so this cost would be a major dent...what is the return. What is the #1 reason buy tickets? Cost...if folks have identical routes in front of them on a screen but one is going to save them $3-5 on one over the other...they choose the cheaper fare. It isn't right or wrong or worth getting emotional over, it is a simple fact and that is OK. As long as that is the overiding factor it would be foolish to ignore it and not realize SWA must keep its fares low but to do it while still generating $700M in revenue (which would equate to a return of around 10% return on investment [in a $7B a year company] by investors to the company which is what attracts money to a company after all) is the goal.
How about salaries? Kelly has no desire to ask for employees to give back any raises...they are well deserved he believes. What is being asked of these groups is a return to the more productive days of when Southwest was leaner and meaner and had fewer employees per airplane. After 911 we had 92 employees per plane, end of '02, we had 88, end of '03 it was 85 employees per airplane, currently we're at 78...the goal is to be at 72 people within 6 months. The last class of flight attendants was nearly all internal hires...we're still attempting to shift folks from jobs where overages occur to where we need them. The goal is to be in the mid 60's sometime within the next 18 months...this has been where we were in earlier years.
Pilots currently fly an average of 64.5 hrs per month, that is EVERY PILOT for an average. The goal is to increase that as close to 70 as possible. Even management pilots may be asked to fly more to the tune of maybe splitting a line between two or three pilots thus saving money since they current don't fly a line but simply take trips from folks who are flying allowing those pilots to get days off while getting paid & the management folks flying the line. Doesn't save the company any money, simply gives a guy some time off.
However, that isn't where the big gain must occur if this goal is reached. The union will need to work with the company to find ways to squeeze more flying time into the lines or use other means to cut down on the inefficiencies. The new density in flight time after 31 Oct actually shows we're more productive than in years past but that effort will need to be worked even more I suspect. It won't be easy but we have some talented minds. Moving the numbers up toward the goal of 70 hrs would allow Southwest to take on 34 aircraft without hiring a single new pilot!!!! For those out there who fear we'll stop hiring because of that...don't worry...it certainly won't happen overnight and this simply illustrates the impact of more productivity on the bottom line. Once you get here you'll benefit from that efficiency....just realize that once you get here we want you to work hard
Where to get 34 more airplanes or any extra airplanes other than the 29 (net)we currently have on order for next year? As Kelly says in the article below there are many cheap aircraft out on the market and when you have just taken out a "non-collateralized loan" at 2% interest (try getting that for your home buying needs some time) for $350M and another $1B being offered by every major financial institution out there, it becomes obvious there are options available to Southwest that most carriers don't have. What is Boeing going to do with those DAL/ATA 737 jets they aren't buying now that were on order? How about leased 737s? Who knows but it is exciting times and will looked back upon as a time when Southwest again showed its true colors and adapted to change I believe.
Revenue and seat costs per mile are concepts being talked about not just in the board room or in the CFO's office anymore, they're discussed in the bathrooms (I saw it scrolled in the training center on a stall) and throughout the company by joe average guy like me. When our seat costs sit at $.0803 and the goal is to be back at .075 within 6 months with an overall goal of .0735, one can't get there without a plan on how to do it. Why not tell everyone where the costs comes from?
People are beginning to understand the underpinnings of what makes an airline company profitable and not profitable...that can never be a bad thing. "Plane Smart Business" (PSB) is an effort by the company to educate the work force to these fundamentals and it has great potential to build on the culture of Southwest in showing everyone what it takes from a business sense to make money and that EVERYONE can have an impact on that goal. Yes we have fuel hedges but how valuable are they? We paid $250M this year for the 20% we didn't hedge...thank goodness to the guys in that department who have kept us in the black but annual revenues for an airline weren't designed to generate fuel hedging as their primary source of revenue....investors want you making 10-15% of return on your primary business...carrying passengers....that is what is happening now and Southwest and Gary Kelly along with the employees are working to make that happen...that is good news for those who wish to work here.
How does our sick leave use rate compare in PHX last year to this year? Compare to other pilot bases? FAs; same rule applies and comparing those numbers from base to base? We should all be concerned about managing the costs of doing business since that is money out of my AND OTHER EMPLOYEES profitsharing plans that could be saved if we are armed with information. These are things that subtracted to the bottom line but that need to be looked at in the light of day by everyone. We don't need to work anyone to death and for those folks who are flying at jobs (& there are plenty I know) that are working their crews way harder than we are at Southwest there is a limit & you've probably been there. I don't believe it is the goal of managment to drive us to the edge but merely to step back & make an honest appraisal in light of the world around us, what are we capable of & how do we get there?
Once one gets to the level of where most SWA pilots and other work groups are at, things can't even be compared to what goes on at the other end of the spectrum IMHO. The employee groups need to buy into this and I'm hopeful they will.
(end of part 1)
The following is no surprise....everybody & I mean everybody is energized with what Gary Kelly has done so far but more importantly what his vision is for the future of Southwest. Nothing is out of bounds when it comes to looking at future options so as they say, if you read it somewhere that Southwest is considering something; Southwest is probably considering it. if they aren't, they maybe by the end of the day when the story gets to Dallas....thinking outside of the box has never occurred as much as it is now at headquarters.
Kelly's buzzwords are COST, CULTURE, PRODUCTIVITY AND ACCOUNTABILITY. Those tenets are what is driving his team and what he is expecting of the employees and future employees also.
On the cost side, everything is up for review. Every attempt is being made to determine where money can be saved. From adding life perservers to aircraft to allow east coast and gulf coast direct routings (saving fuel) to looking at ways to minimize excessive sick leave by employees, health costs and other increasingly costly areas...everything is being looked at. For example, it will cost $36M to do the glass cockpit thing on the round dialed 737s (over half the fleet). This cost has been increasing since it was originally talked about due to the additional requirements that would be required of these older airplanes to have bigger batteries, more computers and other more costly items added than what was originally considered. Does it mean we won't do it? It will be come down to a cost analysis of expenditures vs. return on this investment to reducing costs. Live entertainment also...$275M to put that in all aircraft...our total net revenue in the past year has been around $200M so this cost would be a major dent...what is the return. What is the #1 reason buy tickets? Cost...if folks have identical routes in front of them on a screen but one is going to save them $3-5 on one over the other...they choose the cheaper fare. It isn't right or wrong or worth getting emotional over, it is a simple fact and that is OK. As long as that is the overiding factor it would be foolish to ignore it and not realize SWA must keep its fares low but to do it while still generating $700M in revenue (which would equate to a return of around 10% return on investment [in a $7B a year company] by investors to the company which is what attracts money to a company after all) is the goal.
How about salaries? Kelly has no desire to ask for employees to give back any raises...they are well deserved he believes. What is being asked of these groups is a return to the more productive days of when Southwest was leaner and meaner and had fewer employees per airplane. After 911 we had 92 employees per plane, end of '02, we had 88, end of '03 it was 85 employees per airplane, currently we're at 78...the goal is to be at 72 people within 6 months. The last class of flight attendants was nearly all internal hires...we're still attempting to shift folks from jobs where overages occur to where we need them. The goal is to be in the mid 60's sometime within the next 18 months...this has been where we were in earlier years.
Pilots currently fly an average of 64.5 hrs per month, that is EVERY PILOT for an average. The goal is to increase that as close to 70 as possible. Even management pilots may be asked to fly more to the tune of maybe splitting a line between two or three pilots thus saving money since they current don't fly a line but simply take trips from folks who are flying allowing those pilots to get days off while getting paid & the management folks flying the line. Doesn't save the company any money, simply gives a guy some time off.
However, that isn't where the big gain must occur if this goal is reached. The union will need to work with the company to find ways to squeeze more flying time into the lines or use other means to cut down on the inefficiencies. The new density in flight time after 31 Oct actually shows we're more productive than in years past but that effort will need to be worked even more I suspect. It won't be easy but we have some talented minds. Moving the numbers up toward the goal of 70 hrs would allow Southwest to take on 34 aircraft without hiring a single new pilot!!!! For those out there who fear we'll stop hiring because of that...don't worry...it certainly won't happen overnight and this simply illustrates the impact of more productivity on the bottom line. Once you get here you'll benefit from that efficiency....just realize that once you get here we want you to work hard
Where to get 34 more airplanes or any extra airplanes other than the 29 (net)we currently have on order for next year? As Kelly says in the article below there are many cheap aircraft out on the market and when you have just taken out a "non-collateralized loan" at 2% interest (try getting that for your home buying needs some time) for $350M and another $1B being offered by every major financial institution out there, it becomes obvious there are options available to Southwest that most carriers don't have. What is Boeing going to do with those DAL/ATA 737 jets they aren't buying now that were on order? How about leased 737s? Who knows but it is exciting times and will looked back upon as a time when Southwest again showed its true colors and adapted to change I believe.
Revenue and seat costs per mile are concepts being talked about not just in the board room or in the CFO's office anymore, they're discussed in the bathrooms (I saw it scrolled in the training center on a stall) and throughout the company by joe average guy like me. When our seat costs sit at $.0803 and the goal is to be back at .075 within 6 months with an overall goal of .0735, one can't get there without a plan on how to do it. Why not tell everyone where the costs comes from?
People are beginning to understand the underpinnings of what makes an airline company profitable and not profitable...that can never be a bad thing. "Plane Smart Business" (PSB) is an effort by the company to educate the work force to these fundamentals and it has great potential to build on the culture of Southwest in showing everyone what it takes from a business sense to make money and that EVERYONE can have an impact on that goal. Yes we have fuel hedges but how valuable are they? We paid $250M this year for the 20% we didn't hedge...thank goodness to the guys in that department who have kept us in the black but annual revenues for an airline weren't designed to generate fuel hedging as their primary source of revenue....investors want you making 10-15% of return on your primary business...carrying passengers....that is what is happening now and Southwest and Gary Kelly along with the employees are working to make that happen...that is good news for those who wish to work here.
How does our sick leave use rate compare in PHX last year to this year? Compare to other pilot bases? FAs; same rule applies and comparing those numbers from base to base? We should all be concerned about managing the costs of doing business since that is money out of my AND OTHER EMPLOYEES profitsharing plans that could be saved if we are armed with information. These are things that subtracted to the bottom line but that need to be looked at in the light of day by everyone. We don't need to work anyone to death and for those folks who are flying at jobs (& there are plenty I know) that are working their crews way harder than we are at Southwest there is a limit & you've probably been there. I don't believe it is the goal of managment to drive us to the edge but merely to step back & make an honest appraisal in light of the world around us, what are we capable of & how do we get there?
Once one gets to the level of where most SWA pilots and other work groups are at, things can't even be compared to what goes on at the other end of the spectrum IMHO. The employee groups need to buy into this and I'm hopeful they will.
(end of part 1)
