I've posted the meat of the 10K listings & conversations from the webcast earlier today...my observations & notes;
- Cost per seat mile are decreasing, last qtr 8.09c per mile, first time above 8c...that was an increase of 8.4% from 2Q'03...this qtr it came in at 7.61c per mile, only a 1.3% increase from 1 year ago...costs are coming under control despite higher fuel costs...take away fuel increases & the ASM costs were 6.81 cents & that is flat from last year...very good cost control
- Flat revenues for the qtr...Feb-Jul revenue increases...Aug-Sep slower...lost $15-20m over hurricanes, this would improved the numbers if we hadn't had those loses...FL operations are back to normal with no loss apparent
- Profitsharing of $32m this qtr vs. $34m a year earlier
- 59% of bookings go through the web...big savings for company...fewer full fare tickets sold this qtr than last...troubling but indicates the revenue pressure of too many seats chasing too few folks...seat excess by competition according to Kelly & others
- 21.7% gain in freight revenue...mail is still on the rise & adding to the bottom line; other revenue increased by 25.9% increase to include charter operations, particularly military charters
- Leasing costs for aircraft are declining...less than 40%, we own over 60% of aircraft outright...we still pay cash for delivery of new aircraft...10 more for the rest of the year, 8 -200 retirements, 417 at the end of the year...net of 29 for next year (more on that later), same as this year
- Kelly remarked the goal is open a new city next year under their current plan...no hint at where it would be..much depends on other airlines futures I suspect
- Regional numbers on percent of SWA flights
- NE - 14% - 12% increase since last year
- SE - 15% - -1% decrease since last yr
- SW - 16% - -1% decrease since last yr
- MW - 15% no change
- West 39% - no change
- lots of revenue pressure in the east due to Indy Air, USAir, JB keeping those numbers low...mostly demands for discount fares. we have increased fares on "selected routes" $1-3 depending on competition & length of route
- Kelly specifically addressed the question, "what happens if USAir folds?" He said they would respond when/if it happens & they do have plans...he quoted Kelleher as saying much earlier they would entertain the thought of having 20-25 gates at some point there if the conditions were right...PHL is at their max by late Oct with 41 flits (4 gates).....optimisitic we can get some more in the shorterm...new airplanes in '05 would go to fuel new city & PHL expansion if it is called for....lots of "ifs" & SWA has plans to move in any direction in which a revenue opportunity presents itself...4-5% overlap between USA & SWA...the impact in Kelly's words would be "huge"...no one asked "how many planes could SWA absorb in one year above the 29 you are currently taking?"...that would be very interesting to know & pertinent to many folks on here
- reducing costs has been effective...17% of operating costs are fuel...winglets saving 3% (all modified by Mar 05), fuel hedging reduced fuel costs by $130M...fuel hedging numbers below
- >80% this yr at $24
- >80% next yr at $25
- 60% '06 at $31
- >40% '07 at $30
I believe this demonstrates clearly that SWA believes higher oil prices are here to stay...those are huge bets to make on such a large part of your operating costs
- encouraging news...capital expenditures are actually predicted to be declining over the next few years; $1.8B total this year; $1.4B next year, $1.3B '06...those costs from '06 back to '04 are a reduction of over 30% savings....frees up that money for the bottom line profit, profit sharing, share buyback
-7.9M shares repurchased this qtr, part of overall strategy to reduce the number of outstanding shares...this has been a long range plan all year, on track...fewer outstanding shares...more value to remaining shares (if we can keep the costs down & raise revenues that is!)
- 30K+ folks on property now, end of last qtr 32K+ on property...employee to aircraft ratio has declined from 4Q03 of 85 to 74 folks per airplane at 3Q04...huge cost savings...hope to get that number down to 70 sometime within the next 2 years...will have added 29 airplanes this year with a net decrease in folks, not bad.....2 classes of FAs were 100% internal hires...lower salary costs as they move from higher paying jobs to entry level FA jobs...expect our costs to continue to decline slightly in 4Q
- Cost savings in closing of res center are still being felt...however 3q showed increase in salaries & benefits overall of 3.3%...some of that was the retro checks for FAs along with pay raises granted this qtr...
- Operational efforts to cut fuel costs; costs per flying block hour was 2% this year than last year even with an increase in flying block hours...pilots & dispatch are working to optimize altitudes & route selections...retiring inefficient -200s (all gone by mid Jan '05), more fuel efficient -700s
- ATA...what's up with that Mr Kelly? Who controls the gates? Can you say "preferential gates"...term used by Chicago to say they control the gates, no ATA...we have 19 gates, fly 145 flights...we have current capacity growth there without having to buy anymore gates..not needed at this point...no one asked about the airplanes which was unfortunate...he didn't allude to that issue at all
- Question was asked of Kelly what mark does he wish to leave? international flying? Assigned seating? He said the focus was to maintain low cost advantage, have focus on operational excellence, improve customer service...that will lead to superior cost performance...he wishes to simplify the approach versus complicating it..."no plan to change the product, add different type, fly international routes"...Kelly's words...he wants to address the 75% on time performance, much too low in his opinion & directly related to customer satisfaction...will work hard next year to fix that
- Currently no restrictions placed on SWA by Love Field or city of Dallas in moving to DFW if so desired...question was asked & Kelly answered it...Kelly quoted on CNBC by this reporter as saying he didn't have plans to go to DFW at this point but the weekly msg on 1-877-IFLY737 he talks about the pros & cons of it...interesting discussion & very frank
- Kelly said this was time of weak revenue environment...SWA is designed to survive this type of environment, others aren't but that doesn't mean SWA will grow like it has during other downturns in the market...different environment...
- Profit of $119M...good but not where we want to be in terms of return on investment for shareholders.
___________________
I'm sure there is much I missed or misinterpreted so don't hesitate to correct. I've attached the 10K summary in the subsequent post. I believe the bottom line is that SWA is ready to move in which ever direction the market forces allow it to make the most money. The outlook for hirings next year would appear to be very good based upon these numbers as the company is poised to fully utilize all 29 airplanes we are receiving & are prepared to get more if the situation is right....good luck to all.
- Cost per seat mile are decreasing, last qtr 8.09c per mile, first time above 8c...that was an increase of 8.4% from 2Q'03...this qtr it came in at 7.61c per mile, only a 1.3% increase from 1 year ago...costs are coming under control despite higher fuel costs...take away fuel increases & the ASM costs were 6.81 cents & that is flat from last year...very good cost control
- Flat revenues for the qtr...Feb-Jul revenue increases...Aug-Sep slower...lost $15-20m over hurricanes, this would improved the numbers if we hadn't had those loses...FL operations are back to normal with no loss apparent
- Profitsharing of $32m this qtr vs. $34m a year earlier
- 59% of bookings go through the web...big savings for company...fewer full fare tickets sold this qtr than last...troubling but indicates the revenue pressure of too many seats chasing too few folks...seat excess by competition according to Kelly & others
- 21.7% gain in freight revenue...mail is still on the rise & adding to the bottom line; other revenue increased by 25.9% increase to include charter operations, particularly military charters
- Leasing costs for aircraft are declining...less than 40%, we own over 60% of aircraft outright...we still pay cash for delivery of new aircraft...10 more for the rest of the year, 8 -200 retirements, 417 at the end of the year...net of 29 for next year (more on that later), same as this year
- Kelly remarked the goal is open a new city next year under their current plan...no hint at where it would be..much depends on other airlines futures I suspect
- Regional numbers on percent of SWA flights
- NE - 14% - 12% increase since last year
- SE - 15% - -1% decrease since last yr
- SW - 16% - -1% decrease since last yr
- MW - 15% no change
- West 39% - no change
- lots of revenue pressure in the east due to Indy Air, USAir, JB keeping those numbers low...mostly demands for discount fares. we have increased fares on "selected routes" $1-3 depending on competition & length of route
- Kelly specifically addressed the question, "what happens if USAir folds?" He said they would respond when/if it happens & they do have plans...he quoted Kelleher as saying much earlier they would entertain the thought of having 20-25 gates at some point there if the conditions were right...PHL is at their max by late Oct with 41 flits (4 gates).....optimisitic we can get some more in the shorterm...new airplanes in '05 would go to fuel new city & PHL expansion if it is called for....lots of "ifs" & SWA has plans to move in any direction in which a revenue opportunity presents itself...4-5% overlap between USA & SWA...the impact in Kelly's words would be "huge"...no one asked "how many planes could SWA absorb in one year above the 29 you are currently taking?"...that would be very interesting to know & pertinent to many folks on here
- reducing costs has been effective...17% of operating costs are fuel...winglets saving 3% (all modified by Mar 05), fuel hedging reduced fuel costs by $130M...fuel hedging numbers below
- >80% this yr at $24
- >80% next yr at $25
- 60% '06 at $31
- >40% '07 at $30
I believe this demonstrates clearly that SWA believes higher oil prices are here to stay...those are huge bets to make on such a large part of your operating costs
- encouraging news...capital expenditures are actually predicted to be declining over the next few years; $1.8B total this year; $1.4B next year, $1.3B '06...those costs from '06 back to '04 are a reduction of over 30% savings....frees up that money for the bottom line profit, profit sharing, share buyback
-7.9M shares repurchased this qtr, part of overall strategy to reduce the number of outstanding shares...this has been a long range plan all year, on track...fewer outstanding shares...more value to remaining shares (if we can keep the costs down & raise revenues that is!)
- 30K+ folks on property now, end of last qtr 32K+ on property...employee to aircraft ratio has declined from 4Q03 of 85 to 74 folks per airplane at 3Q04...huge cost savings...hope to get that number down to 70 sometime within the next 2 years...will have added 29 airplanes this year with a net decrease in folks, not bad.....2 classes of FAs were 100% internal hires...lower salary costs as they move from higher paying jobs to entry level FA jobs...expect our costs to continue to decline slightly in 4Q
- Cost savings in closing of res center are still being felt...however 3q showed increase in salaries & benefits overall of 3.3%...some of that was the retro checks for FAs along with pay raises granted this qtr...
- Operational efforts to cut fuel costs; costs per flying block hour was 2% this year than last year even with an increase in flying block hours...pilots & dispatch are working to optimize altitudes & route selections...retiring inefficient -200s (all gone by mid Jan '05), more fuel efficient -700s
- ATA...what's up with that Mr Kelly? Who controls the gates? Can you say "preferential gates"...term used by Chicago to say they control the gates, no ATA...we have 19 gates, fly 145 flights...we have current capacity growth there without having to buy anymore gates..not needed at this point...no one asked about the airplanes which was unfortunate...he didn't allude to that issue at all
- Question was asked of Kelly what mark does he wish to leave? international flying? Assigned seating? He said the focus was to maintain low cost advantage, have focus on operational excellence, improve customer service...that will lead to superior cost performance...he wishes to simplify the approach versus complicating it..."no plan to change the product, add different type, fly international routes"...Kelly's words...he wants to address the 75% on time performance, much too low in his opinion & directly related to customer satisfaction...will work hard next year to fix that
- Currently no restrictions placed on SWA by Love Field or city of Dallas in moving to DFW if so desired...question was asked & Kelly answered it...Kelly quoted on CNBC by this reporter as saying he didn't have plans to go to DFW at this point but the weekly msg on 1-877-IFLY737 he talks about the pros & cons of it...interesting discussion & very frank
- Kelly said this was time of weak revenue environment...SWA is designed to survive this type of environment, others aren't but that doesn't mean SWA will grow like it has during other downturns in the market...different environment...
- Profit of $119M...good but not where we want to be in terms of return on investment for shareholders.
___________________
I'm sure there is much I missed or misinterpreted so don't hesitate to correct. I've attached the 10K summary in the subsequent post. I believe the bottom line is that SWA is ready to move in which ever direction the market forces allow it to make the most money. The outlook for hirings next year would appear to be very good based upon these numbers as the company is poised to fully utilize all 29 airplanes we are receiving & are prepared to get more if the situation is right....good luck to all.