PreContact
Well-known member
- Joined
- Oct 16, 2005
- Posts
- 317
http://www.chicagotribune.com/busin...st-story,0,817723.story?coll=chi-bizfront-hed
Southwest Air to add fewer jets as It slows growth
By Mary Schlangenstein
Bloomberg News
Published June 27, 2007, 10:32 AM CDT
Southwest Airlines Co., the largest low-fare carrier, said it will expand less than planned and drop some unprofitable routes to help blunt a "radical" rise in fuel costs.
Southwest will add 19 Boeing Co. 737s in 2008 instead of 34, Chief Executive Officer Gary Kelly said today in New York. The Dallas-based airline cut its projected capacity increase for this year and 2008 to 6 percent, from 8 percent.
Flying fuller aircraft would help maximize revenue from each flight. Southwest's jets flew about 70 percent full through May, the lowest percentage among the 10 largest U.S. carriers, as costs rose for labor and fuel.
"We have to adjust our cost structure to the reality of much higher energy costs," Kelly said at a meeting with analysts. "That has been a very radical change in 24 months."
Kelly said Southwest also would focus more on business travelers to help boost revenue; is studying the sale of on- board consumer goods and the sale of travel products on its Web site; and plans to announce changes to its seating and boarding practices later this year. Southwest is the only major U.S. carrier that doesn't assign seats.
In total, Southwest expects to add $1 billion in new annual revenue by 2010, Kelly said. Sales totaled $9.1 billion in 2006.
Shares of Southwest rose 16 cents to $14.80 at 11:26 a.m. in New York Stock Exchange composite trading. They declined 4.4 percent this year before today.
Southwest hasn't decided how it will adjust its fleet, Kelly said. The airline may return some aircraft at the end of their leases, "defer delivers or whatever" with Boeing, or possibly sell some of the jets it owns, Kelly said.
"We are looking at all these alternatives," he said. Southwest flies only Boeing 737s.
"It makes more sense to us to sell older aircraft and return aircraft under lease rather than defer deliveries," said Douglas Runte, an analyst with RBS Greenwich Capital Markets in Greenwich, Connecticut. Older planes burn more fuel and have higher maintenance costs.
Fuel and labor are airlines' biggest expenses. A gallon of jet fuel for immediate delivery in New York Harbor has surged 18 percent this year. Jet fuel has averaged $1.93 a gallon so far this year, 27 percent more than the same period in 2005.
Southwest is working to preserve a streak of consecutive quarterly profits dating to 1991.
The airline also is expanding its cargo business, studying proposals to provide wireless onboard Internet access, and considering changes to its frequent-flier program and marketing alliances with other airlines. Those shifts are aimed at boosting revenue without losing Southwest's ticket-price advantage or driving away customers.
Competitors have led Southwest in charging for services such as in-flight meals, speaking to reservation agents or checking bags outside airport terminals. Tickets and cargo make up about 98 percent of Southwest's revenue, compared with about 90 percent at AMR Corp.'s American Airlines.
In May, the airline signed a 10-year agreement to sell tickets through Travelport Ltd.'s Galileo distribution service to help win more business travelers. Southwest previously sold tickets only through Sabre Holdings Corp. Most airlines have agreements with multiple online ticketing sites.
"We do a really good job of capturing the business travelers who are traveling out of their own wallets," Kelly said today. "We struggle more with the business traveler who is price insensitive. If we can win them and they'll pay us more money, we'll be happy. Those are our prime opportunities."
Southwest, which flies only in the 48 contiguous U.S. states, has said it may fly to Canada, Mexico and the Caribbean starting in 2009 under a marketing accord with ATA Airlines Inc.
Southwest has increased fares twice this year, in February and April.
- Didn't Southwest talk about starting up a cargo operation a couple of years back? With their frequencies, they could do prett well on some cargo-only runs.
Southwest Air to add fewer jets as It slows growth
By Mary Schlangenstein
Bloomberg News
Published June 27, 2007, 10:32 AM CDT
Southwest Airlines Co., the largest low-fare carrier, said it will expand less than planned and drop some unprofitable routes to help blunt a "radical" rise in fuel costs.
Southwest will add 19 Boeing Co. 737s in 2008 instead of 34, Chief Executive Officer Gary Kelly said today in New York. The Dallas-based airline cut its projected capacity increase for this year and 2008 to 6 percent, from 8 percent.
Flying fuller aircraft would help maximize revenue from each flight. Southwest's jets flew about 70 percent full through May, the lowest percentage among the 10 largest U.S. carriers, as costs rose for labor and fuel.
"We have to adjust our cost structure to the reality of much higher energy costs," Kelly said at a meeting with analysts. "That has been a very radical change in 24 months."
Kelly said Southwest also would focus more on business travelers to help boost revenue; is studying the sale of on- board consumer goods and the sale of travel products on its Web site; and plans to announce changes to its seating and boarding practices later this year. Southwest is the only major U.S. carrier that doesn't assign seats.
In total, Southwest expects to add $1 billion in new annual revenue by 2010, Kelly said. Sales totaled $9.1 billion in 2006.
Shares of Southwest rose 16 cents to $14.80 at 11:26 a.m. in New York Stock Exchange composite trading. They declined 4.4 percent this year before today.
Southwest hasn't decided how it will adjust its fleet, Kelly said. The airline may return some aircraft at the end of their leases, "defer delivers or whatever" with Boeing, or possibly sell some of the jets it owns, Kelly said.
"We are looking at all these alternatives," he said. Southwest flies only Boeing 737s.
"It makes more sense to us to sell older aircraft and return aircraft under lease rather than defer deliveries," said Douglas Runte, an analyst with RBS Greenwich Capital Markets in Greenwich, Connecticut. Older planes burn more fuel and have higher maintenance costs.
Fuel and labor are airlines' biggest expenses. A gallon of jet fuel for immediate delivery in New York Harbor has surged 18 percent this year. Jet fuel has averaged $1.93 a gallon so far this year, 27 percent more than the same period in 2005.
Southwest is working to preserve a streak of consecutive quarterly profits dating to 1991.
The airline also is expanding its cargo business, studying proposals to provide wireless onboard Internet access, and considering changes to its frequent-flier program and marketing alliances with other airlines. Those shifts are aimed at boosting revenue without losing Southwest's ticket-price advantage or driving away customers.
Competitors have led Southwest in charging for services such as in-flight meals, speaking to reservation agents or checking bags outside airport terminals. Tickets and cargo make up about 98 percent of Southwest's revenue, compared with about 90 percent at AMR Corp.'s American Airlines.
In May, the airline signed a 10-year agreement to sell tickets through Travelport Ltd.'s Galileo distribution service to help win more business travelers. Southwest previously sold tickets only through Sabre Holdings Corp. Most airlines have agreements with multiple online ticketing sites.
"We do a really good job of capturing the business travelers who are traveling out of their own wallets," Kelly said today. "We struggle more with the business traveler who is price insensitive. If we can win them and they'll pay us more money, we'll be happy. Those are our prime opportunities."
Southwest, which flies only in the 48 contiguous U.S. states, has said it may fly to Canada, Mexico and the Caribbean starting in 2009 under a marketing accord with ATA Airlines Inc.
Southwest has increased fares twice this year, in February and April.
- Didn't Southwest talk about starting up a cargo operation a couple of years back? With their frequencies, they could do prett well on some cargo-only runs.
