Is SWA Untouchable?

[Superbird]

Kudos to SWA, they have successfully grabbed the industry (over the past 30+ yrs) by the horns , beating many legacy carriers at their own game, and now seem untouchable. They have a great product and business model. Most things they touch turn to gold (good planning).

Although their costs increase each year as they grow; more planes, employees, higher salaries, can anyone truly compete against SWA and make money?

SWA managment has done a great job positioning themselves in cities, hedging fuel and buying assets. Does SWA have any weaknesses? Is there a terminal velocity?

Could a Virgin USA compete?

 

[canyonblue]

All fame is fleeting.

No one is untouchable in a business that has too many unforeseen events.

 

[treetopflyer]

replace every reference to SWA in the above post with UAL and set the clock back a few years to see if you are untouchable. not saying your co. is not great, but UNTIED was great for a long time as well.

 

[TBF]

All fame is fleeting.

No one is untouchable in a business that has too many unforeseen events.

Words of wisdom!

 

[PHXFLYR]

Words of wisdom!

They sure are!!


PHXFLYR

 

[Z_Pilot]

I am not an expert, but if we look at the history of airlines, then we can see the cycles: The Pan-Am and TWA years, the UAL DAL NWA & AA years. Now we are looking at the SWA JetBlue and _____ years...they are the primary airlines of this cycle, but it will not last forever. Perhaps if the govornment allows the floodgates for cabotage to open, then perhaps the next cycle in 20 or so years will include booking a flight on Aeroflot from Chicago to Phoenix flown by Russian pilots on a Russian airline...
More and more American jobs are outsorced every year and my Aeroflot scanrio may sound rediculous, but I think that it may be possible if the passenger wants to fly coast-to-coast for 20 bucks and if the govornment allows it (foreign ownership, etc...).

 

[Dave Siegel]

I am not an expert, but if we look at the history of airlines, then we can see the cycles: The Pan-Am and TWA years, the UAL DAL NWA & AA years. Now we are looking at the SWA JetBlue and _____ years

You actually are trying to put JetBlue in the same class as Southwest? How long has JB been in business??? Not exactly what I'd call a track record of success. OK, smurfs, chime on in now and get all defensive.

I'd personally put Southwest in a class by itself. The likes of Jet Blue and Air Tran are successful, but I don't think they're at the Southwest level. Hasn't Air Tran been around longer than Jet Blue? Even so, I don't think anyone will ever be able to duplicate what Southwest has going on.

 

[Yahtzee]

You actually are trying to put JetBlue in the same class as Southwest? How long has JB been in business??? Not exactly what I'd call a track record of success. OK, smurfs, chime on in now and get all defensive.

I'd personally put Southwest in a class by itself. The likes of Jet Blue and Air Tran are successful, but I don't think they're at the Southwest level. Hasn't Air Tran been around longer than Jet Blue? Even so, I don't think anyone will ever be able to duplicate what Southwest has going on.

Cavet Emptor:

Please remember to bash the flightinfo version of "Dave Siegel" and not Southwest. "Dave Siegel" uses a Southwest avatar but does not work for Southwest and hopefully never will.

Nice flamebait!

 

[Dave Siegel]

Cavet Emptor:

Please remember to bash the flightinfo version of "Dave Siegel" and not Southwest. "Dave Siegel" uses a Southwest avatar, but does not work for Southwest and hopefully never will.

Nice flamebait!

So much for welcoming me with open arms. I was just making the point that Jet Blue hasn't proven themselves over time like Southwest has. I was ready to get attacked from the Blue Kool-Aid drinkers, but holy smokes! I wasn't even trying to flamebait anyone. As a matter of fact, I'm trying to give up flamebait for Lent! Wow, that was a little harsh, Mr. Yahtzee.

 

[Angus]

As a matter of fact, I'm trying to give up flamebait for Lent! Wow, that was a little harsh, Mr. Yahtzee.

I've tried to give up lent... but every time I use my Dryer... there is tons more floating around the laundry room.

How were you able to get rid of the lent??

Signed:
Curious

 

[Yahtzee]

So much for welcoming me with open arms. I was just making the point that Jet Blue hasn't proven themselves over time like Southwest has. I was ready to get attacked from the Blue Kool-Aid drinkers, but holy smokes! I wasn't even trying to flamebait anyone. As a matter of fact, I'm trying to give up flamebait for Lent! Wow, that was a little harsh, Mr. Yahtzee.

Dave,

No you weren't just making a point about JetBlue...You were bashing JetBlue. Do you really believe the folks at JetBlue are going to read your post and think..."Well he's just making a point that we've haven't been in business as long as SW"

In the past you have made posts leading other folks on this board to believe you actually work for SW, and you were called out pilots from all over the board, include SW pilots. Only recently (as in the last week) did you start writing with the "hopes of going to Southwest".

Do these posts ring a bell?

from: http://forums.flightinfo.com/showthread.php?p=515401#post515401

Thanks for MAKING my point...We DO LIKE it here. That's a revealing comment coming from Mr. Air Tran.

Seems to me the Southwest guys LOVE (or LUV) it at Southwest. That's the difference.

or

You're playing with the numbers. I can't wait to see how "successful" you'll be when your scairbuses start having mechanical problems.

By the way, love the blue uniform shirts. I just saw one of your pilots in the lobby of the hotel. Nevermind, it was the bellboy.

or maybe

from: http://forums.flightinfo.com/showthread.php?t=47135&page=1&pp=40

I'm not down on blue, but I am glad that when I go to Southwest, I won't have to wear the Blue Shirt (makes you look like Delta male flight attendants). I just think people think that JB is this fabulous, wonderful airline, and I think you're like Jurassic Park (the movie)--Pretty decent, but impossible to live up to the hype. At least it seems like you have a pretty level head about you, but some of your pilots are WAY out of touch with reality. Maybe you should slap 'em around some.

Do I want you at Southwest? No..not in a million years with your current attitude. Harsh...maybe to you , but not to the folks who work for and fly on Southwest.

If you have already interviewed at SW and are awaiting a classdate, I hope you might change your outlook toward others and realize the only place to go when you're on the top is down. Have you ever studied Roman History? It's interesting, and only further validates my point. Iviair's signature line say it all..."In peace nothing so becomes a man as modest stillness and humility"

I'm not better than you, but I do work for Southwest and hope our people never think we are unbendable, unbreakable. If you're coming to Southwest, I hope you think about what I'm writing and let some of it sink in. It wasn't written to bash you, as so much to possible change you point of view.

Sorry you caught me on a night when I was too weak to ignore your post.

Yahtz

 

[SWA GUY]

One thing to consider in regards to airline history(survivability) are the years of regulation.

I think survivability during the regulation era and the post regulation era are two significant differences. As is survivability in the post 9/11 era.

If an airline can survive in the post regulation era AND the post 9/11 era, while making profits, the airline should be able to weather the storm.

We'll see I guess.

 

[petepilot]

What will do Southwest in is all this hiring/ expanding they are doing this year, it's what always does an airline in in the long run, growing too fast beyond there means, they should have stuck to what they did for the past 30 years but oh well, so the cycle goes

 

[SWAdude]

What will do Southwest in is all this hiring/ expanding they are doing this year, it's what always does an airline in in the long run, growing too fast beyond there means, they should have stuck to what they did for the past 30 years but oh well, so the cycle goes

Since the beginning SWA has grown 8-15% a year. This year I believe we have aircraft deliveries at the 8% growth range. With the exception of crews, mechanics and dispatchers, we have had a hiring freeze for sometime now.

So...what are we doing this year that is so different to start our demise?

You just made a pointless statement.

 

[satpak77]

also

JetBlue has zero (unless I am wrong) retired pilots as of today. Southwest has some, but nothing like United, DAL, AA, NWA, CAL, UAIR, etc. With these retired pilots come pension costs and medical benefits costs, which is one reason United and US Airways wants to/already has thrown these out, so they keep the current company alive.

JetBlue does not have this problem. Southwest really does not either.

In my opinion (worth exactly 2 cents) JetBlue's ability to "take on" LUV is still yet to be seen. Note that CEO David Neeleman has personally dealings with LUV, having sold Morris Air to LUV years ago. The fact that JetBlue is a carbon copy of SWA, based in KJFK, not KDAL, and flying Airbus (and now RJ's) and not 737s, should not be a earth shattering surprise.

JetBlue should tread carefully with expansion, and RJ's, etc, etc. SWA grew slowly and carefully. The airline business has never been easy, and post 9/11 its even more dicey.

Over the long term, as LUV incurs retireee pension costs, medical costs, etc, in the meantime JBLU is still without said costs, this puts LUV into a weaker financial posture when competing with JBLU.

my 2 cents, nothing more

 

[Bake]

Your 2 cents is more money than Southwest has in pension costs now or that they will have for the greater foreseeable future.

 

[T1bubba]

Satpak,

We don't have pension costs because we don't have pensions, not because we don't have retirees.

 

[Immelman]

Here is what I'm wondering: SWA has a big advantage now due to hedging fuel.. this can only last so long; contracts expire at some point and the higher (assuming it stays high) cost of fuel will catch up with SWA -- at some point things will have to give, ticket prices will have to come up, and suddenly its not a 1-2 horse race anymore. Thoughts?

 

[ivauir]

Immelman, you are right, contracts expire, but we just keeping making new ones. As the market reacts to the long term effects of expensive fuel the amount we are able to hedge our fuel at changes. But we are (and will be) able to hedge our fuel expenses indefinatly. There is always someone willing to bet that the price will fall. Because fuel has been pricy for a while our contracts aren't as good as they used to be, but they continue to isolate us from the worst effects. The fuel hedging program is brilliant of course, but I belive our main advantage comes from cash on hand and a manegment team that contiues to make solid decisions on what to do with that cash (e.g. ATA deal).

 

[lowecur]

Here is what I'm wondering: SWA has a big advantage now due to hedging fuel.. this can only last so long; contracts expire at some point and the higher (assuming it stays high) cost of fuel will catch up with SWA -- at some point things will have to give, ticket prices will have to come up, and suddenly its not a 1-2 horse race anymore. Thoughts?

Greenspan coined the term "irrational exuberance." SWA and the rest of the pack are staking their future profits on a shakeout of capacity in the system. The $65K question is who will not have a seat once the music stops.

If UAIR fails they are only 6% of the total capacity today, but none the less it would be a major coup for SWA, DL, B6, and AirTran. It is again rumored that Branson is meeting with Lakefield in PIT.

I have my doubts that FLYi will be around by the end of the year. That leaves UAL as the next possible legacy victim, with DL in close pursuit. I still believe that once UAL discharges their pensions, they will merge with AMR and that merger could reduce capacity by 10% or so. As the dance will continue till the end of the year, I believe AWA and Frontier stand a good chance of filing at the end of this year, thus keeping the music playing well into 2006.

One thing is clear, it's very hard to kill an airline. For SWA sake, it needs to happen soon, or there will be some hard decisions.

 

[8vATE]

IMO...

Back to the original posters question (and not jetBlue vs. SWA)

Southwest can and will continue to dominate because of their EFFICIENCY..

They know what their product is... they make sure their customers know what their product is (thereby setting the customer's expectations.. ie .. no rubber chicken sandwiches, no assigned seating...etc)


As long as SWA continues to treat their employees well, to focus on cost.....

They will be unstoppable...


As the one poster stated....
Nothing is forever in this industry....

Success can breed arrogance, inefficiencies and greed (insert favorite legacy carrier name here)....
I've been wondering if SWA would go assigned seating or go with some sort of inflight entertainment... but I think they have passed on both for now and just want to be super efficient, high value and low total cost....

They do all this while being highly unionized and paying their pilots well..

Gotta LUV them....

 

[Echopapa]

It is only a matter of time until SWA starts losing money. They got very lucky this quarter (or smart). If they hadn't hedged their fuel they would have lost money. As fuel prices incease so does the cost to hedge. JB made money this quarter without the large volume of fuel hedges. That should scare the pants of a SWA pilot. It is increadible for a start up to make money with so many costs associated with startup (buying gates, uniforms, computers, stationary, busses, tugs, paperclips....hell everything for that matter except their planes).

SWA bought their fuel when prices were low and got lucky when they went up. The question is will the prices fall again so they can re-hedge. If prices don't come down significantly in the next 10 months SWA will be as stuck as anyone else in the business. No one is going to sign a long term contract for $30 a barrell fuel if the current price is 45 and moving up.

I am betting that fuel prices are going to increase, and that SWA will have 10 months of modest profit, and then will start losing money.

 

[Jim Smyth]

I believe that 9-11 taught us that no airline is untouchable!

 

[N1atEcon]

8vate is the only one on here who has a clue what SWA is up to.
" I think they have passed on both for now and just want to be super efficient, high value and low total cost...." Everyone (yes you too lowerIQ) thinks that SWA airlines is just sitting around waiting for an airline to go out of business or for fuel to drop to 21.00. You need to look or be inside the company to see the changes.

Gary Kelly and the gang are one bunch of sharp tacks. We have shed 1000's of job in the last few years. But yet we are growing in areas that make the money, airplanes in the air. I think we are at 70 people per AC. And it will get lower. The seat mile cost is coming down as I type. They won't stop until it is in the high 6 to low 7 cents range. Every department is looking for ways to say a penny. To be more efficient. Yesterday we alone saved 303 gallons of gas. It is not dooms day over here, there is a lot of excitment in the air about our future. For the pilots we can expect more efficiency on our schedules. They are going to raise our average block hours per month. We will save money, our cost will come down, we will continue with our growth and model.

Final thoughts. For those of you who know nothing about fuel hedging please stop with the. "when SWA's fuel hedges run out they are in big trouble."
It just makes you look like a fool.

PR people do surveys all the time. People that use us want safe travel from point A to point B at a the cheapest price as ontime as possible. For flying us they get that and a one of the best rewards progams in the world. If you see any changes in the next two years i would guess assigned seating may be the only change.

Ask anyone who travels a lot. Most reward programs suck!!! Unless you want to go to Detroit in JAN.

Fly safe gents.

 

[canyonblue]

It is only a matter of time until SWA starts losing money. They got very lucky this quarter (or smart). If they hadn't hedged their fuel they would have lost money.

Well as the saying goes.... " If If and Buts were candy and nuts we'd all have a wonderful Christmas."

No one can predict what we would have made of lost if we did not have the hedges in place. The company could have very well cut costs in another area, to eek out a profit if need be. That whole "If Southwest did not have fuel hedges in place they would have lost money" is hands down the stupidest statement I've ever heard, right along with "If Airline X did not have to pay their employees they would have made money". The hedges were bought years ago and business decisions were based on them. If you have not figured it out yet a 33 year track record by SWA management proves to me they have not been lucky, but smart. They may slip up one day, but I would still attribute the success of SWA to smart management. And the other thing about hedges, they don't run out. It is a never ending cycle and Southwest is now buying 4 years plus out. They may be buying a percent at $45 but when oil hits $80 in 2009 it won't look so bad.

 

[lowecur]

SWA: 41% of expense costs are labor, and labor is 39% of the revenue...both growing numbers over the course of the last few years. CASM was down 4.5% in the last Q to Q, but RASM is decreasing with increase in transcons, and reduction of the high RASM short haul. CASM costs will become meaningless as more pressure is exerted as the lack of pricing power will become more evident in the next few years.

I couldn't disagree with you more there Econ.

 

[skykid]

I am not an expert, but if we look at the history of airlines, then we can see the cycles: The Pan-Am and TWA years, the UAL DAL NWA & AA years. Now we are looking at the SWA JetBlue and _____ years...

I disagree. You are comparing apples and oranges. SWA's operation is so different from these others airlines (1 aircraft type, yada yaday yaday) that you can't interchange them with those older carriers, and no disrespect to JetBlue but they haven't been around long enough to compare to SWA. Anything can happen, but I would say the model SWA is using will work for the next 100 years. When I was on the jumpseat a SWA Captain told me, "Everytime I take off a trailer park somehere is empty." Actually Danny Glover was also sitting in the back, but they are not going to run out of trailer parks anytime soon.

Final thoughts. For those of you who know nothing about fuel hedging please stop with the. "when SWA's fuel hedges run out they are in big trouble."

Well said.

lowecurThis user is on your Ignore List

I probably disagree with some of what he posted.

 

[ultrarunner]

SWA is successful because of it's management team and it's philosophy in doing business. It's ability to be flexible and adapt, along with a strategic plan, is the reason for it's success.

It's the reason all long-term successful companies remain successful.

It's not rocket science.

I have to laugh every day when I see how all these airlines are attempting to 'reinvent' themselves. Never knowing where they are going....

As opposed to SWA that know's exactly what they are doing, and what is required to get there.

 

[satpak77]

roger that

Satpak,

We don't have pension costs because we don't have pensions, not because we don't have retirees.

good point, I failed to realize you didnt have the "old style" pension pay-outs. My post however probably conveyed what I was trying to say tho

 

[Rez O. Lewshun]

Many try to copy SWA, but they just can't seem to duplicate SWA success and performance.

SWA works with thier unions.... Jetblue is adamently against them. Neeleman and company are going to have to welcome some kind of union (jBPA) sooner or later....

Name a desirable career airline that isn't organized in the US.

It just seems that the SWA copy cats like what they like about SWA and not all of SWA that makes them success...and that is thier downfall....

Thoughts?