Southwest Air CEO Says Carrier May Consider Adding Smaller Jets
2003-08-29 01:00 (New York)
Southwest Air CEO Says Carrier May Consider Adding Smaller Jets
Aug. 29 (Bloomberg) -- Southwest Airlines Co., the discount
carrier that flies only Boeing 737 jetliners to keep costs low,
will consider adding smaller aircraft, Chief Executive Officer
James Parker said.
Dallas-based Southwest flies four types of 737s, eliminating
the cost to train crews and mechanics, and maintain parts for
planes made by other manufacturers. JetBlue Airways Corp., a low-
fare carrier that flies Airbus SAS A320s with 162 seats, is
ordering smaller jets under a $3 billion contract.
``That whole issue of smaller airplanes is not something we
are going to ignore,'' Parker said in an interview. ``We're going
to look at it, in light of the new technology that's available,
and try to make a rational decision whether it makes sense for us
to consider some smaller airplanes.''
Southwest is the only major U.S. airline to post profits
since the September 2001 terrorist attacks as competitors had
losses exceeding $20 billion. Expansion by low-fare carriers will
force Southwest to start serving markets where rivals such as
JetBlue fly, or move into smaller cities, said Dan Kasper, an
airline economist for LECG LLC, a legal and economic consulting
group in Cambridge, Massachusetts.
``The bigger they get and the more diverse the markets
become, it implies they have to add a different aircraft type at
some time,'' he said. ``No other airline in history has operated a
single fleet type that large.''
Southwest officials haven't spoken recently with Brazil's
Embraer, the only company making a 100-seat jet, Parker said in
his Dallas office. The carrier, which flies to 58 cities in 30
states, previously considered and rejected adding 50- or 70-seat
jets because it wasn't cost effective.
JetBlue
New York-based JetBlue, which flies to 22 cities, said the
100-seat jets would triple the number of markets it might serve.
JetBlue flies 45 A320s and will add eight by the end of the year.
In April, it ordered 65 Airbus planes and placed options to buy an
additional 50 with deliveries starting next year.
JetBlue's 100-seat jet, bought from Brazil's Empresa
Brasileira de Aeronautica SA, will be used to fly into smaller
towns. Parker said the Embraer is an ``interesting'' plane.
Southwest has 381 planes, with the smallest of its 737s
carrying 122 passengers. The carrier accounts for 11 percent of
domestic airline capacity and 40 percent of the U.S. travel
market, Chief Financial Officer Gary Kelly said last month.
Second-quarter net income more than doubled to $246 million,
or 30 cents a share, with U.S. reimbursement of some security
costs and as more travelers sought out its cheaper fares. Sales
rose 2.9 percent to $1.52 billion.
Southwest has said adding another type of aircraft would
boost unit costs beyond its goal of maintaining 7.5 cents per seat
mile flown. JetBlue Chief Executive Officer David Neeleman said
the carrier will have to fill fewer seats on the small planes to
break even.
Southwest isn't pursuing the purchase of a smaller jet more
aggressively than in the past, yet Parker said he ``wouldn't rule
it out.''
The shares fell 9 cents to $16.90 yesterday in New York Stock
Exchange trading and have climbed 22 percent this year. The AMEX
Airline Index of 10 companies, including Southwest and its
competitors, has increased 43 percent this year.
--Mary Schlangenstein in Dallas (1) (214) 954 9451 or
[email protected] with reporting by Brian Sullivan in New
York, through the San Francisco newsroom (1)(415) 912-2980.
Editors: Geimann, Chu, Bray.
2003-08-29 01:00 (New York)
Southwest Air CEO Says Carrier May Consider Adding Smaller Jets
Aug. 29 (Bloomberg) -- Southwest Airlines Co., the discount
carrier that flies only Boeing 737 jetliners to keep costs low,
will consider adding smaller aircraft, Chief Executive Officer
James Parker said.
Dallas-based Southwest flies four types of 737s, eliminating
the cost to train crews and mechanics, and maintain parts for
planes made by other manufacturers. JetBlue Airways Corp., a low-
fare carrier that flies Airbus SAS A320s with 162 seats, is
ordering smaller jets under a $3 billion contract.
``That whole issue of smaller airplanes is not something we
are going to ignore,'' Parker said in an interview. ``We're going
to look at it, in light of the new technology that's available,
and try to make a rational decision whether it makes sense for us
to consider some smaller airplanes.''
Southwest is the only major U.S. airline to post profits
since the September 2001 terrorist attacks as competitors had
losses exceeding $20 billion. Expansion by low-fare carriers will
force Southwest to start serving markets where rivals such as
JetBlue fly, or move into smaller cities, said Dan Kasper, an
airline economist for LECG LLC, a legal and economic consulting
group in Cambridge, Massachusetts.
``The bigger they get and the more diverse the markets
become, it implies they have to add a different aircraft type at
some time,'' he said. ``No other airline in history has operated a
single fleet type that large.''
Southwest officials haven't spoken recently with Brazil's
Embraer, the only company making a 100-seat jet, Parker said in
his Dallas office. The carrier, which flies to 58 cities in 30
states, previously considered and rejected adding 50- or 70-seat
jets because it wasn't cost effective.
JetBlue
New York-based JetBlue, which flies to 22 cities, said the
100-seat jets would triple the number of markets it might serve.
JetBlue flies 45 A320s and will add eight by the end of the year.
In April, it ordered 65 Airbus planes and placed options to buy an
additional 50 with deliveries starting next year.
JetBlue's 100-seat jet, bought from Brazil's Empresa
Brasileira de Aeronautica SA, will be used to fly into smaller
towns. Parker said the Embraer is an ``interesting'' plane.
Southwest has 381 planes, with the smallest of its 737s
carrying 122 passengers. The carrier accounts for 11 percent of
domestic airline capacity and 40 percent of the U.S. travel
market, Chief Financial Officer Gary Kelly said last month.
Second-quarter net income more than doubled to $246 million,
or 30 cents a share, with U.S. reimbursement of some security
costs and as more travelers sought out its cheaper fares. Sales
rose 2.9 percent to $1.52 billion.
Southwest has said adding another type of aircraft would
boost unit costs beyond its goal of maintaining 7.5 cents per seat
mile flown. JetBlue Chief Executive Officer David Neeleman said
the carrier will have to fill fewer seats on the small planes to
break even.
Southwest isn't pursuing the purchase of a smaller jet more
aggressively than in the past, yet Parker said he ``wouldn't rule
it out.''
The shares fell 9 cents to $16.90 yesterday in New York Stock
Exchange trading and have climbed 22 percent this year. The AMEX
Airline Index of 10 companies, including Southwest and its
competitors, has increased 43 percent this year.
--Mary Schlangenstein in Dallas (1) (214) 954 9451 or
[email protected] with reporting by Brian Sullivan in New
York, through the San Francisco newsroom (1)(415) 912-2980.
Editors: Geimann, Chu, Bray.
