MDW - why the fuss?

[lowecur]

In reading this Unisys report, it's a wonder anyone is bidding on MDW. The report really crystalizes the n/s markets only. SWA serves 29 markets from MDW, and has little competition on 20. Unisys states one analyst says ATA was losing $50M per year at MDW, and then infers that SWA has not done much better. Why and how AWA, or AirTran plans to make money is a mystery. Of course B6 will lose money at first with the 320's, but once they plug in the 190's and their associated crew costs and build out their spider networks...........it's an instant moneymaker.

http://www.unisys.com/eprise/main/admin/micro/doc/Scorecard_Oct_Vol-3_Issue1.pdf

 

[canyonblue]

their associated crew costs and build out their spider networks...........it's an instant moneymaker.

If only crew costs were the true difference between making a profit and making a loss.

 

[furloughed dude]

Is anyone else tired of lowecur's love of the 190? Give it a break dude!

 

[lowecur]

If only crew costs were the true difference between making a profit and making a loss.

Oh, I forgot about the number one cost....fuel. Keep hedging that heating oil. It's amazing that a company can show this under fuel and oil expense as a gain. Unless heating oil is used to fuel those 737's, this is nothing more than an unadulterated misrepresentation of an operating expense. It's like hedging the price on coffee or corn, and then telling the stockholders it's a gain on the food service expense.

Got to give him credit though, he's one smart cookie!

 

[lowecur]

Is anyone else tired of lowecur's love of the 190? Give it a break dude!

No!....

 

[FatesPawn]

Oh, I forgot about the number one cost....fuel. Keep hedging that heating oil. It's amazing that a company can show this under fuel and oil expense as a gain.

No, the #1 cost is still labor - but not "crew costs." It's the whole enchilada. CASM

Fate

 

[lowecur]

No, the #1 cost is still labor - but not "crew costs." It's the whole enchilada. CASM

Fate

Right you are. Thanks for the correction.

 

[mach zero]

In reading this Unisys report, it's a wonder anyone is bidding on MDW. The report really crystalizes the n/s markets only. SWA serves 29 markets from MDW, and has little competition on 20. Unisys states one analyst says ATA was losing $50M per year at MDW, and then infers that SWA has not done much better. Why and how AWA, or AirTran plans to make money is a mystery. Of course B6 will lose money at first with the 320's, but once they plug in the 190's and their associated crew costs and build out their spider networks...........it's an instant moneymaker.

http://www.unisys.com/eprise/main/admin/micro/doc/Scorecard_Oct_Vol-
3_Issue1.pdf

What? Just a few months ago you said this about MDW in a thread which you started and titled...
MDW - the prize
"Think there are just a few airlines looking at the deteriorating situation over at ATA? Those numerous gates and lack of expansion possibilities in Chicago, have a few route planners for other airlines salivating at the thought"

 

[lowecur]

What? Just a few months ago you said this about MDW in a thread which you started and titled...
MDW - the prize
"Think there are just a few airlines looking at the deteriorating situation over at ATA? Those numerous gates and lack of expansion possibilities in Chicago, have a few route planners for other airlines salivating at the thought"

Yes, that was brilliant on my part. Scary isn't it, cause that thread is from 5/17/04. I took alot of flak for that, including from you Zero.

The Unisys report strictly implies no one is making money there, so why the mad scramble? My own opinion is the strategic importance of MDW is what entices AirTran, AWA, and Jetblue. Even if you can't break even there, it is an absolute must if you ever expect to gain a loyal customer base nationwide. With more and more business pax flying LCC's, Chicago is a necessity.

 

[UALjan15]

Of course B6 will lose money at first with the 320's, but once they plug in the 190's and their associated crew costs and build out their spider networks...........it's an instant moneymaker.

OK, man, time for a reality check. By my quick calculations, on a 2 hour flight, JB will have to pay the bus crew (pilots only) a whopping $116 more than the 190 crew. Of course, for that extra Ben Franklin, they get the opportunity to sell another 64 seats. I used airlinepilotpay.com pay rates, assuming a 4 yr skipper and 2 yr FO. I don't know the F/A rates, so I didn't include them. If you average the pilot's pay across the number of seats that they fly, the bus costs $2.23/seat, and the 190 is 13% more costly at $2.52/seat (assuming 92 seats).

Obviously, other operating costs differences (like fuel) will determine if the bus or the 190 is the right choice for a particular city pair. The conventional wisdom among amateur analysts is that the airline lives or dies based on what they pay the flight crew, but it just doesn't hold up. It's the overall CASM that really counts.

 

[lowecur]

OK, man, time for a reality check. By my quick calculations, on a 2 hour flight, JB will have to pay the bus crew (pilots only) a whopping $116 more than the 190 crew. Of course, for that extra Ben Franklin, they get the opportunity to sell another 64 seats. I used airlinepilotpay.com pay rates, assuming a 4 yr skipper and 2 yr FO. I don't know the F/A rates, so I didn't include them. If you average the pilot's pay across the number of seats that they fly, the bus costs $2.23/seat, and the 190 is 13% more costly at $2.52/seat (assuming 92 seats).

Obviously, other operating costs differences (like fuel) will determine if the bus or the 190 is the right choice for a particular city pair. The conventional wisdom among amateur analysts is that the airline lives or dies based on what they pay the flight crew, but it just doesn't hold up. It's the overall CASM that really counts.

Point taken.

 

[SWA/FO]

You're 100 correct. We have been losing money for years out of MDW...don't tell anybody.

That is why we want more gates and want to add more flights, so we can accelerate our entire money losing operation. Maybe by this time next year we will be able to double our losses out of MDW.

 

[lowecur]

You're 100 correct. We have been losing money for years out of MDW...don't tell anybody.

That is why we want more gates and want to add more flights, so we can accelerate our entire money losing operation. Maybe by this time next year we will be able to double our losses out of MDW.

Heating Oil Hedge Investment Income thru 9/30/04 = $520M. Net Profit including Heating Oil Hedge Investment Income thru 9/30/04 = $258M. Subtract Net Profit of $258M from the Investment Income and you get Actual Net Profit(or Loss) from Operations = ($262M) NET LOSS FROM OPERATIONS THRU 9/30/04.

AMR and CAL have net losses of $374M and $157M respectively for that same period. I don't believe either have heating oil hedged as SWA does. Eventually the twain shall meet when hedging will hold no advantage. SWA competitive advantage will need to come from somewhere in order to maintain this advantage. If pricing power increases for everyone through attrition,then some competitors will use that pricing power to undercut each other and SWA. It's a neverending cycle, and one that SWA will eventually have to address. You can temporarily outgrow your problem, but the problem just becomes a bigger headache once you finally have to deal with it...........and that's payroll.

 

[CaptSeth]

Fares will have to go up, no doubt about it. 2006 at the latest, but there will be a number of liquidations by then. Whoever is left standing will make plenty of money.

 

[lowecur]

Fares will have to go up, no doubt about it. 2006 at the latest, but there will be a number of liquidations by then. Whoever is left standing will make plenty of money.

Good point, but this will be a temporary phenom. The buildout of the LCC's will accelerate as you will see many of the options exercized for a/c to fill the gap, and new startups like Virgin and others will also keep fares in check.