Southwest looks to acquisitions? Maybe they will make LBB a hub too?

[General Lee]

From Financial Times

Southwest looks to acquisitions

By Doug Cameron in Chicago

Wednesday Jun 13 2007 11:25

Southwest Airlines (NYSE:LUV) said on Wednesday that it was examining potential acquisitions and alliances with multiple carriers, a signal that industry consolidation could emerge among the fast-growing low-cost segment.
Gary Kelly, chief executive, said the largest US domestic airline had the funding to support acquisitions, despite a slowdown in revenue growth across the industry which is challenging its expansion plans and profit forecasts.
His comments followed a recent signal by Delta Air Lines (NYSEAL) , which emerged from bankruptcy protection in April, of interest in a future combination with JetBlue (NASDAQ:JBLU) , the second-largest low-cost carrier. Analysts at Goldman Sachs reported the interest after a management meeting, though Delta has played down its significance.

The US low-cost segment is seen as ripe for consolidation after Delta's successful rebuff of a hostile bid from US Airways this year raised concerns that any deals among the large network carriers could be blocked on antitrust grounds.

While low-cost carriers such as Southwest and JetBlue continue to expand faster than network rivals, the overlap in their route systems is less likely to attract opposition from regulators.

Mr Kelly declined to be drawn on any potential targets, though analysts have in the past linked the company with Denver-based Frontier and Spirit, a Florida-based carrier which focuses on routes to the Caribbean. He noted Southwest had made acquisitions in the 1980s and 1990s – Texas-based Muse Air and Morris Air, a Utah-based airline run by JetBlue founder Dave Neeleman. "Who knows, maybe we'll do one this decade," he said.

Southwest's business model formed the template for the rapid emergence of low-cost carriers around the world such as Ryanair, Easyjet and AirAsia. However, the airline is evolving its strategy to provide the flexibility for code shares and other alliances, as well as international flights. Southwest had previously eschewed such moves to protect its cost structure.

The airline is upgrading its computer systems to handle the added complexity of alliance partners and international flights. Southwest's only code-share is with ATA, a domestic carrier which it helped rescue from bankruptcy to secure its slots and gates at Chicago's Midway airport.
Analysts believe it is likely to seek partnership s with overseas carriers operating to the US. JetBlue last year signed an alliance with Aer Lingus to offer the Irish carrier's passengers onward travel within the US, and is examining similar partnerships.

Mr Kelly also said domestic margins remained under pressure at the start of the key summer travel season. "If trends don't change, it would be appropriate to change the growth rate," he said, noting Southwest had the flexibility to defer some of the 32 Boeing 737s scheduled for delivery next year.


Bye Bye--General Lee

 

[lowecur]

Sure, why not! Forget about B6, it would never get past the DOJ. F9???...sure! They could sell the Airbii's, and the DOJ probably wouldn't blink twice at the loss of a midwest carrier.

My money would be on Alaska for the sure thing.

imp:​

 

[Tejas-Jet]

We get all the assets...then do preferential interviews. Just to make sure we get the "right" kind of people....the kind that are junior to me...

 

[On Your Six]

Now things are getting interesting.... If SWA acquires something, there goes the single-aircraft strategy unless Alaska or Aloha are the targets... I guess the Aloha and Alaska pilots have a right to get excited with the possibilities if SWA is intent on sticking to its core operational single-fleet strategy.

If SWA's expenses continue to rise with labor and fuel, etc., revenue will need to rise more to maintain margins and profits. That's important because SWA's stock price is based on earnings per share growth and projections over time (profits matter). However, with increased LCC competition and so many aircraft coming on line for all of the carriers (Jet Blue, SWA, AirTran, Spirit, Skybus and now VA all adding a tremendous number of airplanes in the next few years), watch prices fall as competition for market share heats up and these carriers run out of non-SWA routes to put all of their airplanes... Falling prices and increasing costs are never a good match.

Good thing the legacies are focusing on less-competitive and thus more lucrative international routes and putting "cheaper" large RJs (E170s, CR9s, etc.) on the more competitive routes to protect their own margins and provide needed international feed in both directions. Delta is looking to expand in Africa of all places. Wow - I'm glad I got out of 121 flying - it's gonna be interesting.

 

[afhercdriver]

My money is on AirTran. We could pay cash, eliminate our closest competitor and secure Atlanta. For what it's worth, SWA is hosting a party for the arrival of our 500th 737 on 28 Jun. That would be a good time to make a major anouncement. This could get really interesting.

 

[STL717]

My money is on AirTran. We could pay cash, eliminate our closest competitor and secure Atlanta. For what it's worth, SWA is hosting a party for the arrival of our 500th 737 on 28 Jun. That would be a good time to make a major anouncement. This could get really interesting.

You may be on to something.

LUV would pick up new cities including:BOS, LGA, DCA, RIC, CHS, MIA, SRQ, PNS, GPT, ICT, MKE, MSP and MLI.

 

[AA717driver]

We get all the assets...then do preferential interviews. Just to make sure we get the "right" kind of people....the kind that are junior to me...

Do you work for AA? If you don't, you missed your calling. TC

 

[Alcatraz]

My money is on AirTran. We could pay cash, eliminate our closest competitor and secure Atlanta. For what it's worth, SWA is hosting a party for the arrival of our 500th 737 on 28 Jun. That would be a good time to make a major anouncement. This could get really interesting.

I agree. I wouldn't even call it anywhere near rumor status, but the more informed/educated people I work with (including me) tend to think airTran would be a decent business move. ATL and LGA would be great markets, plus all the overlap in our MDW and BWI markets are enticing.

And yes, it's been rumored that Gary wants to have a second type of airplane (I'm assuming bigger, but who knows).

 

[Whataburger]

.......and give Delta a double fisted version of the Southwest Effect!!!!!

 

[Lear70]

.......and give Delta a double fisted version of the Southwest Effect!!!!!

ROFLMAO!!!

As long as ALL the pilots get jobs... splitting up the fleets and the pilots with it would pretty much suck.

 

[afhercdriver]

AirTran's market cap is about $1 billion. SWA could spend around $1 billion to buy 47 more new 737-700s or spend $1 billion to aquire them with AirTran.

http://www.stockhouse.com/comp_info.asp?symbol=AAI&table=NYSE

 

[Jetjockey]

We get all the assets...then do preferential interviews. Just to make sure we get the "right" kind of people....the kind that are junior to me...

The sad thing is, you probably aren't kidding. I've been through 3 furloughs, and the 'friendly' end of your "preferential interview". Once you wipe that sh#%t eating grin off your face, pray you never have the pleasure of being on the wrong end of a bad airline management decision. No one in this industry is bullet-proof,......................NO ONE.

Cheers.

 

[On Your Six]

.......and give Delta a double fisted version of the Southwest Effect!!!!!

Getting rid of 60-70 717s without lowering their values significantly won't be that easy. Who will buy them beyond Midwest (doubtful)? If you remove one LCC competitor more will pop up. If that combination happens, watch other competitors ramp up to fill the void. Fares will still be low across the board.

Although, when you think about it, a SWA/AirTran combination could be a good thing... Perhaps SWA will finally keep and institute AirTran's seat reservation system. WE CAN ONLY HOPE!!!!!!!!!!!!!!!!!!

 

[bravodude]

Getting rid of 60-70 717s without lowering their values significantly won't be that easy. Who will buy them beyond Midwest (doubtful)? If you remove one LCC competitor more will pop up. If that combination happens, watch other competitors ramp up to fill the void. Fares will still be low across the board.

Although, when you think about it, a SWA/AirTran combination could be a good thing... Perhaps SWA will finally keep and institute AirTran's seat reservation system. WE CAN ONLY HOPE!!!!!!!!!!!!!!!!!!

i wouldn't bet on it, it would spoil the quick turns we have. I talk to more and more customers who seem to like the way we board. ( not trying to start another boarding debate)

 

[GuppyWN]

Alaska. And if Gary Kelly is publicly admitting it then it's more likely in the 7th inning stretch than in the warmups.

Gup

 

[On Your Six]

Alaska. And if Gary Kelly is publicly admitting it then it's more likely in the 7th inning stretch than in the warmups.

Gup

Aquiring Alaska would remove a big West Coast competitor, but VA and others would likely try to fill in the void and keep fares low for all. I agree that Alaska and Air Tran are two likely contenders if an acquisition takes place. But you gotta think about how SWA would gain from a possible acquisition beyond more purchasing power and squeezing suppliers to reduce costs. Access to non-competitive international routes would provide incremental profits but I don't know of many unique international routes flown by Alaska or Air Tran that couldn't be flown by current competitors (intra-Alaska flights are profitable but wouldn't provide that much overall incremental benefit - just a small dent).

It will be interesting to watch if something happens......

 

[ivauir]

if Gary Kelly is publicly admitting it then it's more likely in the 7th inning stretch than in the warmups.

Or it is a ruse and is not even being considered.

 

[scoreboard]

Nothing to see here, move along, move along...

 

[Lear70]

i wouldn't bet on it, it would spoil the quick turns we have. I talk to more and more customers who seem to like the way we board. ( not trying to start another boarding debate)

Why would it spoil the quick turns?

We turn 137 people in 20 minutes every day... with a business class seating mix thrown in for good measure.

And our cleaning people are nowhere NEAR as efficient as yours are... I could make some comments about them, but the fact is, our process isn't anywhere near as efficient as yours and we STILL flip the airplanes quickly.

There's one station that regularly flips these planes in 15-18 minutes (they're also one of the few good stations for cleaning as well), and they board by a zone/window/aisle seat configuration that no one else uses, despite the numerous reports we turn in about this method.

It can be done without impacting your turns, promise...

 

[SWA/FO]

its West Jet we are going to buy. Gary just told me tonight over a few beers.

www.westjet.com

no union, all 737s, the SWA of Canada.

 

[K-Mart]

From Financial Times

Southwest looks to acquisitions

By Doug Cameron in Chicago

Wednesday Jun 13 2007 11:25

Southwest Airlines (NYSE:LUV) said on Wednesday that it was examining potential acquisitions and alliances with multiple carriers, a signal that industry consolidation could emerge among the fast-growing low-cost segment.
Gary Kelly, chief executive, said the largest US domestic airline had the funding to support acquisitions, despite a slowdown in revenue growth across the industry which is challenging its expansion plans and profit forecasts.
His comments followed a recent signal by Delta Air Lines (NYSEAL) , which emerged from bankruptcy protection in April, of interest in a future combination with JetBlue (NASDAQ:JBLU) , the second-largest low-cost carrier. Analysts at Goldman Sachs reported the interest after a management meeting, though Delta has played down its significance.

The US low-cost segment is seen as ripe for consolidation after Delta's successful rebuff of a hostile bid from US Airways this year raised concerns that any deals among the large network carriers could be blocked on antitrust grounds.

While low-cost carriers such as Southwest and JetBlue continue to expand faster than network rivals, the overlap in their route systems is less likely to attract opposition from regulators.

Mr Kelly declined to be drawn on any potential targets, though analysts have in the past linked the company with Denver-based Frontier and Spirit, a Florida-based carrier which focuses on routes to the Caribbean. He noted Southwest had made acquisitions in the 1980s and 1990s – Texas-based Muse Air and Morris Air, a Utah-based airline run by JetBlue founder Dave Neeleman. "Who knows, maybe we'll do one this decade," he said.

Southwest's business model formed the template for the rapid emergence of low-cost carriers around the world such as Ryanair, Easyjet and AirAsia. However, the airline is evolving its strategy to provide the flexibility for code shares and other alliances, as well as international flights. Southwest had previously eschewed such moves to protect its cost structure.

The airline is upgrading its computer systems to handle the added complexity of alliance partners and international flights. Southwest's only code-share is with ATA, a domestic carrier which it helped rescue from bankruptcy to secure its slots and gates at Chicago's Midway airport.
Analysts believe it is likely to seek partnership s with overseas carriers operating to the US. JetBlue last year signed an alliance with Aer Lingus to offer the Irish carrier's passengers onward travel within the US, and is examining similar partnerships.

Mr Kelly also said domestic margins remained under pressure at the start of the key summer travel season. "If trends don't change, it would be appropriate to change the growth rate," he said, noting Southwest had the flexibility to defer some of the 32 Boeing 737s scheduled for delivery next year.


Bye Bye--General Lee

Better than Atlanta. I'd rather live in LBB.

 

[humuakalaka]

My money would be on AirTran for eliminating a major competitor on the East coast (the place where the analyst mentioned that SWA is having trouble making money). Also, AirTran's non-fuel CASM is lower than SWA's, so their cost structure is more in line with SWA's. I'm not sure SWA would eliminate the 717. It may make sense to keep them. The 717 is an awesome airplane and AirTran has proven that a two airplane fleet does not necessarily mean higher costs. It may make actually make more sense to take on the 717's and eliminate a comensurate number of -300's/-500's if the CASM on the 717 is lower than the -300/-500. Also, ATL and LGA would be two very valuable markets for SWA.

Alaska is also a possibility in my mind because of it's routes and destinations in Mexico, Alaska, and Canada. I don't know that these would be as valuable to SWA as AirTran's business on the East coast.

Then, there's always the crazy outside chance of a merger with a company from left field like Ryan Air in Europe coupled with a code share to link trans-Atlantic passengers between the two. Who knows?

 

[Lear70]

I don't know about the -300's and the -500's, but the 717 is more expensive on a CASM basis than the -700's we run.

 

[FlyBoeingJets]

1) Southwest Airlines (NYSE:LUV) said on Wednesday that it was examining potential acquisitions and alliances with multiple carriers,

2) a signal that industry consolidation could emerge among the fast-growing low-cost segment.

Bye Bye--General Lee

Let's not get carried away here. SWA also looked at a smaller airplane too and we know what that amounted too.

SWA's comment #1 above does not necessarily translate into the reporter assumption #2.

Further codeshare has been a long time in coming. Now may be the right time.

But what is the definition of an airline alliance? Like the SWA/ATA cozy, exclusive codeshare? That is more than a simple codeshare.

An alliance is definitely less than a buyout/merger. Something like an exclusive or expanded codeshare after some money has changed hands.

I can see an Airtran/SWA alliance. Mergers are too messy. Why do it if you don't have too?

Besides, another codeshare or alliance would put pressure on the pilots in negotiations. At least the threat would.

 

[FlyBoeingJets]

I don't know about the -300's and the -500's, but the 717 is more expensive on a CASM basis than the -700's we run.

Many 300's need reskinning. Some need it really soon.

 

[HalinTexas]

Let's not get carried away here. SWA also looked at a smaller airplane too and we know what that amounted too.

SWA's comment #1 above does not necessarily translate into the reporter assumption #2.

Further codeshare has been a long time in coming. Now may be the right time.

But what is the definition of an airline alliance? Like the SWA/ATA cozy, exclusive codeshare? That is more than a simple codeshare.

An alliance is definitely less than a buyout/merger. Something like an exclusive or expanded codeshare after some money has changed hands.

I can see an Airtran/SWA alliance. Mergers are too messy. Why do it if you don't have too?

Besides, another codeshare or alliance would put pressure on the pilots in negotiations. At least the threat would.

This is the most cogent post so far.

As recently as April the CEO of ATA Airlines, and ATA Holdings, soon to be Global Aero Logistics, stated that there will be considerable growth in the ATA/SWA codeshare over the next 5 years. Specifically to Canada, Mexico, Latin America and the Caribbean.

The ATA/SWA codeshare is exclusive of Asia, Europe and S. America, meaning, that SWA could announce a European partner soon.

I'll say it again. Unless and until they put an HMG/RAT on it the B737 in whatever variety is a lousy ETOPS airplane. ETOPS and less so, international ops is an expensive and long prospect. As stated above, "why do it if you don't have to?" Let someone else deal with it now, at no cost to SWA, than spend 2 years or more spooling up to do it yourselves. Reap the benefits at someone else's expense, like Hawaii (and LGA) and ATA. This codeshare, even on a limited basis, has reaped lucrative rewards at little or no cost to SWA.

The codeshare lasts until 2015, I believe, so GK might have plans for SWA totake it all over after that point. In the mean time, spend someone else's money and take home the profit sharing.

 

[Tejas-Jet]

The sad thing is, you probably aren't kidding. I've been through 3 furloughs, and the 'friendly' end of your "preferential interview". Once you wipe that sh#%t eating grin off your face, pray you never have the pleasure of being on the wrong end of a bad airline management decision. No one in this industry is bullet-proof,......................NO ONE.

NO ONE...you're right...including me. Yup, I too have been on the wrong end of bad airline management decisions....thats why I left there and came here.

Lots of Pilot have made it through the Preferential Interviews here. Lots make it...some don't...thats just the way it is.

Maybe thats the sting that makes you take my comments too seriously. I'm just another FI poster with an opinion. I don't make corporate policy or union policy here.

 

[ultrarunner]

Now things are getting interesting.... If SWA acquires something, there goes the single-aircraft strategy unless Alaska or Aloha are the targets...

An acquisition doesn't necessarily mean all the hardware is going to be kept. Same for buildings, employees, etc...

You pull existing airframes off unprofitable routes, pull stuff out of the sand, cut unprofitable routes, etc...

You're buying a network, gates, landing rights, etc...

 

[ivauir]

You posted this without comment (for a change) but make referance to LBB as a hub. After this much time on SWA threads you should know that we don't have hubs....

You claim to have freinds here (I doubt you have freinds at all) and you spout off all of this drivel about what it is like to work here, but you don't even know that we don't have hubs?

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