Southwest to ‘trim headcount’ after growth in costs

[cameltoad]

Sounds like another round of bend over and take it for the Value Jet boys

 

[Ty Webb]

Sounds like another round of bend over and take it for the Value Jet boys

Simma down, clown. Not really your issue, is it?

Maybe you should just worry about yourself, and when Parker calls you back, hope you can pass your medical.

:laugh:

 

[wood pecker]

AF Citrus what types of TFP and days off are you seeing since you mentioned the 107 is not accurate? Just curious.

I was expecting 87 TFP guarantee x 119 (think that's 7 year rate) = more than I make at AT flying extra.

 

[redflyer65]

Lines are running around 90-97. You can pickup pretty easily to around 120. All depends on how many days off you'd like, how much money you'd like to make.

RF

 

[Just thinking]

Mitchell Schnurman: Where’s the advantage in Southwest Airlines 2.0?

It’s not easy to age gracefully.

Southwest Airlines has long defied the odds, but now its workforce is older and richer, and rivals have used bankruptcy to get leaner and stronger. The Dallas airline that always played the upstart underdog is looking more like the legacy carriers it used to mock.

Southwest has high labor costs, stalled growth, and the headaches that come with more congested airports. It’s betting on international service, toiling to integrate an acquisition and struggling with new computers for reservations and revenue management.

Southwest’s business model — built around simplicity — is no longer so simple. It has a raft of fares, add-on fees and higher maintenance costs from taking on a second airplane model.

And the bottom line: Third-quarter profit came in lower than for every large rival, even bankrupt American.

“It’s just a different airline today than it was 10 or 20 years ago,” CEO Gary Kelly told analysts this month.

Times change, of course, and Southwest has adapted remarkably well. It has a four-decade streak of profits and no layoffs, and it’s still one of the nation’s most admired companies. Passenger revenue growth has been huge since the recession, a tribute to Southwest’s ability to expand and dictate prices. It’s increased fares five times this year, following eight increases last year.

Southwest’s big problem is on the expense side of the ledger. Pilots, for instance, are paid twice as much, on average, as a decade ago, the result of good raises and 10 more years of seniority.

In 2001, Southwest’s labor costs were significantly lower than those of its legacy rivals. Last year, Southwest paid more than every other carrier except American Airlines — and American is in the process of slashing that measure with the help of a New York court.

Southwest’s “unit costs have now increased for 10 straight years, and we don’t expect that trend to change anytime soon,” analyst Hunter Keay wrote this month.
Many analysts want Southwest to add bag fees, a valuable addition for most airlines. Charging passengers to check up to two bags could generate $1.2 billion in revenue, estimates Keay of Wolfe Trahan & Co.

Southwest counters that it picks up almost that much in additional business, precisely because it offers the perk. Southwest has also turned “bags fly free” into a branding message that fits its customer-friendly philosophy.

Kelly usually shoots down suggestions to change. But in the conference call, he said Southwest wouldn’t say no to anything — and was looking for any good ideas.
Southwest has several initiatives under way. It’s upgrading the fleet and adding seats, which will save fuel. It’s boosting revenue with a new frequent flier program, early boarding and other seating options. The integration of AirTran Airways, acquired 18 months ago, continues — albeit at a slower pace than expected.

New computer systems are being developed, and Kelly said they’ll help bring international routes with “handsome profit opportunities.”

“Most of our challenges right now are internal — in other words, managing our own transformation,” Kelly said.

Kelly has warned about rising expenses at Southwest. A year ago, after American’s Chapter 11 filing, Kelly sent a memo to employees: “Now, the enemy is our cost creep, our own legacy-like productivity and our inefficiencies,” he wrote.

Southwest’s labor costs began topping the large players’ around 2006. The impact was masked by Southwest’s fuel hedges, which let the company avoid the worst spikes in oil prices. Those hedges expired, and Southwest has been paying industry rates for fuel since 2009.

Southwest also has an edge in nonlabor expenses. But the carrier has moved into crowded airports in New York, Philadelphia and Denver, and those costs are up 27 percent in the past decade, according to federal data compiled by the MIT Airline Data Project.

One final advantage that’s faded: growth. After decades of expansion, Southwest has trimmed seats from its schedule through the first nine months of the year. And Kelly said that won’t change until results improve.

No longer is Southwest offsetting its rising labor costs by adding new, lower-paid employees.

“Peel that away, and there’s no stopping the cost creep,” said William Swelbar, research engineer at MIT.

Kelly has said he wants to cut at least $100 million in overhead and reduce head count through attrition.

The company has to get back to its roots. In 1994, Southwest’s annual report was titled “How to build the low-fare airline,” and the first chapter focused on low costs.

“This is the most important aspect of our business strategy, after safety,” the report said.

 

[Lear70]

One final advantage that’s faded: growth. After decades of expansion, Southwest has trimmed seats from its schedule through the first nine months of the year. And Kelly said that won’t change until results improve.

No longer is Southwest offsetting its rising labor costs by adding new, lower-paid employees.

“Peel that away, and there’s no stopping the cost creep,” said William Swelbar, research engineer at MIT.

Exactly right.

Airline management over the years at pretty much EVERY major airline have said exactly the same, summed up quite nicely by Crandall: "If you're not growing, you're dying."

Trim the headcount and overhead (we did 1/4 the flying with 1/8 of the office personnel), put those fuel initiatives to work like single engine taxi (a quarter of a BILLION dollars a year), and GROW! The rest of the Caribbean and Central America are calling with lots of $$$. We grow, we add ASM's with lower-cost new employees.

Every airline CEO knows this; they've all said it at one point or another in years past. Yet I wonder why the resistance to growth?

FTR: Our F/O's who have gone over that I've talked to are averaging about 100 Trips per month with about 15 days off, give or take. They're just too junior to play the trading game except for ELITT. Our CA's, on the other hand, have been doing quite nicely, in the 120+ TFP as RF noted. Gotta have the seniority to play the game.

 

[777forever]

IMO, Southwest is in SERIOUS trouble. The the most profitable airline in the US right now is Spirit, which is growing rapidly and just opened up a DFW base. Spirit is taking and will continue to take many if SWA's leisure customers. My aunt, a longtime SWA flyer, called me recently to ask if Spirit Airlines was a real airline when she saw a round trip ticket to from Dallas to Houston for $90.

Spirit is a true no frills airlines, and while customers whine and complain about missing the good ole days, how they spend their money tells you what they want. Steve Jobs said it best, a company has to put out a product they know the people will want, not what they tell you they want(Virgin America).


Sent from my iPad using Tapatalk HD

 

[GhettoBeechjet]

777 is spot on. We are in serious trouble. In general our customers love us, just not enough to spend an extra $10 to fly on us instead of an overcrowed RJ or an Airbus with pre reclined seats. At this point it seems like the airlines have a very defined life cycle. So far WN has been the longest lasting in the deregulated environment. The fact is we can't escape the laws of nature. We have exceeded our growth limit. It looks like we are now in a shrink to profitability mode. My prediction is that in less than 36 months we will be at least 88 airframes smaller than the combined fleet now and seriously overstaffed as a result. I'm interested to see how we respond to 500+ too many pilots. Some day Spirt will mature unless they can exert Wal Mart like controls on their labor costs. AT that point a new carrier will come in with much lower costs and start to grow to fill the void.

 

[Monster Buck]

IMO, Southwest is in SERIOUS trouble. The the most profitable airline in the US right now is Spirit, which is growing rapidly and just opened up a DFW base. Spirit is taking and will continue to take many if SWA's leisure customers. My aunt, a longtime SWA flyer, called me recently to ask if Spirit Airlines was a real airline when she saw a round trip ticket to from Dallas to Houston for $90.

Spirit is a true no frills airlines, and while customers whine and complain about missing the good ole days, how they spend their money tells you what they want. Steve Jobs said it best, a company has to put out a product they know the people will want, not what they tell you they want(Virgin America).


Sent from my iPad using Tapatalk HD

Good luck on your interview at Spirit. It appears here that you are trying to convince yourself that it will be good to go to Spirit by claiming SW is in series trouble. Many of Spirit passengers are one and done, never again when they get their final bill. They are not doing nearly as good as a growing airline as you believe. I'm sure that Spirit will be just fine for some...but no where near what a career is worth at SW.

 

[Lear70]

777 is spot on. We are in serious trouble. In general our customers love us, just not enough to spend an extra $10 to fly on us instead of an overcrowed RJ or an Airbus with pre reclined seats. At this point it seems like the airlines have a very defined life cycle. So far WN has been the longest lasting in the deregulated environment. The fact is we can't escape the laws of nature. We have exceeded our growth limit. It looks like we are now in a shrink to profitability mode. My prediction is that in less than 36 months we will be at least 88 airframes smaller than the combined fleet now and seriously overstaffed as a result. I'm interested to see how we respond to 500+ too many pilots. Some day Spirt will mature and its costs will become too high. AT that point a new carrier will come in with much lower costs and start to grow to fill the void.

I don't think it's quite THAT dire.

Yes it's a critical juncture. No I don't believe 88 planes will come out of service in the next 3 years. No evidence to that at all.

However, if there isn't expansion and they try to shrink to profitability (which hasn't worked anywhere, really, not as a long term solution), they would do it using attrition and classic retirements once the transition is complete. No reason to do it before then, since they've already taken out the unprofitable markets from AirTran's network.

Still a critical time...