Southwest will 'make every effort' to keep smaller AirTran cities

[DieselDragRacer]

http://travel.usatoday.com/flights/post/2011/04/southwest-airlines-smaller-cities/155439/1

 

[relief tube]

sure....just like AA made every effort to keep STL, DL made every effort to keep CVG and United probably with Cleveland.

 

[Kharma Police]

sure....just like AA made every effort to keep STL, DL made every effort to keep CVG and United probably with Cleveland.

If SWA can make money at those cities then they probably will keep them.

 

[Ky.BrownBourbn]

The cost of oil is going to make or break everyone! It is gonna have a huge determining factor for smaller cities!

Some are in a better position than others (and I'm not talking about hedging because some tool on here is gonna bring it up!)

Kbb

 

[jonjuan]

If SWA can make money at those cities then they probably will keep them.

i.e. if they can keep the subsidies at those cities as well (which helps with "making" money.)

 

[Crzipilot]

Ding Ding....correct answer there. AT was good at getting multiple millions of dollars in subsidies to start service and continue service. I believe when the airports balked at renewing subsidies, you saw the service go away......Or at least get minimized drastically.....

 

[redflyer65]

If SWA can make money at those cities then they probably will keep them.

Completely agree.

 

[Kharma Police]

Ding Ding....correct answer there. AT was good at getting multiple millions of dollars in subsidies to start service and continue service. I believe when the airports balked at renewing subsidies, you saw the service go away......Or at least get minimized drastically.....

We weren't good at getting subsidies, the cities begged and pleaded for us to provide service to them and then threw money at us to make us stay. The moment we pulled out, (insert large airline) would drastically jack up the prices overnight pissing off the local population. End result, less people would travel or drive hours to another airport that we or another LCC served.

 

[Full of LUV]

We weren't good at getting subsidies, the cities begged and pleaded for us to provide service to them and then threw money at us to make us stay. The moment we pulled out, (insert large airline) would drastically jack up the prices overnight pissing off the local population. End result, less people would travel or drive hours to another airport that we or another LCC served.

Right, so your saying a legacy airline operates for years trying to earn a profit by actually charging a rate that will pay the bills, and AT takes handouts by the city to start LCC service charging $39 each way (which the legacy has to match to stay in competition) but when the "pent up" $39 demand is dried up and the subsidies run out, AT pulls service or "drastically reduces" service unless the city ponies up some more cash. So I guess there are two ways to look at the situation.

 

[JetMonkey]

Southwest said the same thing when they bought Morris Air. FAT, EUG, COS all got the axe..

 

[redflyer65]

Right, so your saying a legacy airline operates for years trying to earn a profit by actually charging a rate that will pay the bills, and AT takes handouts by the city to start LCC service charging $39 each way (which the legacy has to match to stay in competition) but when the "pent up" $39 demand is dried up and the subsidies run out, AT pulls service or "drastically reduces" service unless the city ponies up some more cash. So I guess there are two ways to look at the situation.

Wait...so if the airport is willing to GIVE Airtran money to come in with service, you would turn it down?

It's just business, whether your Airtran or the legacy.

 

[On Your Six]

SWA got money for North Florida Beaches (Panama City), right? They aren't afraid of taking money.


OYS

 

[FlyinGuy]

SWA got money for North Florida Beaches (Panama City), right? They aren't afraid of taking money.


OYS

Let me fix that for ya OYS....."They aren't afraid of MAKING money."

Just thought I would clarify that. They make more than they take!!!

 

[B727Driver]

OYS, read the following:

St. Joe Co. doesn't owe Southwest Airlines in 2010, but invests in fuel hedges to protect itself from rising energy prices

By Terry Maxon/Reporter
[email protected] | Bio
11:00 AM on Thu., Mar. 10, 2011 | Permalink
Last May, Southwest Airlines started service to the new Northwest Florida Beaches International Airport with a guarantee from the St. Joe Co. that any Southwest Airlines losses would be backstopped by St. Joe.

Neither company has disclosed Southwest's results at the new Panama City airport, other than to say they've been good.

Now, in St. Joe's annual 10-K financial report filed last week, we learn that Southwest did well enough that St. Joe didn't have to pay out any money.

"There were no reimbursements to Southwest Airlines during 2010; no losses were incurred per the agreed upon services," the development company said.

However, higher fuel costs could hurt the profitability of the routes. Therefore, St. Joe has invested in fuel hedges to protect it from Southwest's rising fuel costs.

"In order to mitigate potential losses that may arise from changes in Southwest Airlines' jet fuel costs, we have entered into a short-term premium neutral collar arrangement with respect to the underlying cost of jet fuel for a portion of Southwest Airlines' estimated fuel volumes," St. Joe said.

And for those who want more detail, St. Joe adds later on:

"In order to mitigate potential losses that may arise from changes in Southwest Airlines' jet fuel costs, we have entered into a short term premium neutral collar arrangement expiring in May 2011 with respect to the underlying cost of jet fuel for a portion of Southwest Airlines' estimated fuel volumes. The notional quantity hedged is 200,000 gallons per month, with the call price at $2.55 per gallon and the put price at $1.93 per gallon.”

 

[Skybus]

WOW... Amazing, I actually learned something on FI.

Thanks for sharing this.

Bus

OYS, read the following:

St. Joe Co. doesn't owe Southwest Airlines in 2010, but invests in fuel hedges to protect itself from rising energy prices

By Terry Maxon/Reporter
[email protected] | Bio
11:00 AM on Thu., Mar. 10, 2011 | Permalink
Last May, Southwest Airlines started service to the new Northwest Florida Beaches International Airport with a guarantee from the St. Joe Co. that any Southwest Airlines losses would be backstopped by St. Joe.

Neither company has disclosed Southwest's results at the new Panama City airport, other than to say they've been good.

Now, in St. Joe's annual 10-K financial report filed last week, we learn that Southwest did well enough that St. Joe didn't have to pay out any money.

"There were no reimbursements to Southwest Airlines during 2010; no losses were incurred per the agreed upon services," the development company said.

However, higher fuel costs could hurt the profitability of the routes. Therefore, St. Joe has invested in fuel hedges to protect it from Southwest's rising fuel costs.

"In order to mitigate potential losses that may arise from changes in Southwest Airlines' jet fuel costs, we have entered into a short-term premium neutral collar arrangement with respect to the underlying cost of jet fuel for a portion of Southwest Airlines' estimated fuel volumes," St. Joe said.

And for those who want more detail, St. Joe adds later on:

"In order to mitigate potential losses that may arise from changes in Southwest Airlines' jet fuel costs, we have entered into a short term premium neutral collar arrangement expiring in May 2011 with respect to the underlying cost of jet fuel for a portion of Southwest Airlines' estimated fuel volumes. The notional quantity hedged is 200,000 gallons per month, with the call price at $2.55 per gallon and the put price at $1.93 per gallon.”

 

[redflyer65]

Let me fix that for ya OYS....."They aren't afraid of MAKING money."

Exactly. What a concept!!

 

[dicko]

OYS, read the following:

St. Joe Co. doesn't owe Southwest Airlines in 2010, but invests in fuel hedges to protect itself from rising energy prices

By Terry Maxon/Reporter
[email protected] | Bio
11:00 AM on Thu., Mar. 10, 2011 | Permalink
Last May, Southwest Airlines started service to the new Northwest Florida Beaches International Airport with a guarantee from the St. Joe Co. that any Southwest Airlines losses would be backstopped by St. Joe.

Neither company has disclosed Southwest's results at the new Panama City airport, other than to say they've been good.

Now, in St. Joe's annual 10-K financial report filed last week, we learn that Southwest did well enough that St. Joe didn't have to pay out any money.

"There were no reimbursements to Southwest Airlines during 2010; no losses were incurred per the agreed upon services," the development company said.

However, higher fuel costs could hurt the profitability of the routes. Therefore, St. Joe has invested in fuel hedges to protect it from Southwest's rising fuel costs.

"In order to mitigate potential losses that may arise from changes in Southwest Airlines' jet fuel costs, we have entered into a short-term premium neutral collar arrangement with respect to the underlying cost of jet fuel for a portion of Southwest Airlines' estimated fuel volumes," St. Joe said.

And for those who want more detail, St. Joe adds later on:

"In order to mitigate potential losses that may arise from changes in Southwest Airlines' jet fuel costs, we have entered into a short term premium neutral collar arrangement expiring in May 2011 with respect to the underlying cost of jet fuel for a portion of Southwest Airlines' estimated fuel volumes. The notional quantity hedged is 200,000 gallons per month, with the call price at $2.55 per gallon and the put price at $1.93 per gallon.”

Clever.

Kudos to SWA and St. Joe Co. for developing an innovative approach to the business.

If this has been going on for ten years and I'm the only one that didn't know about it .... Then ignore me

 

[Flying the Line]

So, St Joe is responsible for running up the cost of oil for everyone?

Sounds like they are just making a play in the oil trades and playing it off as a hedge against SWA maybe losing money on 8 flights a day?

 

[Ty Webb]

Ding Ding....correct answer there. AT was good at getting multiple millions of dollars in subsidies to start service and continue service. I believe when the airports balked at renewing subsidies, you saw the service go away......Or at least get minimized drastically.....

That may be your perception, but it isn't based on the facts.

In Pensacola, for example, AirTran asked for a ridership guarantee. The Chamber of Commerce (which is a private organization) got local businesses to pledge money to a "ticket bank". If there were not enough seats sold to equal a certain load factor, then the ticket bank would kick in. To my knowledge, that never happened, since the ridership was good.

AirTran does ask new communities for some advertising dollars to offset the cost of opening/promoting a new station, but I believe that number was a few hundred thousand, certainly not in the millions.

 

[737tanker]

That may be your perception, but it isn't based on the facts

Then why did AirTran stop service to CHS after the subsidy ended?