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

[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?

 

[Ty Webb]

I'm not familiar with the specifics of every city, but if the ridership wasn't there to support the service, what do you expect?

Before Pensacola, AirTran used to serve Mobile, AL. Delta walk-up fares for the 48 minute flight to ATL was $600. AirTran came in with a normal rate, and Delta matched it, and threw triple miles on the route.

When the local folks opted to ride on Delta for the triple miles and more convenient schedule, AirTran pulled out of Mobile. Of course, the next day, Delta raised the rates again, and the people of Mobile scratched their heads and wondered what had happened.

AirTran learned from that experience, and has worked with small market cities to ensure that if they do enter service, there will be ridership to support it.

Smart business.

 

[Crzipilot]

Well that ticket bank was in the area of 1.5 to 2million. Was looked at by other communities, and the statement was that they didn't think businesses in the area would want to tie up their travel dollars. I.E. the local community has to pony up the cash up front it seems. In the SRQ deal, the Airport was considering using 2 million from their reserves to attract Airtran. But Federal rules prohibited them from using their reserves for such purposes.

http://www.heraldtribune.com/article/20100928/article/9281053?p=3&tc=pg

AirTran agreed to begin flying from Sarasota-Bradenton International in October 2004, after the airport lined up a $5 million incentive package aimed at stemming passenger losses.


The ticket bank required the businesses to purchase 2 million of tickets AHEAD of time.
http://www.heraldtribune.com/article/20040227/BUSINESS/402270437?p=3&tc=pg
Another option to lure AirTran would be for the local business community to set up a travel bank and commit to buying $2 million in seats from AirTran ahead of time.That might sound like a stretch, but it's exactly what businesses in Tallahassee and Pensacola did, to the tune of $1.5 million and $2 million, respectively.




Sounds to me like that 2 million went into Air Trans Coffers, did they refund that money back to the communities?

 

[Saluki Dawg]

As long as we keep MLI, I'll be happy. Yes I'm serious!

 

[user912]

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

Exactly. It keeps cities it can make money on while other legacy type carriers try passing them on to Regional "partners"