SWA abroad...more than a rumor

[Wingsweep]

http://www.msnbc.msn.com/id/12405290/

 

[atafan]

Southwest Airlines on Thursday gave its clearest indication to date that the world's largest low-cost carrier would launch international flights for the first time.

The Dallas-based airline said it has furthered preparations to launch cross-border flights with partner ATA Airlines, though Gary Kelly, chief executive, said the domestic market would remain its primary focus over the next two years.

Southwest has provided the business model for the global expansion of low-cost carriers such as Ryanair and AirAsia, and is widely regarded as the most efficient airline in the US.

However, it has resisted the temptation to export its strategy for fear that the added cost and complexity of international operations would damage its 33-year record of unbroken profitability.

"I'm assuming some day we will," said Mr Kelly when asked on an analysts' call whether international flights were on the horizon.

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.He said the deal with ATA, which flies to Hawaii and Mexico and has been examining transatlantic flights, had helped prepare its reservations system for international flights. "We've got a lot to do, but we're on track," he added, pointing to the need for technical and regulatory work to prepare aircraft for longer flights.

Roger King, analyst at CreditSights, said the remarks were a clear sign that the airline's business model was evolving. The pact with ATA calls for Southwest to market and support international flights by its partner by the end of 2009, though this could be amended.

The use of Southwest's marketing power on inter-national flights would intensify its competition with US legacy carriers, most of whom are shrinking their domestic networks in favour of more profitable overseas flights.

Mr Kelly said his airline still had more opportunities in the domestic market than aircraft, but on Thursday doubled the number of firm orders it had in a move that will increase its overlap with the legacy airlines.

Southwest started flights from Denver in January and plans to enter the Washington Dulles market this year. Both airports are major hubs for United Airlines.

Southwest said it would exercise options for 79 Boeing aircraft from 2007-2012, taking its order book to 140 aircraft and 116 options, as well as purchase rights for another 54 by the end of 2014.

Southwest and low-fare rivals such as JetBlue and AirTran account for almost all of the new aircraft due to enter the US domestic market and there is concern that their rapid expansion could dent the recent recovery in fares and revenues across the broader industry.

US airlines are generating record revenues to compensate for high fuel prices.CUTTABLEAmerican Airlines is cutting its domestic capacity by 4 per cent in the second quarter, and Delta and Northwest continue to shrink their domestic networks. All of the large legacy carriers are redeploying a capacity from the domestic market to more profitable international routes.

 

[YourPilotFriend]

If I recall an international carrier flying for a seperate domestic feeder is one of the most flawed models in this business.

 

[sandman2122]

Isn't this going against the conservative minded approach SWA is known for.........could be debated as risky or greedy.......

But then, places like Jackson, MS could be considered an international destination..............

 

[FlyBoeingJets]

We now have clear wording from the conference call that Gary Kelly wants ATA to fly international in 2009 for SWA. Mr. Kelly also said SWA's current fleet is not properly equiped for Europe or Hawaii and maybe the Carribean.

Maybe its the coffee I'm drinking this morning (Columbian special surprise in the grounds) but I feel strongly that ATA will be flying intl for SWA for at least two or three years after 2009. Hopefully much longer. And the transition would take awhile too. The rough part is between now and then. ATA's ETOPS fleet is a benefit that SWA does not have and is not slated to have for years.

Why? I think it's the risk and cost of maintaining a small fleet of specialized airplanes (as opposed to the large fleet of cheaper SWA 737s). ATA is going to be compensated for that risk and expense. I wish they would pay you guys more, but I'm thinking that will be on the table when your contract (you guys have a contract right now?) is amenable.

Anyways, congrats are in order for ATA. I am thankful SWA is partnering with such a world class airline and that ATA is finding a way to survive.

I'd like to see ATA fly international out of Orlando to Europe. Yes folks, you heard it here first!!!

 

[FlyBoeingJets]

If I recall an international carrier flying for a seperate domestic feeder is one of the most flawed models in this business.

Isn't this going against the conservative minded approach SWA is known for.........could be debated as risky or greedy.......

Never say never. SWA is doing things differently under GK and will continue to do so.

2006 is a very tough year for the non-hedged. AA is temporarily parking 27 planes and the opportunities are out there.....this year.

 

[atafan]

FlyBoeingJets,

Thanks for your kind words.

We all have scenarios and opinions so here goes one more....

ATA continues to develop Int'l markets for SWA while SWA stays pretty much with their tried and true business plan. ATA over two to three years starts to change out the B757 with B737-900. ATA would become a B737-800 and 900 airline meanwhile, SWA becomes a B737-700 airline.

During this 2 to 3 year period SWA continues to shape ATA into a mirror image of SWA, corporate wise. Up to this point SWA has spent next to nothing to have an international airline that would dove tail into their ops.

SWA could fly pretty much fly anywhere in the world with one fleet type.

 

[sandman2122]

atafan:

SWA could fly pretty much fly anywhere in the world with one fleet type

Don't you mean ".....codeshare anywhere in the world..." with ATA? Or is SWA's plan to buy all of ATA, paint the planes, etc.........?

You guys merging or what??

 

[FlyBoeingJets]

atafan:

Don't you mean ".....codeshare anywhere in the world..." with ATA? Or is SWA's plan to buy all of ATA, paint the planes, etc.........?

You guys merging or what??

No plans for that now. Most at SWA would say that will not happen.

But with Gary Kelly, I like to say "Never say Never". We were considering turning our two oldest planes into frieghters last year.

 

[capt. megadeth]

atafan:

Don't you mean ".....codeshare anywhere in the world..." with ATA? Or is SWA's plan to buy all of ATA, paint the planes, etc.........?

You guys merging or what??

C'mon sparky.....wake up.....think about it.

Somehow I don't see a merger on the horizon

 

[Truckdriver]

I also heard that XJT is going to start flying point to point from lots cities in Texas, New Mexico, Arizona, and California into lots of cities in Mexico. The rumor was that XJT would be doing the flying under their name with the airplanes they are losing form CAL and that SWA would be a code share partner. I guess the new guy at SWA thinks he can get into Europe and Hawaii with ATA and Mexico with XJT.

 

[atafan]

I guess the new guy at SWA thinks he can get into Europe and Hawaii with ATA and Mexico with XJT.

The seven year codeshare agreement between ATA and SWA is exclusive, there will be no other codeshare partners unless mutually agreed.

 

[Bringupthebird]

Why doesn't SWA go to a Chinese or Indian airline and say "We'll run it for you". Money is money.

 

[OffHot]

I don't know if the ATA is exclusive as GK has said he would continue to look at codesharing with ATA and any other carriers when it makes sense. The international thing is also nothing new since it was part of our agreement witht he partnership that bought our interest in ATA. On the ATA merger, if that is what you want to call it, with yesterdays annoucement that we will exercise our options on 70+ airplanes I would say that has also been put on the back burner, giving us and the company time to negotiate in sec 6 just how this will done in the future (in writing).