SWA Discontinues Service to IAH

[SWAInflt]

http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh35640_2005-01-27_16-50-01_n27308712_newsml


UPDATE 1-Southwest to end Houston Geo. Bush airport service
Thu Jan 27, 2005 11:50 AM ET
(Adds details, CEO comment, share price)CHICAGO, Jan 27 (Reuters) - Southwest Airlines Inc. (LUV.N: Quote, Profile, Research)on Thursday said it will discontinue its unprofitable service atHouston George Bush Intercontinental Airport at the end of the day onApril 2.

Southwest, the No. 6 U.S. airline, currently operates six daily nonstopflights between George Bush Intercontinental Airport and Dallas LoveField Airport.

The carrier said it will continue to offer service between Houston and Dallas through its Houston Hobby Airport operation.

"With the continuing airline industry challenges, we cannot continue toserve two airports in Houston and realize the losses we have generatedfor years at Houston George Bush Intercontinental Airport," saidSouthwest Chief Executive Gary Kelly in a statement.

The industry has been facing massive losses in the face of rising fuel costs and tough competition.

"We are making an enormous commitment to Houston Hobby Airport, making it the focal point of our future growth," he said.

Southwest said it will start contacting passengers who holdreservations into and out of George Bush Airport from April 3 throughJune 6 to help change their travel plans.

Southwest shares edged down 13 cents to $14.26 on the New York Stock Exchange at midday.

 

[chase]

Some observations about closing IAH

Spoke to persons today who had conversations with the IAH folks earlier today on what one would've thought would be a rather glum day. Don't get me wrong, people weren't going around doing high fives & cheering according to the folks who I spoke with at the closing of their station but some simple observations & perspectives about the great people we have hired in the past & what makes working at SWA something a little different than others.

How were the folks treated at IAH?

At least 3 senior company official, one at the VP level, flew down to IAH & spoke with the 29 folks there this AM....they got the word directly from the folks who are their supervisors at the headquarters in Dallas...they stayed to answer questions from the IAH station folks...getting notified of a station closing is never good but hearing about it on the radio or reading about it in USA Today isn't a good message either. As soon as the meeting was over, the execs called up Dallas & said to put out the news release....the folk at IAH were the first to know, then the rest of us....again not painless but professional & respectful of one's employees I believe.

1. No mandatory layoffs...in fact most are going to shift to HOU in their current position...some are filling shortages at HOU, others will be adding to the overage there but once the new gates come open & more flights start flying from there that will take care of itself.

How about if you live near IAH & the commute will be painful?

1. The company will pay for a move to any new city that the person transfers to where there are openings & if they go to HOU, across town, the company will pay for their move to south HOU, across town....this offer is good for 2 years I was told from the time of closure, 2 April.

Some interesting info I was told about our operations at IAH by some reliable sources.

Landing fees have increased by 93% recently due to the new runway 8L/26R, the outside one that takes forever to get to any gates & a new terminal by Continental...these costs caused even more red from our flights. Those costs are obviously paid by our customers, the decision was made to obviously close the base.

Only 6 flights a day from a high at one point I believe of 10...since 911 the load factor was in the 40's...too low to make money...increased costs weren't helping but it made sense to put those airplanes (since the -200s are gone) to other more lucrative cities.

We're not closing service to a city...we had 60 cities (61 come May w/PIT), we still have 60 cities....other cities are not on the chopping block according to the folks briefing the IAH folks.

SWA generally runs 10 flights minimum from a single gate...6 flights is not productive for employees & equipment....fees, usuage rates, fixed costs aren't spread out over very many flights...hard to recoup those expenses.

This illustrates perfectly why splitting ops between two major airports in one city with similar demographics isn't a wise idea, i.e. HOU & IAH, DFW & DAL....the inefficiencies in running two operations from an airport that is dominated by one carrier (IAH with CAL, DFW w/AA) & from another airport where SWA is the dominant carrier (DAL & HOU) illustrates why the DFW offer isn't really an offer SWA should take. Continental has announced they expect to increase flights from IAH another 200 flights over the next two years...does this sound like AA in DFW? I believe so...why would SWA wish to enter that fight? Simply to lose money? I don't think so....it doesn't make good business sense & at this point we have someone who makes pretty good sense. Some may argue we do this with LAX, BUR, SNA, ONT but I would argue the demographics & geography (urban living patterns) create a different opportunity/environment than either Dallas or Houston....starting from scratch in today's environment is much different than the incremental growth that occurred with the LA basin. (trying to head off Lowecur before he has chance to rebute )

The most telling part of the story as told to me was the following conversation that went on with the CA & the ops gal on the radio when the crew called in range. In effort to cheer them up & sympathize with them the CA said before saying anything else said, "We're sorry".the young girl on the radio responded with a cheery voice, the young gal returned with the following quote "It'll be OK guys!"....rather amazing, she was trying to make the CA & FO feel OK!!!

This simply proves why besides Gary Kelly, the next most important folks at SWA are the folks in the PD, interview teams sorting out to find more folks like the folks at IAH...folks that work hard regardless of the situation, always have a good attitude & provide great customer service even if things may not being great....my hats off to the folks at IAH & to our PD & interviewers (all departments) in finding the right folks for SWA.

Again I'm sorry for the disruption of the lives of these folks but the perspective they had on the problems in their lives with what is going on around them in the industry obviously made them appreciate even more the good fortune of working at SWA....again for those at other carriers who are experiencing troubling times I wish you the best & hope things improve for you....my apologies if my post may appear insensitive to some...that wasn't my intent. Again, best of luck in landing on your feet. Hope to see the folks at IAH in the future to thank them personally.

Cheers & God Bless,

 

[English]

How were the folks treated at IAH?

At least 3 senior company official, one at the VP level, flew down to IAH & spoke with the 29 folks there this AM....they got the word directly from the folks who are their supervisors at the headquarters in Dallas...they stayed to answer questions from the IAH station folks...getting notified of a station closing is never good but hearing about it on the radio or reading about it in USA Today isn't a good message either. As soon as the meeting was over, the execs called up Dallas & said to put out the news release....the folk at IAH were the first to know, then the rest of us....again not painless but professional & respectful of one's employees I believe.

Yet again a great example of how a sucessful company is, and should be, run.

Thanks for the update.

 

[lowlycfi]

Great post Chase, thanks.