Boyd Group
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Well respected aviation analysts at the Boyd Group had this to say about Southwest (among other forecasts):
"[font=Tahoma, Verdan, Lucida]The fact is that on a fully-adjusted "normalized" basis, Southwest is losing money. True, its fuel hedges are allowing it to report legitimate profits, but these are essentially the result of a well-managed bet that somebody else lost. Fuel hedges are like a no-interest, no-payback loan. Great. But they will expire in the next 18-24 months - and that will expose Southwest's Achilles heel - high labor costs - to the hard light of competitive reality."
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They also point to the inability of an LCC (save Jet Blue in the future with multiple-size fleet types) to access the amount of markets traditional hub-and-spoke and (in the future) hybrid structures can:
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"As many communities found on a small scale after US Airways closed its PIT hub - there isn't a replacement for much of the service lost. That's because the LCC model is a cherry-picking, high-density traffic model. It's a model that doesn't typically accommodate the economics to support the types of equipment that can access traffic at either Bangor or Beijing. Nor do they have any economic incentive to invest tens of millions in establishing new multi-level hub operations.
So, if Delta accommodates the fervent desires of some in academia, and goes out of business, don't hold your breath for an LCC to toss several hundred flights into CVG or SLC."
"But what most folks are missing is that a P & L statement involves two sides of the ledger. The cost part is what everybody seems to be focusing on. But the revenue part is the one that's more important. While Southwest can do a great job in high density markets, its fleet of 737s are useless in relatively small markets like Saltillo or Muskegon or Montgomery or Shreveport. And they're not very good in accessing traffic at Shanghai or Taipei or Osaka, either. Tumble to it: it's markets like these where the real future revenue growth will be found.
Northwest, on the other hand, can access the revenues at places such as these and cross-flow them throughout their system. So can American and United and Continental."
On to my own predictions... once the fuel hedges are over, Southwest will face the exact same issues the legacies have been facing. True, Southwest's operational tempo and finesse is comparable to a Formula 1 racer, nevertheless Southwest too will require extensive cutting and slicing due to its one dimensional point-to-point structure and high-labor costs.
Now, Southwest is preempting foreseeable problems, for example, encouraging Boeing to design a new fleet mix of 737s that are as ultra-efficient as the 787 will be. This preemption is on par with Jet-Blue ordering the mixable Embraer "double-bubbles" and the legacies with their already existing ability to match capacity to route at the strategic AND tactical levels of operation. Gaining an honorable mention is the soon to be built C-Series by Bombardier which is currently holding the keen interest of Northwest Airlines (and of course, future arguments on flightinfo.com will include "what property" the Embaer's and C-Series belong on when economics will make that decision regardless of webboard pissing contests).
Southwest has also been preempting future problems with a hefty cash balance.
When this all said done (atleast this battle of the deregulation war), Southwest will still be around, but it will have undoubtedly changed from the Southwest we see today. Unless it stays in its current niche, which is easily survivable, Southwest might then be operating more than one fleet type on a hybrid (point-to-point/hub-and-spoke) route structure, and will be doing so side-by-side with newly minted "legacies" that have completely morphed into lean-mean operators due to bankruptcy proceedings (most likely on the backs of their former fee-for-departure carrriers).
Now flame away...