SWA going to MKE

[firstthird]

I thought LUV hedges were still in place though 2012 or 16. LUV just unwound 2009 and 2010.

You are probably right, but I think the hedges we have for later on are not nearly as good or cover as high a percentage. We definitely owe the 950 million, regardless of future prices. I have seen that we are getting back in with some hedging but nothing to knock your socks off. which is fine by me.

we were good when we were 65% hedged at 65 a barrel for 2009. then we went to 75% hedged at 75 a barrel and that was the bet which screwed the pooch. we bought some hedges around 140 a barrel. we went from locking in future costs to gambling. and we lost. hopefully our hedge geniuses learned something and our future hedging is like our hedging up until the summer of 2008 when we got too smart for ourselves.

locking in at a price we KNOW we can make money is much different than betting the future of the company on the commodities market, which is what they did last summer.

 

[fam62c]

One of these days we'll see a headline that says "Southwest Airlines Enters Every Market." They seem to be a lot less certain than they used to be. They don't seem to develop a market as carefully as they used to before they are off to the next thing. The flying that they are adding is coming from other places; it seems like they are searching for enough revenue to exceed costs and it's not as easy as it used to be. I'm not a SWA basher, it's a great company and they've done more things right in this industry than anyone else, but they are no longer the rapidly expanding carrier that they once were with new planes and new employees coming onto the property in droves to dilute their costs. SWA is too big to ever have the growth that they once had on a percentage basis. They still have an advantage but that advantage will decline as they are now paying the same for fuel as everybody else and they are paying more for labor than most airlines. They also have a higher percentage of more senior (read more expensive) employees than AAI and JetBlue because they have been around for a long time. I also wonder how well SWA team spirit and employee morale will hold up without the rapid advancement and big profit sharing checks of days gone by. SWA doesn't seem to be immune from economic downturns anymore.

SWA will have a tougher time as a large, mature carrier that's not growing than they did as a smaller, rapid growth company. It's the nature of the business, the larger you get, the more you pay and the longer you have been around the harder it gets to control costs. The biggest advantage that SWA may have against AAI in MKE will be their ability, made possible by their stronger balance sheet, to absorb losses in a market longer than AAI until AAI throws in the towel. SWA might start behaving more like a legacy carrier and start caring more about market share than profitability. SWA is the heavyweight in the ring and can take more punches than anyone else and still remain standing.

 

[Colonel Savage]

"They seem to be a lot less certain than they used to be. They don't seem to develop a market as carefully as they used to before they are off to the next thing. The flying that they are adding is coming from other places; it seems like they are searching for enough revenue to exceed costs and it's not as easy as it used to be. I'm not a SWA basher, it's a great company and they've done more things right in this industry than anyone else, but they are no longer the rapidly expanding carrier that they once were with new planes and new employees coming onto the property in droves to dilute their costs..."

You make several good points. One thing SWA has been doing for several years is getting away from the original business model of operating only out of smaller, low traffic airports efficiently (HOB, MDW, etc) to flying into more and more high volume, delay prone airports (PHL, BOS, soon LGA). They may increase traffic and revenues, but it decreases their efficiency and increases CASM. The core business based on the original model still dominates their system; so long as that remains the case they will succeed.

Interresting article below about companies that do get away from their winning strategies and what the consequences can be:

http://www.businessweek.com/magazin...6786379.htm?chan=magazine+channel_cover+story

 

[jonjuan]

When will WN announce HPN?

 

[FlyinGuy]

I did not know that we flew into Hobbs, NM!!!????

 

[Colonel Savage]

I did not know that we flew into Hobbs, NM!!!????

You don't, not yet anyway. Give 'em time. But except for that what did you think of my analysis?

I meant Hoboken, BTW...

 

[Penguin46]

Assuming AAI can survive other LCC competition; is there a point where it is cheaper to absorb AAI rather than compete with them?

 

[Colonel Savage]

Assuming AAI can survive other LCC competition; is there a point where it is cheaper to absorb AAI rather than compete with them?

Yes, but I don't think that the MKE market will be that big an operation for SWA. They already have the MDW hub, and buying AAI to protect whatever market they have in MKE just wouldn't make sense.
SWA and AAI compete on a much larger scale in BWI and MCO, and you haven't seen that lead to any takeover attempts to gain market share.

 

[Britpilot]

Merger with AirTran just around the corner. Expect to hear about Atlanta soon.

Maybe, maybe or someone else..............

 

[Tejas-Jet]

And you married her.

Geee....don't know how you got marriage out of my statement...but...no...it wasn't even contemplated...it was just a conversation...