tredding@swa
SWA F/O
- Joined
- Jul 1, 2002
- Posts
- 294
OK, I'll admit it, I AM reading between the lines... but this STILL sounds good to me... we need some new rumors anyhow!! Call me LL - I am ready to come to DAL!!!!?
xoxo - Tred -
From the Houston Chronicle;
Aug. 27, 2002, 10:26PM
Airline unfurls its wings
Southwest grows as others shrink
By BILL HENSEL JR.
Copyright 2002 Houston Chronicle
At a time when most other airlines are retrenching amid red ink, Southwest Airlines is flying solo in the opposite direction.
Dallas-based Southwest, which is one of the few moneymaking carriers, has said it will continue adding flights.
And to make it even harder for other carriers to win back business, last week Southwest dropped its highest fares by one-fourth. This move shows how the carrier is targeting business travelers who need to catch flights at the last minute.
That pronouncement alone could amount to a knife at the throat of its biggest competitors.
"Southwest has good control over its cost structure, which the network carriers do not," analyst Ray Neidl of Blaylock & Partners said. "Southwest operates a very cost-effective system."
Southwest, which carries more than 80 percent of Hobby Airport's passengers, serves 58 cities in 30 states. It is still considered a niche airline compared to carriers with global networks.
However, those larger rival carriers are fighting their own axis of evil in the form of a sluggish economy, changes in business travel patterns and the effects of the Sept. 11 attacks. They are giving up market share to Southwest because that combination forced them to cut costs after they collectively lost $7 billion last year.
Not so Southwest, which is turning a profit and has more than $2 billion in the bank.
"We are playing to our strength, which is our low cost, and trying to do it in a way where we think we have a real good opportunity," Gary Kelly, the carrier's chief financial officer, said during a conference call last week.
"We see this as a way to get a lot of business travelers interested in Southwest who might not be thinking of us right now."
The time may be ripe for its recent cost cut and moves to appeal to frequent fliers traveling longer-haul routes.
A recent survey by the Business Travel Coalition indicated that some businesses had felt gouged by skyrocketing business airfares, which increased 74 percent between 1996 and 2001.
As a result, the coalition that represents company travel managers found some business travelers have shifted to lower-fare airlines such as Southwest, Frontier, AirTran and JetBlue.
Fare wars are order of the day.
Average domestic airfares declined 9.1 percent in July, with the average price for a 1,000-mile trip totaling $109.68, according to a report released Tuesday by the Air Transport Association.
The group's chief economist, David A. Swierenga, said airfares dropped because of persistently weak travel demand.
"In order to stimulate demand, airlines have reduced prices to levels not seen since 1988," Swierenga said.
Southwest's profits are off some compared with past years, but it's still the only large carrier to consistently post a profit since Sept. 11.
It also has seen fewer passengers, though, with 6 percent less for the first six months of 2002. That translated to an 8.5 percent decrease in passenger revenues.
Southwest is backing up its growth plan with more than 400 airplanes on order with Boeing through 2012.
The carrier has continued to expand during the past year, albeit at a slower rate than before. Since 9/11, the expansion has slowed to 4 to 5 percent.
Since Southwest reduced its highest fares from $399 to $299 one-way, Houston-based Continental Airlines, along with Northwest Airlines and Delta, said they would match the lower fares on routes where they compete with Southwest.
Kelly said Southwest expects to increase its market share and profits with the move to reduce its long-haul fares.
Air traffic generally falls in September, which Southwest said was one reason for the fare-reduction tactic. But it is difficult to ignore the timing, given the announcements in recent weeks by carriers cutting capacity.
Other airlines declined to comment.
Kelly didn't sound worried about other carriers trying to pick a fight with Southwest, saying "Our cost advantage, vis-à-vis the major airlines, is huge. I would argue our cost is 50 percent lower than the major airlines."
The reasons Southwest continues to make money are many.
For one, it uses its planes more each day. Blaylock & Partners' Neidl noted in a report released Tuesday that the carrier has one of the highest daily aircraft utilization rates in the country, at around 11 hours.
Southwest also gets about 75 hours of flight time a month from its pilots, compared with about 50 hours for carriers that have route systems built around hubs, like Continental. The carrier also operates a simple fleet, operating various models of the 737, which Neidl said keeps operations simple and costs low.
Southwest's approach goes back to its birth as an intrastate carrier in Texas. It offered frequent and inexpensive single-class air service that quickly became popular for short-haul flights.
Upon the deregulation of the industry in 1978, Southwest steadily expanded across the country and has recently begun to move into some long-haul markets, such as Baltimore to Phoenix.
Neidel sees plenty of room for growth as communities court Southwest, which , by virtue of its low fares, helps fill underused airports.
"We believe that new markets exist that could support 10 percent annual growth for the next 10 years," he said in his report.
The leader among discount carriers, Southwest says it has gained additional business passengers since the Sept. 11 attacks. But industry travel trends, particularly involving businesses, already were moving downward.
Southwest's $399 fares largely were used in cities like Baltimore and Chicago, where Southwest recently inaugurated or will soon begin longer flights. On some of the routes where it will have the $299 fare cap, competitors have been charging as much as $1,181 one way.
While Southwest is pleased it has shown a profit the past three quarters, it is not satisfied with profit levels -- which is why it is continuing to look at every possible initiative.
"That is what is motivating us," Kelly said.
Large airlines historically have relied considerably on last-minute business customers to pay higher fares.
That premise has been called into question of late. A survey commissioned by travel Web site Orbitz showed that while 90 percent of Americans are traveling more or at the same level as before Sept. 11, business travel has been reduced and has not bounced back.
The Business Travel Coalition's studies determined that some portion of business travel will not return to the major network carriers for the next several years.
In addition to the high cost, other factors cited by businesses as reasons to cut back on travel were eroding customer service levels and growing unreliability in the nation's aviation system, according to the coalition.
xoxo - Tred -
From the Houston Chronicle;
Aug. 27, 2002, 10:26PM
Airline unfurls its wings
Southwest grows as others shrink
By BILL HENSEL JR.
Copyright 2002 Houston Chronicle
At a time when most other airlines are retrenching amid red ink, Southwest Airlines is flying solo in the opposite direction.
Dallas-based Southwest, which is one of the few moneymaking carriers, has said it will continue adding flights.
And to make it even harder for other carriers to win back business, last week Southwest dropped its highest fares by one-fourth. This move shows how the carrier is targeting business travelers who need to catch flights at the last minute.
That pronouncement alone could amount to a knife at the throat of its biggest competitors.
"Southwest has good control over its cost structure, which the network carriers do not," analyst Ray Neidl of Blaylock & Partners said. "Southwest operates a very cost-effective system."
Southwest, which carries more than 80 percent of Hobby Airport's passengers, serves 58 cities in 30 states. It is still considered a niche airline compared to carriers with global networks.
However, those larger rival carriers are fighting their own axis of evil in the form of a sluggish economy, changes in business travel patterns and the effects of the Sept. 11 attacks. They are giving up market share to Southwest because that combination forced them to cut costs after they collectively lost $7 billion last year.
Not so Southwest, which is turning a profit and has more than $2 billion in the bank.
"We are playing to our strength, which is our low cost, and trying to do it in a way where we think we have a real good opportunity," Gary Kelly, the carrier's chief financial officer, said during a conference call last week.
"We see this as a way to get a lot of business travelers interested in Southwest who might not be thinking of us right now."
The time may be ripe for its recent cost cut and moves to appeal to frequent fliers traveling longer-haul routes.
A recent survey by the Business Travel Coalition indicated that some businesses had felt gouged by skyrocketing business airfares, which increased 74 percent between 1996 and 2001.
As a result, the coalition that represents company travel managers found some business travelers have shifted to lower-fare airlines such as Southwest, Frontier, AirTran and JetBlue.
Fare wars are order of the day.
Average domestic airfares declined 9.1 percent in July, with the average price for a 1,000-mile trip totaling $109.68, according to a report released Tuesday by the Air Transport Association.
The group's chief economist, David A. Swierenga, said airfares dropped because of persistently weak travel demand.
"In order to stimulate demand, airlines have reduced prices to levels not seen since 1988," Swierenga said.
Southwest's profits are off some compared with past years, but it's still the only large carrier to consistently post a profit since Sept. 11.
It also has seen fewer passengers, though, with 6 percent less for the first six months of 2002. That translated to an 8.5 percent decrease in passenger revenues.
Southwest is backing up its growth plan with more than 400 airplanes on order with Boeing through 2012.
The carrier has continued to expand during the past year, albeit at a slower rate than before. Since 9/11, the expansion has slowed to 4 to 5 percent.
Since Southwest reduced its highest fares from $399 to $299 one-way, Houston-based Continental Airlines, along with Northwest Airlines and Delta, said they would match the lower fares on routes where they compete with Southwest.
Kelly said Southwest expects to increase its market share and profits with the move to reduce its long-haul fares.
Air traffic generally falls in September, which Southwest said was one reason for the fare-reduction tactic. But it is difficult to ignore the timing, given the announcements in recent weeks by carriers cutting capacity.
Other airlines declined to comment.
Kelly didn't sound worried about other carriers trying to pick a fight with Southwest, saying "Our cost advantage, vis-à-vis the major airlines, is huge. I would argue our cost is 50 percent lower than the major airlines."
The reasons Southwest continues to make money are many.
For one, it uses its planes more each day. Blaylock & Partners' Neidl noted in a report released Tuesday that the carrier has one of the highest daily aircraft utilization rates in the country, at around 11 hours.
Southwest also gets about 75 hours of flight time a month from its pilots, compared with about 50 hours for carriers that have route systems built around hubs, like Continental. The carrier also operates a simple fleet, operating various models of the 737, which Neidl said keeps operations simple and costs low.
Southwest's approach goes back to its birth as an intrastate carrier in Texas. It offered frequent and inexpensive single-class air service that quickly became popular for short-haul flights.
Upon the deregulation of the industry in 1978, Southwest steadily expanded across the country and has recently begun to move into some long-haul markets, such as Baltimore to Phoenix.
Neidel sees plenty of room for growth as communities court Southwest, which , by virtue of its low fares, helps fill underused airports.
"We believe that new markets exist that could support 10 percent annual growth for the next 10 years," he said in his report.
The leader among discount carriers, Southwest says it has gained additional business passengers since the Sept. 11 attacks. But industry travel trends, particularly involving businesses, already were moving downward.
Southwest's $399 fares largely were used in cities like Baltimore and Chicago, where Southwest recently inaugurated or will soon begin longer flights. On some of the routes where it will have the $299 fare cap, competitors have been charging as much as $1,181 one way.
While Southwest is pleased it has shown a profit the past three quarters, it is not satisfied with profit levels -- which is why it is continuing to look at every possible initiative.
"That is what is motivating us," Kelly said.
Large airlines historically have relied considerably on last-minute business customers to pay higher fares.
That premise has been called into question of late. A survey commissioned by travel Web site Orbitz showed that while 90 percent of Americans are traveling more or at the same level as before Sept. 11, business travel has been reduced and has not bounced back.
The Business Travel Coalition's studies determined that some portion of business travel will not return to the major network carriers for the next several years.
In addition to the high cost, other factors cited by businesses as reasons to cut back on travel were eroding customer service levels and growing unreliability in the nation's aviation system, according to the coalition.
