Follow along with the video below to see how to install our site as a web app on your home screen.
Note: This feature may not be available in some browsers.
Per Walter Thorpe, Sr. Analyst, although one of the largest airlines as measured by passengers carried, their low fare places it in the bottom third revenue wise in the group.
Pros:
1. Operating efficiencies is most profitable of group. LUV is only 6% of Airport Industry’s revenue in 2000, but, LUV took in a remarkable 20% of earnings.
2. LUV just went thru one of the most difficult period on record for airlines, LUV stayed in the black, while other airlines were in the red.
3. Although capitalization is greater than competitors, share price does not fully reflect LUV’s superior profit potential in 2006-2008.
4. Demand should gradually improve as the economy improves.
5. A low cost structure gives the company a competitive edge that enables mgmt to keep fares down and achieve profit.
6. Although terrorism is a concern, LUV is more insulated than others. LUV flies mostly to smaller airports, which are less likely to be targeted.
7. Customer traffic to increase faster than capacity.
8. Pt to Pt route structure is more cost efficient than monopolistic hub-n-spoke model used by major carriers.
9. 2nd Tier airports are used, where landing fees & congestion is minimal, keeping costs and shortening delays that waste valuable resources.
10. Increasing Internet sales helps reduce travel agents commission from 5% to 1%; other national airlines selling expenses are closer to 7-8%.
11. LUV accounts for only 11% of domestic capacity, leaving lots of room for future growth.
12. Low cost structure consistently demonstrates it can move into new market and grow.
13. LUV, to date, has never experienced any serious union discord.
14. Fuel hedging has helped keep costs down for the immediate future.
Negs:
1. Travel is depressed
2. LUV’s expansion plans on hold.
3. Abrupt hikes in jet fuel prices can squeeze carrier’s margins in the LT future