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SWA Poolies - Hopeful news about increased revenues = possible growth!

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Well-known member
Nov 27, 2001
Article in yesterday's Dallas Morning News. Good overview of why SWA's revenues are going up despite fewer seats. More seats being added (see PHL-BOS thread) in 2Q and 3 Q...always a good thing.
Southwest adjusts schedule in bid to seek more connecting fliers
12:00 AM CST on Sunday, February 21, 2010

By TERRY MAXON / The Dallas Morning News
[email protected]
If Southwest Airlines Co. put up a stone tablet engraved with its operating philosophy, the top item might be: "We are a point-to-point airline."

Since its beginning in 1971, the Dallas-based carrier has made it clear that it focuses on carrying passengers nonstop from one city to another.

There has been far less focus on getting passengers who take one flight then connect to another to get where they're going.

But that's changing. At least, a little bit.

Southwest is now lining up flights at a number of its big airports so that they arrive at about the same time and depart shortly afterward about the same time. The goal: to get more people making connections to other Southwest flights.

"We're still primarily point-to-point. We've got a network built around point-to-point," Southwest executive Bob Jordan said. "All that we've really done is go back and look at flight times in a way that we could better arrange some of these connecting opportunities."

Some might call that a version of the hub-and-spoke system used by major competitors such as American Airlines Inc., Delta Air Lines Inc., United Airlines Inc., Continental Airlines Inc. and US Airways Inc.

Those airlines use a common philosophy that builds their schedule around banks of connections.

The hub is the operation at the big airport; the spokes are the flights to and from other cities. At a hub, all the flights come in within a narrow time span and exchange passengers who connect to different flights, and then all the airplanes go out in a narrow time span.

But Jordan and other Southwest officials express emotions akin to horror at any suggestion that their scheduling change makes them anything like that of the hub-and-spoke airlines.

How it works
On an average day, Southwest operates about 3,200 flights. Jordan said only about 400 to 425 flights are arranged specifically for connections, primarily at Phoenix, Baltimore, Las Vegas, St. Louis, Denver and Chicago.

"We're still talking about just north of 10 percent of our flights where we're tweaking the times to allow connecting opportunities," said Jordan, executive vice president of strategy and planning.

"But the network is built around the point-to-point philosophy. We're tweaking that to allow for better connections in our bigger cities. I would not call it banking," he said.

"They're not a hub-and-spoke carrier," agreed aviation consultant Stuart Klaskin. "They're a carrier that's got a lot of connecting opportunities at focus cities."

As an example of how the revamp worked, Jordan cited flights going through Baltimore, one of Southwest's busiest airports. Before, passengers couldn't make a connection from Islip, a New York-area airport, to West Palm Beach, Fla., because the connecting time in Baltimore was too long.

After Southwest reworked its schedule last spring, the Islip flight and others were arranged to arrive in Baltimore with short connecting times to a lineup of outbound flights. Immediately, the number of passengers on flights increased.

Jordan said the average load factor, or percentage of seats filled with paying passengers, increased 22 percentage points on Southwest's flights from Baltimore to West Palm Beach, for example. That compares fourth quarter 2008, prior to the change, to fourth quarter 2009.

By reworking its Chicago Midway schedule, Southwest saw its westbound flights from Chicago to Portland, Ore., register load factors that jumped more than 16 points on average.

"These aren't people who were just flying a different route on us before" the changes, Jordan said. "These were folks that were not flying Southwest Airlines on the route at all because we couldn't sell them that O&D [origin and destination]."

Klaskin applauded Southwest for making the changes.

"It's not a fundamental change in strategy but a notable shift in tactics," said Klaskin, a founder of consulting firm Klaskin, Kushner & Co. "I think it's a great idea. I think they're going to have a lot of success with it."

Increased loads
The loads on the average Southwest Airlines flight have been on a sharp rise in the last year. In early 2009, Southwest began showing monthly loads that were up noticeably compared with the prior 10-year average for those months.

By late 2009, the months were running far ahead of the 10-year average. From September through this January, Southwest's monthly load factors averaged nearly 11 points higher than the 10-year average. In 10 of the last 12 months, Southwest has set an all-time monthly record for load factors.

Jordan said the schedule changes are only part of the reason for fewer empty seats on Southwest flights. The carrier's "bags fly free" advertising campaign is obviously paying off, as well as efforts to trim less successful flights.

"But there is some piece of that load factor improvement that is due to these connections because you're literally putting more people on planes," he said. And it's done it as it reduced capacity in 2009 and is holding it flat in 2010, he said.

"You're putting more product on the shelf without having to add more aircraft," Jordan said.

Ohio State University professor Nawal Taneja, who focuses on the airline industry, said Southwest will use the technique only on its bigger cities that have a sufficient "critical mass" to support banks of incoming and outgoing flights.

"They won't do it in cities where there are only two flights a day, one in the morning, one in the evening," said Taneja, who chairs Ohio State's aviation department in its engineering college. "Then, if you miss the morning flight, you're stuck there for the rest of the day."

Jordan said he doesn't see Southwest expanding the percentage of flights lined up for connections to more than about 15 percent of its schedule.

"You push the concept too far and you begin to add cost in the operation," he said. "You begin to actually hurt your on-time performance because you're holding flights. There's a balance between operational performance and the passenger traffic."

As an experiment, Southwest scheduled San Francisco flights to Denver so passengers could connect with flights heading east from Denver. But the carrier eventually took most of the San Francisco flights off the lineup because they were too often delayed.

Although traditional connecting hubs can pay off with a lot of revenue and passengers, they aren't compatible with Southwest's intent to focus on point-to-point flying, Jordan said.

"The beauty of a hub-and-spoke system is the efficiency of the hub. You can leverage the costs because you're driving all kinds of activity over one location," he said.

"But the downside is that the only way that works is that you've got to build your entire operation around those hubs and make them work that way."
St Joe - Panama City New City Update

St. Joe Co. plans ‘Southwest Effect'

Comments 11 | Recommend 0
Officials see economic opportunity in 2010

February 23, 2010 07:47:00 PM

SCARLET SIMS / News Herald Writer

WEST BAY — St. Joe Co., the largest private property owner in Northwest Florida, hopes Southwest Airlines will lift the company and region out of a major recession that has crashed the real estate market.
“We continue to believe we will be positioned to take advantage of the new airport,” St. Joe president and CEO Britt Greene said. “We believe this is a game builder for St. Joe Co.”
The company, which donated the land for the airport project, released its fourth quarter and 2009 report during a press conference Tuesday. The company’s net loss for 2009 was about $130 million. In 2008, the company lost about $40 million. The fourth quarter of 2009 saw a net loss of about $59 million compared to a loss of about $28 million for the same time in 2008.
The company was hit hard during the recession, which devastated property values last year. St. Joe sold off about $6.6 million in commercial property and $14.3 million in rural property and is positioning itself for the opening of the Northwest Florida Beaches International Airport on May 23, officials said Tuesday.
“We are energized by the significant opportunities the airport will present since it is surrounded by some of St. Joe’s most valuable land holdings,” Greene said.
The company reduced overhead, restructured and renegotiated and extended its corporate credit facility, company CFO and Executive Vice President William S. McCalmont said. Southwest Airlines is key to St. Joe’s plans, which include developing about 1,000 acres in the West Bay sector adjacent to the new airport, Greene said. St. Joe plans A 35,000-square-foot industrial-flex space and 50,000-square-foot commercial spaces. Greene said he expects to make announcements this year about companies locating at the new industrial park.
Local officials have said at least one company has shown interest in the space.
Southwest Airlines will fly up to 2,000 people per day to Bay County, which means more tourism, more business and more demand for real estate, Greene said. The new airport will be a contender for the aerospace industry as local leaders push to be part of a regional effort to build an aerospace corridor.
St. Joe agreed to pay Southwest up to $26 million to cover any losses the airline incurs during its first two years of operation.
Beazer Homes expects to build more than 200 homes, priced between $150,000 to $250,000, to meet demand, said Matt Brandman, Beazer’s Northwest Florida division president via e-mail. New construction has been down countywide since 2008, except in Lynn Haven, and is a leading indicator for economic recovery.
Already, ticket sales are encouraging, Southwest Airlines spokeswoman Christi Day wrote Tuesday in an e-mail. She said vacationers often book early but noted Panama City is different than any of Southwest’s other markets. The company is especially pleased with ticket sales in advance of the advertising campaign that starts in March.
“This is a sign that people who are already familiar with the market are excited about being able to travel there more easily than before and at an affordable rate and also a sign that others are discovering this new destination on Southwest.com,” Day wrote. “We do hope to see this trend continue all the way through the start of service.”
St. Joe Co. owns about 577,000 acres in Northwest Florida and 71,000 acres surrounding the new airport. The property in the West Bay Sector Plan is a mixed-use, master planned project in Bay County. To see the company’s 2009 report, visit www.joe.com
Gary Kelly 1 on 1 in MCO - discusses profitability

Southwest has caught a tailwind in these tough economic times. The all-coach, low-fare carrier is flying more passengers and making money while most big competitors struggle.
CEO Gary Kelly was in Orlando on Wednesday to tell a couple of thousand employees about the state of Southwest at an annual gathering at SeaWorld.
He talked with the Times about how Southwest has benefited by shunning bag fees, got a boost from bargain-minded shoppers in a recession and how it dealt with kicking a celebrity off a flight for being "too fat to fly."

How did Southwest fare last year?
A year ago, our outlook was we were going to lose our winning streak in terms of (annual) profitability. We didn't, not because the economy got better, but our people brought new products forward.

And for 2010?
Our January traffic was very strong. We had record load factor (percentage of seats filled), and unit revenues were up 14 to 15 percent. No one is close to that.

Basically, Southwest is carrying more people in fewer available seats?
And we're not giving the product away. Overall, our fares are fairly level with a year ago. Those trends are continuing into February, and March bookings look strong.

You've said Southwest increased its share of the domestic airline market by 1 percent, roughly $800 million in revenue a year. How much of that is the result of not charging for up to two checked bags and widely advertising the policy on television?
Certainly, "Bags Fly Free" has to be a contributor. Any customer you talk to — unless they've been living in a cave — know we don't charge for bags.

Besides the obvious cost, what bothers people about bag fees?
I hate the bag fee, and I'll bet you the other airlines executives would say that, too. It's inconvenient. You're trying to get checked in, and you've got to get your credit card out. People try to carry on more than they should. It slows down the boarding process. It slows down the flight.

But isn't the fee good for an airline's bottom line?
I think the analysis is flawed. A majority of people — 60, 70, 80 percent — will pay it and go about their business. But that other 5 to 20 percent is huge.

So, the share shift is all about bag fees?
It's hard to piece it apart. We have a strong low-fare brand, and traditionally in a recession we'll see better awareness of the Southwest product. People shop harder. So, was it awareness, was it message, was it "Bags Fly Free"? It probably wasn't just one thing. But "Bags Fly Free" was huge.

Southwest got a fair share of negative press from movie director Kevin Smith's removal from a California flight this month. Did you make mistakes handling the incident?
We have lots of transactions. We have 90 million boardings a year, 3,300 flights a day. It is an intimate customer experience. Things are going to happen. It's going to be flight delays, it's going to be weather, it's going to be customers of size. There are going to be customers with offensive words on their T-shirts. I think Southwest is better than anybody about valuing people, valuing our customers. If we have 132 seats, it gets back to the fundamental issue of physics. If someone needs more than one seat, something's got to give.
Our policy is you can't encroach — either for comfort or safety — on a second seat with someone in it. It has to be dealt with, and we try to do that as delicately as we can.

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