SWA to cut 88 Flights to boost revenue

[RJP]

Report: Southwest to cut 88 flights this fall


By CBS MarketWatch
Last Update: 12:50 AM ET Aug. 23, 2004


A story in the online edition of the Wall Street Journal Monday, citing company officials, reported the company (LUV: news, chart, profile) estimates the schedule change in October could boost annual revenue by about $60 million.



Southwest typically makes some changes to its schedule in the fall, the Journal noted, but that usually involves only about a dozen flights.



The report quoted Southwest chief executive Gary Kelly as saying the company is not producing the kind of profits it needs to and the schedule change is intended to make the company more efficient.



Kelly, formerly Southwest's chief financial officer, replaced chief executive and vice chairman James Parker, who resigned in mid-July after the low-fare carrier reported a 54 percent drop in its second-quarter profit amid higher operating expenses and fuel costs.



Southwest reported second-quarter net income of $113 million, or 14 cents a share, down from $246 million, or 30 cents a share, in the year-ago period, which included a $271 million gain resulting from government aid. The results missed Wall Street's expectations of 16 cents a share.



Southwest has projected its third-quarter earnings will exceed last year's profit of $106 million. It added that passenger bookings for July, August and September are looking strong.



Southwest, which is best positioned among its competitors against all-time high oil prices, said its average fuel cost per gallon in the quarter increased 21.5 percent to 81.9 cents. The carrier said it has locked in 80 percent of its fuel costs in 2005 with prices capped at about $25 a barrel. For 2006, 45 percent of its fuel costs are hedged with prices capped at about $28 per barrel.



The Journal report also said Southwest is rolling out a new computer system to give it more flexibility in scheduling.



Shares of Southwest, based in Dallas, added 24 cents on Friday to close at $14.70.

 

[Lear70]

Not exactly the truth?

Looks to me like they're just redeploying flights to different destinations, not necessarily cutting 88 total flights...?

A story in the online edition of the Wall Street Journal Monday, citing company officials, reported the company (LUV: news, chart, profile) estimates the schedule change in October could boost annual revenue by about $60 million.
Southwest typically makes some changes to its schedule in the fall, the Journal noted, but that usually involves only about a dozen flights.

The report quoted Southwest chief executive Gary Kelly as saying the company is not producing the kind of profits it needs to and the schedule change is intended to make the company more efficient.

Kelly, formerly Southwest's chief financial officer, replaced chief executive and vice chairman James Parker, who resigned in mid-July after the low-fare carrier reported a 54 percent drop in its second-quarter profit amid higher operating expenses and fuel costs.

Southwest reported second-quarter net income of $113 million, or 14 cents a share, down from $246 million, or 30 cents a share, in the year-ago period, which included a $271 million gain resulting from government aid. The results missed Wall Street's expectations of 16 cents a share.

Southwest has projected its third-quarter earnings will exceed last year's profit of $106 million. It added that passenger bookings for July, August and September are looking strong.

Southwest, which is best positioned among its competitors against all-time high oil prices, said its average fuel cost per gallon in the quarter increased 21.5 percent to 81.9 cents. The carrier said it has locked in 80 percent of its fuel costs in 2005 with prices capped at about $25 a barrel. For 2006, 45 percent of its fuel costs are hedged with prices capped at about $28 per barrel.

The Journal report also said Southwest is rolling out a new computer system to give it more flexibility in scheduling.

Shares of Southwest, based in Dallas, added 24 cents on Friday to close at $14.70.

 

[vc10]

Correct. This is a reoptimization of the schedule. Southwest has typically used rather simple tools to schedule its system. It's now finally starting to use sophisticated tools, and this is one of the results.

Looks to me like they're just redeploying flights to different destinations, not necessarily cutting 88 total flights...?

 

[Slug]

You are correct siiiirrrr

I think the total number of flights cut for the new schedule was 6 despite the fact that we are taking more planes and hiring continues. More long haul = more saddle sores.




Slug

 

[MLBWINGBORN]

Funny..

Why is it that the title of the piece says "to cut 88 flights"?

Saying what is REALLY going on isnt really newsworthy i guess..

The new software is "freeing up" flights and moving them into other markets over time..

These changes will make for better flows and a more efficent schedule..

In the long run it will make more money and increase productivity system wide..Was told that its like finding 6 jets in a hanger and putting them to use on the more profitable routes..

There are some pretty smart folks down in Meca..And Kelly is one of the smartest..

Mike

 

[BigDave]

I heard an interesting rumor that Southwest is serious looking into flying to Hawaii from LAX. Is there any validity to this? I know the new 737 have the range but they will need to be ETOP certified.

 

[Daddy]

They would have to buy rafts, too...my money's on redeployment of aircraft to MDW mostly (see ATA rumors) and then PHL secondly.

 

[RVR300]

I believe we already are (certified that is).

If I remember this correctly, Aloha (or Boeing) used one of our 737-700s to do the proving runs to HNL from OAK, and the word at the time was that since it was our aircraft, the proving runs apply to us as well.

Could be wrong, but that's how I remember it.

HNL would be great. We already fly PVD-PHX which is blocked around 5.5 hrs.

But I remember Herb saying during our new hire 'breakfast' years ago that SW has many more places we could go here in the continental US.

 

[RJP]

They would have to buy rafts, too...my money's on redeployment of aircraft to MDW mostly (see ATA rumors) and then PHL secondly.

Rumor's been going around for a while now that the last couple of orders of -700s included life rafts.

 

[Daddy]

I guess I was half right anyway...



Associated Press
Southwest to Shift Flights to Philadelphia
Monday August 23, 4:46 pm ET Southwest to Cut 88 Flights in October, Shift Planes Mostly in and Out of Philadelphia

DALLAS (AP) -- Southwest Airlines Inc. plans to cut 88 flights in October and shift planes to more profitable routes, mostly in and out of Philadelphia, officials said Monday.

The low-cost carrier said Monday it hopes the changes will increase revenue by $60 million.

[size=-2]ADVERTISEMENT[/size]
var lrec_target="_blank";var lrec_URL = new Array();lrec_URL[1] = "http://us.ard.yahoo.com/SIG=1259hctcr/M=301311.5264260.6403104.1435155/D=fin/S=8988914:LREC/EXP=1093387642/A=2302151/R=0/id=flashurl/SIG=1260s6emn/*http://promotions.yahoo.com/sbc/static/index.html?.u_vers=080104phot";var link="javascript:LRECopenWindow(1)";var lrec_flashfile = 'http://us.a1.yimg.com/us.yimg.com/a/sb/sbc2/sbcphoto_LREC_080604.swf?clickTAG='+link+'';var lrec_altURL = "http://us.ard.yahoo.com/SIG=1259hctcr/M=301311.5264260.6403104.1435155/D=fin/S=8988914:LREC/EXP=1093387642/A=2302151/R=1/id=altimgurl/SIG=1260s6emn/*http://promotions.yahoo.com/sbc/static/index.html?.u_vers=080104phot";var lrec_altimg = "http://us.a1.yimg.com/us.yimg.com/a/sb/sbc2/sbcphoto_LREC_080604.jpg";var lrec_width = 300;var lrec_height = 250; on error resume next plugin = ( IsObject(CreateObject("ShockwaveFlash.ShockwaveFlash.4"))) "It's just taking the planes and redeploying them. The capacity remains the same," said Ed Stewart, a Southwest spokesman. "We should see increased revenue by putting planes in places where lots of people want to fly."

Stewart said the Oct. 31 schedule changes will result in 41 daily flights at Philadelphia, where Southwest began service in May. The Dallas-based carrier said Philadelphia has been its most successful opening ever.

The changes will affect about 3 percent of Southwest's schedule of 2,800 daily flights.

Southwest said it would reduce some round-trip flights between Kansas City and Chicago, Dallas and Tulsa, Houston and New Orleans, and many less-frequent routes.

For example, the company will cut daily departures at Dallas from 130 to 123 daily and reduce Kansas City flights from 70 to 61 each day. Among less-traveled routes, Southwest plans to trim Albuquerque-El Paso flights from four to three daily.

Besides Philadelphia, other routes getting additional flights include Houston-Orlando, Fla.; Chicago-Tampa, Fla.; and Baltimore-Nashville, Tenn.

The changes were first reported by The Wall Street Journal.

Southwest has been hurt by rising costs for jet fuel and labor and saw second-quarter profits slide 54 percent.

The airline has partly insulated itself against fuel increase by buying about 80 percent of its supply under long-term deals with guaranteed lower prices, but still paid 21.5 percent more for fuel in the April-June period than it did a year earlier.

On the labor side, the company reached a deal last month that gave flight attendants average pay raises of 31 percent over six years.

Gary Kelly, who replaced James Parker as chief executive last month, said in a recent interview that Southwest was "pushing the boundary of what we can afford with our wages."

Southwest has said that earnings in the July-September quarter will beat last year's profit of $106 million. Kelly said bookings for July and August were strong. Shares of Southwest fell 10 cents to close at $14.60 Monday on the New York Stock Exchange.