[font=Arial, Helvetica, sans-serif]When it comes to choosing which airline one wishes to work for it is important to realize what is the attitude of that airline management team toward costs & revenues. It seems rudimentary but costs have to be attacked at every level & constantly reviewed to determine ways to insure one's future earnings aren't so restricted as to be able to make a profit at the end of the day....many companies have forgotten this basic principle and failed to educate its employees to this relationship. Unions have yelled in the past, "this isn't our concern, we're just labor"....passengers on a airplane may not have control of the airplane but they certainly want their pilots to avoid upcoming thunderstorms by making small course corrections earlier rather than later to insure a smooth ride....the same could be said of management....small course corrections are better early rather than major one later. While some may still yell "we're just labor", most at SWA understand WE ALL HAVE A VESTED INTEREST in keeping costs low if we wish to have a future. [/font]
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[font=Arial, Helvetica, sans-serif]This article reflects a bit of the insight & energy the SWA leaders have in trying to shave costs wherever they can I believe....again it is built into the culture & hiring folks who understand that fact is very important I believe. Again some modest ramblings, my apologies in advance. There's more to the story than is presented in the article below about SEA....SWA played hardball & led the other airlines in making SEA shave additional costs from their budget when they were going to force feed a budget down all the carriers throats....the leadership shown by the company resulted in SEA reviewing their budget & making some hard costs vs. just passing along everything to the airlines. Its a battle that is fought everyday but well out of sight of the public or employees generally.
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[font=Arial, Helvetica, sans-serif]http://www.southwest.com/swatakeoff/airport_cost.html[/font]
[font=Arial, Helvetica, sans-serif]Airports: How much do they cost and who pays for them?
[/font][font=Arial, Helvetica, sans-serif]By Bob Montgomery, VP of Properties for Southwest Airlines[/font]
[font=Arial, Helvetica, sans-serif]What goes up must come down, and when one of our 737’s goes up and comes down, it always starts and ends its journey at the airport. Every single Customer we have travels through the airport, and most of our Employees spend a good portion of their lives at airports as well. Just like the homes in which we raise our families, our airport homes have owners, they must be maintained, developed, and overseen, and they cost money: Lots of money. As our CEO Gary Kelly travels about talking with Employees and investors alike about our finances, he identifies airports as one of the three major cost pressures facing Southwest Airlines in the post 9-11 environment.[/font]
[font=Arial, Helvetica, sans-serif]Airports are almost always owned by a governmental body. This might be a city government, a county, or a state. In some instances airports are owned by Port Authorities which are charged with supporting both air and sea commerce, or they might be owned by Airport Authorities which are institutions created by state legislatures for the sole purpose of managing and developing airports. However, since airports have runways, and since they exist to serve air traffic, the FAA is intimately involved in each and every one of them. One thing they demand is that airports be as self sufficient as possible. This means that taxpayers don’t pay, users do.[/font]
[font=Arial, Helvetica, sans-serif]As the primary user of airports, airlines typically pay in the form of terminal rents and landing fees. Terminal rents work much like rent in an apartment, except that like most commercial space, they lease for a rate per square foot. Landing fees are assessed every time one of our airplanes lands at its destination, based on its weight. For example, each time a new Boeing 737-700 lands at Seattle, it costs us $457.50. In view of the fact that we operate 39 flights a day from SEA, this comes to more than $5.7 million annually. In 2003, we expect to pay more than $355 million for our airport space systemwide, or in other words, the cost of 10 new 737’s. Airport costs represent 7% of all costs that we incur.
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[font=Arial, Helvetica, sans-serif]Operating Expenses[/font]
[font=Arial, Helvetica, sans-serif]http://www.southwest.com/images/swatakeoff/operating_expenses.gif[/font]
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While as a percentage of total costs, that figure might seem reasonable, the rate of recent increases - especially since 9-11 - is alarming. Comparing projected 2004 costs against actual 2000 costs, our expenses for airports have increased an astounding 60.88%. In terms of cost per passenger, they have risen from $3.17 in 2000 to a projected $5.10 in 2004. This increase should be compared against Laura Wright’s profit perspective in “Plane Talk” on this web site. Our profit in the 5 quarters after 9-11 was merely $2.96 per Customer. When we see cost increases at airports alone of nearly $2 per passenger, their impact to our profitability and to our profit sharing should be immediately obvious.[/font]
http://www.southwest.com/images/swatakeoff/landing_fees.gif
[font=Arial, Helvetica, sans-serif]Why are these costs spiraling upward? This is due to a number of factors. Southwest has protected jobs and grown since 9-11, while most other carriers have cut back on both Employees and flights. This has resulted in Southwest Airlines incurring a larger slice of the airport cost “pie.” In some cases, such as BWI, Southwest’s growth has driven expansion projects, and we must pay for them. In other cases, airport expansion projects were well underway at 9-11 and could not be stopped. Additionally, security is placing enormous pressure on airport costs. Airports must hire more Police to handle security duties, and present and future in-line baggage screening solutions must be embraced to ensure that our Customers find flying convenient and practical. [/font]
[font=Arial, Helvetica, sans-serif]Contrary to popular perception, no taxes on general taxpayers are required in any of the cities served by Southwest Airlines to generate the economic benefits derived from our airports. Users such as Southwest Airlines pay 100% of the costs involved with owning, operating, and improving the airports we serve. The economic benefits to communities can be startling. For example, the Phoenix Airport System had a total economic impact (including multiplier effects) of $20.4 billion in FY 2000. The Phoenix Airport System supported 279,031 jobs in Arizona, with payroll of $6.7 billion. The direct impact of Sky Harbor International Airport was $6.1 billion, supporting 24,516 jobs on the airport with a payroll of $946 million. Airports are big business, all conducted at no cost to the taxpayer. The American system of airports is the finest in the world. We are presently challenged to ensure that they meet the needs of our Customers, and that they are as safe and secure as they can possibly be. They represent a home in which we can all take pride.[/font]
[font=Arial, Helvetica, sans-serif]At the same time, to maintain air service and Employee job security while returning to profitability, airlines have been compelled to make tough decisions to reduce overhead, defer or cancel capital spending, and become more productive. If our national air transportation system is to survive, our travel partners - airports - must do the same. Some are. Many are not. If victory is defined as holding on to or increasing air service by financially stable carriers, only those airports (and the communities they represent) that succeed in managing these escalating costs will be victorious.[/font]
[/font]
[font=Arial, Helvetica, sans-serif][/font]
[font=Arial, Helvetica, sans-serif]This article reflects a bit of the insight & energy the SWA leaders have in trying to shave costs wherever they can I believe....again it is built into the culture & hiring folks who understand that fact is very important I believe. Again some modest ramblings, my apologies in advance. There's more to the story than is presented in the article below about SEA....SWA played hardball & led the other airlines in making SEA shave additional costs from their budget when they were going to force feed a budget down all the carriers throats....the leadership shown by the company resulted in SEA reviewing their budget & making some hard costs vs. just passing along everything to the airlines. Its a battle that is fought everyday but well out of sight of the public or employees generally.
_______________________________
[font=Arial, Helvetica, sans-serif]http://www.southwest.com/swatakeoff/airport_cost.html[/font]
[font=Arial, Helvetica, sans-serif]Airports: How much do they cost and who pays for them?
[/font][font=Arial, Helvetica, sans-serif]By Bob Montgomery, VP of Properties for Southwest Airlines[/font]
[font=Arial, Helvetica, sans-serif]What goes up must come down, and when one of our 737’s goes up and comes down, it always starts and ends its journey at the airport. Every single Customer we have travels through the airport, and most of our Employees spend a good portion of their lives at airports as well. Just like the homes in which we raise our families, our airport homes have owners, they must be maintained, developed, and overseen, and they cost money: Lots of money. As our CEO Gary Kelly travels about talking with Employees and investors alike about our finances, he identifies airports as one of the three major cost pressures facing Southwest Airlines in the post 9-11 environment.[/font]
[font=Arial, Helvetica, sans-serif]Airports are almost always owned by a governmental body. This might be a city government, a county, or a state. In some instances airports are owned by Port Authorities which are charged with supporting both air and sea commerce, or they might be owned by Airport Authorities which are institutions created by state legislatures for the sole purpose of managing and developing airports. However, since airports have runways, and since they exist to serve air traffic, the FAA is intimately involved in each and every one of them. One thing they demand is that airports be as self sufficient as possible. This means that taxpayers don’t pay, users do.[/font]
[font=Arial, Helvetica, sans-serif]As the primary user of airports, airlines typically pay in the form of terminal rents and landing fees. Terminal rents work much like rent in an apartment, except that like most commercial space, they lease for a rate per square foot. Landing fees are assessed every time one of our airplanes lands at its destination, based on its weight. For example, each time a new Boeing 737-700 lands at Seattle, it costs us $457.50. In view of the fact that we operate 39 flights a day from SEA, this comes to more than $5.7 million annually. In 2003, we expect to pay more than $355 million for our airport space systemwide, or in other words, the cost of 10 new 737’s. Airport costs represent 7% of all costs that we incur.
[/font]
[font=Arial, Helvetica, sans-serif]Operating Expenses[/font]
[font=Arial, Helvetica, sans-serif]http://www.southwest.com/images/swatakeoff/operating_expenses.gif[/font]
[font=Arial, Helvetica, sans-serif]
While as a percentage of total costs, that figure might seem reasonable, the rate of recent increases - especially since 9-11 - is alarming. Comparing projected 2004 costs against actual 2000 costs, our expenses for airports have increased an astounding 60.88%. In terms of cost per passenger, they have risen from $3.17 in 2000 to a projected $5.10 in 2004. This increase should be compared against Laura Wright’s profit perspective in “Plane Talk” on this web site. Our profit in the 5 quarters after 9-11 was merely $2.96 per Customer. When we see cost increases at airports alone of nearly $2 per passenger, their impact to our profitability and to our profit sharing should be immediately obvious.[/font]
http://www.southwest.com/images/swatakeoff/landing_fees.gif
[font=Arial, Helvetica, sans-serif]Why are these costs spiraling upward? This is due to a number of factors. Southwest has protected jobs and grown since 9-11, while most other carriers have cut back on both Employees and flights. This has resulted in Southwest Airlines incurring a larger slice of the airport cost “pie.” In some cases, such as BWI, Southwest’s growth has driven expansion projects, and we must pay for them. In other cases, airport expansion projects were well underway at 9-11 and could not be stopped. Additionally, security is placing enormous pressure on airport costs. Airports must hire more Police to handle security duties, and present and future in-line baggage screening solutions must be embraced to ensure that our Customers find flying convenient and practical. [/font]
[font=Arial, Helvetica, sans-serif]Contrary to popular perception, no taxes on general taxpayers are required in any of the cities served by Southwest Airlines to generate the economic benefits derived from our airports. Users such as Southwest Airlines pay 100% of the costs involved with owning, operating, and improving the airports we serve. The economic benefits to communities can be startling. For example, the Phoenix Airport System had a total economic impact (including multiplier effects) of $20.4 billion in FY 2000. The Phoenix Airport System supported 279,031 jobs in Arizona, with payroll of $6.7 billion. The direct impact of Sky Harbor International Airport was $6.1 billion, supporting 24,516 jobs on the airport with a payroll of $946 million. Airports are big business, all conducted at no cost to the taxpayer. The American system of airports is the finest in the world. We are presently challenged to ensure that they meet the needs of our Customers, and that they are as safe and secure as they can possibly be. They represent a home in which we can all take pride.[/font]
[font=Arial, Helvetica, sans-serif]At the same time, to maintain air service and Employee job security while returning to profitability, airlines have been compelled to make tough decisions to reduce overhead, defer or cancel capital spending, and become more productive. If our national air transportation system is to survive, our travel partners - airports - must do the same. Some are. Many are not. If victory is defined as holding on to or increasing air service by financially stable carriers, only those airports (and the communities they represent) that succeed in managing these escalating costs will be victorious.[/font]
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