Want to be a 20 yr fo? 15% roic!?!

[m80drvr]

Yeah and the 787 has been huge success for Boeing and the airlines that purchased it. Years late, over weight, and still a POS.

When in the last 20 years has an airframe manufacturer turned out a plane that is on time, within weight projections and meets performance specs. Honestly, to wait for a plane that is basically on the drawing board is absurd. RUN THE DAMN AIRLINE......NOW, NOT IN THE FUTURE!!!!!

15% ROA is a excuse for SWA to not grow and blame it on the employees. Gary is way over his head and has no idea what he is doing running an airline. But when it comes to counting beans he is doing great...Just blame the empoyees for sick calls when one of the beans comes up missing. "Damn employees stole my beans when they called in sick, ill make sure to scold them at the next coolaid fest"

Hey Gary... how about the fact that you have employees that have worked every weekend and every holiday for YEARs and now they want a few days off with their families... Gary have you worked EVERY weeked for th last 5 years? Not Herbs airline anymore.....No vision, no plan, blame the employees. So much for the SWA culture. Sounds like every other airline in the US.

 

[vikesfanIV]

Yeah and the 787 has been huge success for Boeing and the airlines that purchased it. Years late, over weight, and still a POS.

When in the last 20 years has an airframe manufacturer turned out a plane that is on time, within weight projections and meets performance specs. Honestly, to wait for a plane that is basically on the drawing board is absurd. RUN THE DAMN AIRLINE......NOW, NOT IN THE FUTURE!!!!!

15% ROA is a excuse for SWA to not grow and blame it on the employees. Gary is way over his head and has no idea what he is doing running an airline. But when it comes to counting beans he is doing great...Just blame the empoyees for sick calls when one of the beans comes up missing. "Damn employees stole my beans when they called in sick, ill make sure to scold them at the next coolaid fest"

Hey Gary... how about the fact that you have employees that have worked every weekend and every holiday for YEARs and now they want a few days off with their families... Gary have you worked EVERY weeked for th last 5 years? Not Herbs airline anymore.....No vision, no plan, blame the employees. So much for the SWA culture. Sounds like every other airline in the US.

Comparing the 787 to the Max is ridiculous. The Dreamliner is new technology, plus Boeing made the mistake of outsourcing way to much of the work. Neither of those factor in when talking about the Max. In fact, it wouldn't surprise me to see the Max delivered in 2016, not the current 2017 date. Do you really think Boeing would be stupid enough to not give themselves ample slop in the schedule after the whole Dreamliner fiasco? The CEO (Jim McNerney) knows that is probably the fastest way to lose his job. Everything I hear and read from Boeing leans in that exact direction. They won't come out and say it outright but they keep hinting at being ahead of the game on the Max development. As far as achieving the 10-12% efficiencies, yes I do think they will hit their targets. The new winglet they just annouced gives 1.5% on top of the 10-12, so that right there is a nice little cushion to achieve the desired targets. Time will tell.

I won't waste my time commenting on the rest of your rant.

 

[RobZerbe]

Alaska Air Group is basically a money printing press thanks to their monopoly route structure and lucrative code share deals, and even they can't come close to 15% ROIC. This goal is ridiculous. I'm settling in for a 20+ year upgrade. Growth is a long, long way off.

Bro (I think the TOS forbid me from using your real name, sorry to be obtuse),

You will be #2 pilot on the seniority list at this Company. Seriously, honestly and with all due respect, if that isn't good enough find something that is. JMHO, but being at SWA is a good deal, but not good enough if it makes you miserable.

Maybe I'm reading too much into it, but it seems like there is some real bitterness in your posts. Life is too short for that. I think you know how to get my number, feel free to call.

 

[jp1030]

Bro (I think the TOS forbid me from using your real name, sorry to be obtuse),

You will be #2 pilot on the seniority list at this Company. Seriously, honestly and with all due respect, if that isn't good enough find something that is. JMHO, but being at SWA is a good deal, but not good enough if it makes you miserable.

Maybe I'm reading too much into it, but it seems like there is some real bitterness in your posts. Life is too short for that. I think you know how to get my number, feel free to call.

Rob,
What is he saying that's not true? 15% ROIC is ridiculous and it will be a long long time for most of us to upgrade because of that stupid arbitrary number. He is no more bitter than most....just check out the poon once in a while.

 

[Mach 80]

So it allows bottom feeders like SWA (in the 80s) to: not pay a pension, undercut wages, not pay for holding, give crappy perdiem rates, garbage workrules called "flexibility", and then have that formula compete against the airlines that had that for over 80 years??

1. Not pay a pension: Not a traditional one, but they've had a great (union held) 401k and profit sharing plan which have done well for the pilots in general. I recall UAL and USAir pilots scoffing at the plans telling SWA pilots that "their pensions were guaranteed unlike the outcome of the 401k plans". How's that guarantee now?

2. Undercut wages: Back in the day, pay RATE was less than other airlines for a long time but "flexibility" and efficiently built trips allowed SWA pilots to net something closer to other pilots on an annual basis.

3. Not pay for holding: Not true, SWA pays for holding and delays and always has. Although the formula generally pays by the mile, there is and has been a formula that gets triggered for delays and holding.

4. Garbage workrules called "flexibility": It was and always has been the free enterpise system at SWA. Just as some pilots could work to FARs if they want, others could give away or trade all that could get picked up by others. Some guys work hard for a couple months and then take huge chunks of time off. In general, because of flying efficiencies with point to point flying, SWA pilots flew more per day but no more days than other pilots. Other airline pilot unions always had rules and caps in place that caused the airline to hire more pilots and additionaly their hub and spoke flying created big gaps in the middle of the pilot's workday of sitting at the hub, changing airplanes, and looking at magazines at the airport bookstore. Maybe if some of the caps and union rules restricting how much pilots could fly had been less restrictive, there would have been fewer layoffs and downgrades today.

 

[PreContact]

Why doesn't Southwest start doing red eyes? Getting even more utilization on the airframes couldn't hurt...

 

[fletch717]

Why doesn't Southwest start doing red eyes? Getting even more utilization on the airframes couldn't hurt...

Their res system can't handle a flight that starts one day and finishes the next. It also can't handle international flights. They just purchased a new system that will handle it.

 

[Full of LUV]

1. Not pay a pension: Not a traditional one, but they've had a great (union held) 401k and profit sharing plan which have done well for the pilots in general. I recall UAL and USAir pilots scoffing at the plans telling SWA pilots that "their pensions were guaranteed unlike the outcome of the 401k plans". How's that guarantee now?

2. Undercut wages: Back in the day, pay RATE was less than other airlines for a long time but "flexibility" and efficiently built trips allowed SWA pilots to net something closer to other pilots on an annual basis.

3. Not pay for holding: Not true, SWA pays for holding and delays and always has. Although the formula generally pays by the mile, there is and has been a formula that gets triggered for delays and holding.

4. Garbage workrules called "flexibility": It was and always has been the free enterpise system at SWA. Just as some pilots could work to FARs if they want, others could give away or trade all that could get picked up by others. Some guys work hard for a couple months and then take huge chunks of time off. In general, because of flying efficiencies with point to point flying, SWA pilots flew more per day but no more days than other pilots. Other airline pilot unions always had rules and caps in place that caused the airline to hire more pilots and additionaly their hub and spoke flying created big gaps in the middle of the pilot's workday of sitting at the hub, changing airplanes, and looking at magazines at the airport bookstore. Maybe if some of the caps and union rules restricting how much pilots could fly had been less restrictive, there would have been fewer layoffs and downgrades today.

No one company mgmt has been 100% legit.... but the only way the legacies could compete with the "new model" of no pension plan, no retiree medical, roll back significant work rules, etc is a trip through BK court, otherwise the employees would have never gone for it. The legacies only other option would have been to just go out of business which would have benefited no one except SWA. Yes creditors, employees and countless outhers took a beating in BK reseting expectations, but that is the state of the industry, you can't offer employees and retirees 70's style benefits in a 2000's airline industry environment and still compete. It took a trip through BK court to reset the industry to SWA's industry pall bearer contract expectations. Every airline would have loved to fuel hedge in the 2000's, only SWA had the cash!
LUV

 

[Downwind]

Wow. I never knew we had so many airline managers on FI.com.

 

[kf4amu]

Every airline would have loved to fuel hedge in the 2000's, only SWA had the cash!
LUV

Mostly the credit rating, but cash can trump credit.

Blame the competitors for not having the credit or cash. Perhaps if they had a good employee relationship they would have had the credit and cash like southwest had.

 

[whymeworry?]

>>>Now that they lost that crutch they have to actually compete to run an airline. Imagine that.<<<

No...it had nothing to do with fuel hedging. It's having to compete against the biggest crutch of all -- bankruptcy ...that allowed SWA's competitors to dump debt, totally screw their investors, creditors, and by shredding contracts and promised retirements -- employees.

And someone stupidly mentions that the playing field has been "leveled"? Yeah...bankruptcy and cutting your employees pay, benefits, and retirements in half does a real good job of that!! Nice way to operate and compete!!

Not all airlines filed for Ch 11 protection. Mine didn't. It has been documented in numerous financial articles that SWA used the hedges to gain market share, by keeping the product below real marketplace cost due to fuel hedges. That's one strategy, and it certainly worked, they did indeed gain market share. But when it comes time to sober up to the realties of paying retail for fuel, they've come to realization that they have to price the product accordingly in order to assure profit. It's suddenly not so easy to go after that market share. to add to their woes, if they stop growing, their labor costs soar due to longevity scales.

Hey, don't shoot the messenger. I have absolutely no problem with SWA's success model. Most of it is built around incredible respect and investment in the employee. I completely agree with that approach. But lets call a spade a spade. The next decade is going to be much harder for them than the past. Solely due to their dependance on fuel hedges in past year, which are now mostly gone.

I still believe they will succeed, and even grow. And I want them to succeed because they are one of the only companies in America who has a corporate culture that truly puts employees first. But their going to have to work to compete now (the mgmt that is). In the past they just coasted as a result of successful fuel gambles.

 

[jhill]

can't see how on the one hand they say they need 800's to reduce CASM, increase RASM, and on the other defer the planes you need to hit the target ROIC.

The SWA pyramid scheme is over.

ding ding ding ding ding ding WE HAVE A WINNER

They see the recession coming. They always see it first.

However, this place has peaked and has nowhere to go. Under this leadership anyway.

 

[dalad]

Not all airlines filed for Ch 11 protection. Mine didn't. It has been documented in numerous financial articles that SWA used the hedges to gain market share, by keeping the product below real marketplace cost due to fuel hedges. That's one strategy, and it certainly worked, they did indeed gain market share. But when it comes time to sober up to the realties of paying retail for fuel, they've come to realization that they have to price the product accordingly in order to assure profit. It's suddenly not so easy to go after that market share. to add to their woes, if they stop growing, their labor costs soar due to longevity scales.

Hey, don't shoot the messenger. I have absolutely no problem with SWA's success model. Most of it is built around incredible respect and investment in the employee. I completely agree with that approach. But lets call a spade a spade. The next decade is going to be much harder for them than the past. Solely due to their dependance on fuel hedges in past year, which are now mostly gone.

I still believe they will succeed, and even grow. And I want them to succeed because they are one of the only companies in America who has a corporate culture that truly puts employees first. But their going to have to work to compete now (the mgmt that is). In the past they just coasted as a result of successful fuel gambles.

What airline do you work for that hasn't filed BK?
Please don't tell me it's CAL.

 

[maxblast72]

Alaska Air Group is basically a money printing press thanks to their monopoly route structure and lucrative code share deals, and even they can't come close to 15% ROIC. This goal is ridiculous. I'm settling in for a 20+ year upgrade. Growth is a long, long way off.

15% ROIC might be a little closer than you think. According to the ROIC calculations for the preceding 12 months ending 3/31/12 included in the April 19, 2012 Southwest Q1 Earnings press release, SWA has about $13 billion of invested capital. When you do the math and remove the one time special items, SWA would have needed a $1.75 billion operating profit to acheive their 15% ROIC profitability target for the 12 month period ending 3/31/12.

So how does SWA get there? Increase revenue and/or decrease costs. So far this year, the monthly RASM figures have been coming in around 5% greater than the previous year. That corresponds to roughly $700 million more revenue per year even if capacity levels remain flat. According to the US Energy Information Administration website, the spot price of Jet A has gone from about $3.20-3.30/gallon back in Feb/Mar to the current spot price range of $2.70-2.80 today ($3.20 was the average all in price for Southwest during 2011). On a basis of approximately 1.8 billion gallons per year, that equates to a savings of approximately $900 million per year going forward compared with 2011 energy prices.

So with the current revenue/fuel cost environment (and the normal 2-3% non-fuel CASM creep), SWA could acheive their 15% ROIC profitability target quicker than you think. Remember, Gary Kelly has hundreds of B737 options available to him if he feels growth would be warranted and profitable.

Of course those numbers could change if Israel attacks Iran or the European sovereign debt crises fears cross the Atlantic Ocean and cause a recession here in the US. If that happens, both Southwest and AirTran pilots will be thankful Southwest has the deepest balance sheet in the industry.

 

[redflyer65]

So how does SWA get there? Increase revenue and/or decrease costs.

By pushing back 1 Billion dollars in capital expenditures while flying the 'paid for' 300's a little bit longer. Add in fuel cost that has dropped off a cliff and you get pretty close this year.

 

[SIG600]

By pushing back 1 Billion dollars in capital expenditures while flying the 'paid for' 300's a little bit longer. Add in fuel cost that has dropped off a cliff and you get pretty close this year.

Doesn't SWA own something like 90% of their a/c outright?

 

[redflyer65]

It was close to 85% owned outright before the AAI purchase.

I believe most of theirs are leased except for a couple maybe.

 

[maxblast72]

Right from page 34 of the 2011 annual report to the shareholders, Southwest and AirTran operated a total of 698 aircraft as of 12/31/11. 499 aircraft are owned while 199 aircraft are leased. 111 of Southwest's and 38 of AirTran's aircraft are pledged as collateral as of 12/31/11. That would leave 350 aircraft being owned outright and would account for the $6-7 billion unencumbered aircraft asset value CFO Laura Wright quotes often to Wall Street.

 

[acaTerry]

I'll probably end up being a 15 year FO at NutJets. I'd take that SWA 15 yr FO any day, at least they still get raises after year 10. Now if I just had 200 more PIC turbine....