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

[texman]

I know it is old news, but good info.

http://www.centreforaviation.com/an...pproach-to-growth-with-deferral-of-737s-74365

 

[xjhawk]

Well if I am not mistaken, even the reserve FO's get 15 days off and are well paid. Sounds better than a lot of other places.

 

[scoreboardII]

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.

 

[texman]

Well if I am not mistaken, even the reserve FO's get 15 days off and are well paid. Sounds better than a lot of other places.

True, just a good read. I don't live in a bubble. Just saying.

 

[whymeworry?]

Like anybody didn't see this coming. SWA rested on its laurels during the past 8-10 years as a result of fuel hedging. Now that they lost that crutch they have to actually compete to run an airline. Imagine that.

Don't get me wrong, I admire their management for putting employees first. But they patted themselves on the back a lot as they grew at the expense of others by artificially keeping prices low since they had hedged fuel. It woud've been far more fastidious to keep prices at or above the real cost of product and to bank the difference. Instead, they used the advantage to capture market share. Now that the playing field is level they're sobering up to the realities of real-world competition. IMO, no way they can reach 15% ROIC in this environment.

Kind of reminds me of CAL mgmt bragging that they run such a lean company when in fact they've always had the lowest cockpit crew costs in the (Legacy) industry. They weren't really all that smart, they just benefitted from a weak labor group. Hardly any novel approach to running the business, the pilots subsidized the success of the entity with no payout for such efforts. The payday went to the execs instead. Now mgmt is facing the grim reality that the loan is due and it's time to pay up or shut the airline down (maybe even for good). They think they've got the pilots by the balls since the gov't always gives in to big business. I think they're in for a rude awakening.

 

[PCL_128]

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.

 

[Mach 80]

>>>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!!

 

[Avalanche]

>>>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!!

Spot on!

 

[sfomarc]

>>>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!!

Exactly.

 

[vixin]

Spot on Mach. The crutch as stated was smart business. Bankruptcy is a poor business plans crutch.

 

[jonjuan]

>>>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!!

However, the playing field is now leveled. Discounting the massive gains from the 2000s fuel hedging is a bit disingenuous. SWA used gains to grow throughout the 2000s.

 

[jonjuan]

Spot on Mach. The crutch as stated was smart business. Bankruptcy is a poor business plans crutch.

And a 20 year upgrade due to zero growth will be the result of swa's business plan going forward.

 

[redflyer65]

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.

Plan for the worse, hope for the best. I can't disagree with you here.

 

[fam62c]

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.

Strange indeed, it saves cash but cash has a return of near zero percent. If a -800 can be used more profitably than the plane it replaces it may not return 15% but it will return more than cash. Buybacks and an increase in the dividend that still leaves the yield too small to attract dividend investors isn't going to move the share price; the company needs to move forward not run in place. The share price isn't going to go anywhere until SW can show investors that the company is going somewhere. If the CEO is trying to manage the share price it's not going to work, he needs to manage the airline first.

 

[scoreboardII]

True dat.