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.

 

[BILL LUMBERG]

>>>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!!

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??

It kills me when people on this board point at other startups and say they are the problem.

So the only way to undo that problem is court supervised restructuring. I hope you never have a management team hellbent to destroy the airline and your lifestyle just to prop up their payouts when they leave and go become the CEO of a paper company or something else. As employees, we need this safety valve......the only problem is, even the "new" management likes to hide behind the judges robe and squeeze even more.....ask an AA pilot.

 

[redflyer65]

Bill,

Bankruptcy was never meant to be a crutch for companies to gut contracts and agreements. But here we are with CEOs doing just that. Shareholders get zero, contract holders take a bath, labor takes a bath and the CEO just hits the reset button and starts over. Golden parachute and on to the next company. There is no accountablity for any of their actions.

 

[vikesfanIV]

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.

Why would Gary delay delivery of 30 800's? Simple in my book. Why spend 1 billion dollars on new airplanes if you can wait 4 years and then get an airplane (the Max) that is 10-12% more efficient than the 800. And have that added efficiency for the next 16 years. We have a fleet of almost 700 airplanes... delaying 30 deliveries for 4 years isn't going to cost the company that much in lost efficiency. It's a smart business decision.

 

[redflyer65]

Vikes is exactly right. Save 1 Billion dollars over 4 years, roll those planes into the Max version. Add six more seats to the exsisting 700s. Open Central and South America when able, throw in Hawaii/Alaska down the road.

I don't like pushing back deliveries from the pilot prospective, but the business end looks pretty solid.

 

[fam62c]

Why would Gary delay delivery of 30 800's? Simple in my book. Why spend 1 billion dollars on new airplanes if you can wait 4 years and then get an airplane (the Max) that is 10-12% more efficient than the 800. And have that added efficiency for the next 16 years. We have a fleet of almost 700 airplanes... delaying 30 deliveries for 4 years isn't going to cost the company that much in lost efficiency. It's a smart business decision.

I'll buy that if the MAX comes out on time and meets it's numbers.

 

[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.