Why Do People Bash Swa?

[Sluggo_63]

Hey wait a second Bavarian. I was a tanker and tweet IP in a former life. Don't make me put on my wife's pink visor hat and come out of my computer chair and bust on you.

Yeah... me too, Bavarian.

I soon as I can find a pair of pumps to match my dress, I'm gonna kick your a$$.

 

[Jim Smyth]

Southwest from day one has tried to run a clean operation and provide a good service for a reasonable price while keeping there costs in check and always watching the bottom line. That still continues today. Our Executives are well compensated but are not robbing the airline blind every chance they get. Other Airlines in the past never followed that rule and forgot what put butter on there bread. They started rental car companies, giant computer systems, hotel chains, alter ego airlines etc all while forgetting that the Airline was supposed to be there #1 priority. The waisted money by the truck loads in the good times and ended up completely broke in the bad times and unfortunately the employees are the ones to pay the price for there incompetence!

Southwest has been attacked from day one and it continues today and I see no end in sight. Southwest continues to improvise and adapt to the current situation at hand and IMO does a pretty good job. They tend to hire people with a can do attitude and that will go the extra mile. The proof is there with 30+ years of profits. I hope this Southwest Attitude continues and we don't get in the same trap that has come to most of the legacies of top tier wages, people becoming a number and starting not to care, its not my job, me,me,me etc.

Time will tell if the next generation keeps the Southwest Spirit alive...............Bash us all you want..........but its been a good ride so far!

 

[Big Beer Belly]

....but its been a good ride so far!

... and hopefully that ride will end for you when you turn 60!

BBB

 

[Jim Smyth]

That reminds me........................... I need to go get my fly swatter!

 

[YourPilotFriend]

Though it's just like America, when you are number one, everyone hates you.

 

[FlyBoeingJets]

I don't think the is any way to quantify the damage SWA has done to this industry. For instance thousands of vendors have lost their jobs simply because service has been stripped from domestic inflight to compete with SWA. They are the Walmart of aviation. Yes their employee's make good money, but everyone else around has suffered. Look at airport financial records if you don't believe me. When SWA takes over, sales in the airport plummet.

Wow. Not only do you denegrate SWA as an anti-worker "Category Killer" you also predict their BK in 2009?

So which is it? Are they unstoppable or about to turn into another high cost carrier in need of restructuring RIGHT NOW?

How, exactly, is a SWA BK around the corner in 2009? It took 4 years after 9/11 for relatively financial stable NWA and DAL to go bankrupt when they started losing money. Didn't the airlines start losing money in late 2000 or early 2001??

If SWA starting losing money next quarter it would take at last 4 years to go BK. The losses would be small not gigantic like at the bloated legacies and take longer to drain their $2Bil. The also have the ability to hock an incredible amount of equity. Think about it. SWA does not operate on leveraged assets like the other airlines do. This fiscal conservatism has been a cornerstone at SWA for years and has mostly been totally foreign to the legacies. NWA was conservative at one time but the last LBO in the '80s ruined all that. The legacies would rather pay huge management bonuses and grow too fast to keep debt high. Not much thought went to financial security in downturns. Blame that on whatever outside source you want, but it was internal mismanagement that counted on every other airline being equally mismanaged. If we were all business students we could have seen all this coming in the early '90s. Getting mad at the "category killer" is not the way to go. Apps should have been going in at SWA from every Legacy dude since SWA kicked UAL's shuttle on the West coast and you know it. If you were working at a Hat company and you saw the trend away from hats, would it have been smart to stay?? Life in America is tough. It's tough for the UAW dudes right now too. Mostly due to their management.

I'm not bashing you, but I've got to call you out on the sweeping statements that contradict each other. Tell me why 2009 will be the BK year...and make it better than "Because I said so".

 

[FlyBoeingJets]

. The problem is the companies approach to business is absolute cost minimalism...Do not confuse this with profit maximization. In other words SWA analyzes routes for maximum capacity increase on a slim margin. It may be the best in terms of airlines but that's because of such controlled costs. This is called the Southwest effect. If an airline is charging 20 cents a mile, SWA will go into an area and charge 12 cents a mile.

The problem with this approach is that the model assumes exponential growth if you do not raise fares. . However, such growth is physically impossible, which is why, I have said SW will be bankrupt by 2009 if it continues on its current course. They would need over 1000 737's by 2009 to avoid it. .

You obviously understand the cost vs profit thing. But you fall into the classic airline management trap of only expanding on high margin routes to "Chase" profits regardless of the costs incurred of adding the capacity. It may make more "profit" for a time but history has proven the cost side is at least equally as important over the long haul. Classic cowboy airline CEO's never want to hear about the long haul.

If it's bad that SWA has "cheapened" the product, why do they have satisfied customers? Making a superior product, at a higher price, and stating the public prefers it is not intellectually honest. The products operated side by side and the public chose. They chose to go cheap. Legacy management's failure to offer a more preferred product in a competitive industry is THEIR FAILURE. No matter how much you guys spent on consultants telling you to offer more amenities it didn't change what the public actually wanted.

Again, there is more than one way to manage an airline. When we saw this way gain traction we all should have jumped on board. How do you fight this method?

Then you lost me---

1000 aircraft or Bust?? Exponential growth necessary?

It's not like Amway over at SWA, is it?


One thing I will give you is the cheap prices SWA negotiated for the 737-700 years ago. That will be hard to duplicate. This, almost as much as the fuel hedges and for a longer period of time, has been a great boon for SWA.

The 737-700 orders, like the fuel hedges, will eventually run out. But not for a few years.

 

[capt. megadeth]

Just curious why some people bash SWA, List your reason.

CYA

Cuz it's fun to watch the SWA guys get their panties in a wad over it.

 

[PHXFLYR]

...ain't that the truth!!


PHXFLYR

 

[YourPilotFriend]

I'm not bashing you, but I've got to call you out on the sweeping statements that contradict each other. Tell me why 2009 will be the BK year...and make it better than "Because I said so".

SWA has reached absolute minimal cost. There is absolutely no way to reduce costs at SWA other than through bankruptcy.

In 1993 the government produced a report on the southwest effect. The jest of which was to encourage the government to back other low cost start ups since they believed SW would eventually wipe out the legacies. However, the actual SW effect was interesting to me when looking at how it behaves over time. When SW goes into a market segment, the fares decrease and capacity increases, there has been cases were it has increased many time. However, over time this capacity is not sustained. SWA then raises fares up to a certain level to maintain at least break even. In some cases the capacity levels have dropped below pre-SW levels. The legacies have restructured their costs to compete at the break even level of SW. So SW has three options to remain profitable 1. grow into new markets 2. raise fares 3. reduce costs. This is the only way to keep the model going at the levels it is used too.

This doesn't mean SW will ever go into debt, but quite the contrary. SW will remain probably break even if it maintains its current growth. The problem is the company will be devalued if it can't maintain the ROI the investors expect. You will see what I'm talking about if you look at the stock performance over the past few years, it has done nothing. 2007 may see a slight increase in the stock for the first half of the year, but it will slide in the later half and decline in 2008. At that point SW will will have significant assets, be virtually debt free, and be heavily undervalued. This will make it a sitting duck to investors trying to disassemble the company. To protect itself, SW will have to become legacy like in debt or take the company private. The best process to do this is through bankruptcy in my opinion.

 

[Benhuntn]

Tweet IP is gay but not as gay as a land based Navy pilot....T-34, T-2, T-45. But I digress. The KC-135A was a manly jet. Water in the front and steam out the back.

 

[Bavarian Chef]

Yeah... me too, Bavarian.

I soon as I can find a pair of pumps to match my dress, I'm gonna kick your a$$.

Murph n Sluggo -- I love you goofy bastard$. Go buy some new thigh-highs with your longevity raises!

 

[Bavarian Chef]

Tweet IP is gay but not as gay as a land based Navy pilot....T-34, T-2, T-45. But I digress. The KC-135A was a manly jet. Water in the front and steam out the back.

Guess you missed that F-14 in the profile. Huh?

Those are training planes for pete's sake. Thanks for all the gas though! I wouldn't have won all those air medals without it!


edit: 3 responses to an obvious joke though and only yours tells me you are gay but don't know it yet. neither does your wife...

 

[HalinTexas]

It has nothing to do with the employees, I think they are great people and are very lucky. The problem is the companies approach to business is absolute cost minimalism...Do not confuse this with profit maximization. In other words SWA analyzes routes for maximum capacity increase on a slim margin. It may be the best in terms of airlines but that's because of such controlled costs. This is called the Southwest effect. If an airline is charging 20 cents a mile, SWA will go into an area and charge 12 cents a mile.

The problem with this approach is that the model assumes exponential growth if you do not raise fares. Simply put SWA will have to raise fares considerably to remain profitable as other airlines match SW prices. This is why SWA load factors have remained consistent over the years. If SW is allowed to grow untamed this is a good thing for pilots, as they pay the best salaries now. However, such growth is physically impossible, which is why, I have said SW will be bankrupt by 2009 if it continues on its current course. They would need over 1000 737's by 2009 to avoid it. They could raise fares and risk the capacity drop if other airlines do not match. Fuel going up in price would also help SW.

Here's the rub that seems to be missing from most speculation. The industry never remains static. It's constantly changing.

Here's my case.

Boeing is selling airplanes hand over fist. Someone is buying them, and it's not all Asian carriers. DAL and NWA even in bankruptcy are taking deliveries. I know for a fact that B767-300's and B757's are impossible to find for all but the wealthiest. He!!, NWA is looking to buy another airline. How does a bankrupt carrier do that?

Most "experts" have concluded that the industry has probably hit bottom in 2006. Load factors and traffic are "good" to "great." Fares have been increasing over the last year or so. If this is the case, increasing revenues are the cause of profits, not so much decreasing costs if there are any. Oil is steady at between $55-65. Therefore, WN and others will be able to raise fares to some degree should they need to. This means that a 2009 BK is next to impossible. WN has too much cash. Yes, there will be future downturns in the industry, you can count on it, but not this time things are not remaining the same.

Labor contracts are coming due all over the industry in the next year or two, including WN. This means that costs will be increasing for many other carriers, but I think WN will not increase all that much. WN hasn't looked at work rules for years because this was a 10 year contract. That may be the lionshare of their contract changes. Other carriers entering Sec. 8 neg. want the concessions they gave up back.

History is replete with economic forecasters making millions off of doom and gloom projections. I remember some author/econ. professor forcasting the "Great Depression of 1989" (or some such year). Didn't happen. Many of them have disappearred, or come up with some excuse why their forecasts were wrong.

It seems that other LCC's are having a harder time remaining profitable than SWA. B6 and FL are two that come to mind. Should one or more carrier disappear, it could radically change the industry.

Consolidation. It's coming. Been saying that for years. We'll see, but if it happens, that could be great news for WN. They rest of the industry will be a mess.

Age 65 changes may have unpredicted ramifications.

I'm done forecasting who's staying and who's disappearing, who's winning who's losing. I've been wrong half the time. Like Jim Kramer.

Dancing on WN's grave is a little premature.

Good luck everyone.

 

[YourPilotFriend]

Dancing on WN's grave is a little premature.

I don't think it's that premature. SWA performance on finances is the stuff dreams are made of, but their stock is flat as a pancake. If SWA can buy enough of its stock back, it could probably avoid having its management removed. All the investors keep hearing about is this secret plan they have to keep SW competitive. Stuff like assigned seating and missed targets are showing signs of weakness. 2007 will hold the key to the success of this airline...I still stick by my statement, it has nothing to do with debt. GM is $300 billion in debt and they are not bankrupt. You file chapter 11 to reorganize your cost structure, something SW has to do to stay competitive. If your company starts to produce a loss, it will not make a profit again until bankruptcy, that is result of being at absolute minimal cost.

 

[FlyBoeingJets]

SWA has reached absolute minimal cost. There is absolutely no way to reduce costs at SWA other than through bankruptcy.

The legacies have restructured their costs to compete at the break even level of SW.

This doesn't mean SW will ever go into debt, but quite the contrary. SW will remain probably break even if it maintains its current growth. The problem is the company will be devalued if it can't maintain the ROI the investors expect.

At that point SW will will have significant assets (after the stock slide), be virtually debt free, and be heavily undervalued. This will make it a sitting duck to investors trying to disassemble the company. To protect itself, SW will have to become legacy like in debt or take the company private. The best process to do this is through bankruptcy in my opinion.

Good response. I will have to look at the next quarter's reports to figure out if the legacies have gotten their costs down far enough. Not convinced of that one yet. But it has gotten close enough that the international route premiums make up the difference. I'll agree with you that legacy profit will be even with SWA in 2007 and may be even better than SWA in 2008 when the hedges are almost gone. Earnings issues at Airtran and JetBlue tell us a lot about 2007 LCC trends. But that has always been the case in good times. Great profits at Legacies and pretty good at SWA.

SWA stock is already undervalued. So your prediction is already right. If it goes down further, without drops in other airline stocks, I would definitely expect some Walstreet money flowing into the stock. Not to run it, but to speculate on the stock recovery. Breaking it apart for the assets...I haven't thought of that one. The 737-700s are worth a pretty penny.

I can't imagine the company not buying back stock with excess cash before the value of the stock gets low enough for an asset play. But who has $4 Billion lying around to buy up 50% of LUV stock if it goes down to $10 shr??

BK to fix costs??? That is going to be impossible unless the company is showing losses, is mortgaged to the hilt and can't get new money (loans) to continue. You can't just go BK because you don't like your employees anymore. The lawsuits would be incredible. The payouts for terminated promises would not be worth the expense. Even in Delta's weakened state everyone due retirement monies is getting some sort of settlement.

By your reasoning AA and CAL should go into BK right now!!

We'll see who is right in '09

 

[YourPilotFriend]

Apparently there is a better option for SWA and its investors. Herb Kelleher is now on the board of directors for the federal reserve. Looks like he will be there long enough to protect SWA from a LBO while it buys back its stock. Perhaps the company is being taken private? This will allow SWA to restructure without the use of bankruptcy. I didn't see that coming, I guess that was the secret plan. I have to say their management may be better than I give them credit for.

 

[:-)]

Six pages and no one has given the correct answer.

People bash SWA because of SWA's pilot applicant rejection history, specifically because of the way in which they seem to randomly choose pilots. Right or wrong, that's the underlying reason for the bashing on this board. UAL, AMR, etc went through about the same amount of applicants to find successes, but in those cases, the bar was pretty well defined. For SWA, who the hedoublehockeysticks knows. We all know great people who get hired at SWA, and equally great people who get rejected by SWA. Once the average internet bulletin board participant gets a handle on what it takes to succeed at SWA, and begins to understand why certain people get rejected instead of having to wonder "why that great guy" got rejected; the bashing will diminish.

As long as SWA's rejection criteria appears to be smoke and mirrors over substance, the rejectees will continue to stir the pot.

 

[Quimby]

Apparently there is a better option for SWA and its investors. Herb Kelleher is now on the board of directors for the federal reserve. Looks like he will be there long enough to protect SWA from a LBO while it buys back its stock. Perhaps the company is being taken private? This will allow SWA to restructure without the use of bankruptcy. I didn't see that coming, I guess that was the secret plan. I have to say their management may be better than I give them credit for.

sounds like you've got it all figured out.

 

[Flopgut]

I am not fond of what deregualtion has done to airline customer expectations. The cost of airline tickets are expected to be the cheapest part of a vacation or business trip. No where in our lives as consumers are we finding a similiar pricing phenomenon except maybe in the cost of food.

Deregulation has produced only one real winner: SWA.

I like SWA people fine for the most part, just frustrated/disapointed about what the company has done.