SWA CEO Pleased with 2.6 pct Nov to Nov Growth in RPMs


#1

Can someone explain to me how CEO Kelly can be “pleased” with 2.6 percent growth in Revenue Passenger Mileage while is Available Seat Mileage grew 6.4 percent on a November-to-November basis? The load factor for Nov '07 fell below 70 percent. It is my opinion that the initial
reaction to the Business Select, Freedom Awards, A-List, et al, as a result of their traffic report was negative. How can he be “pleased”?


#2

How does this compare to the rest of the industry?


#3

he’s pleased because SWA is an upbeat airline who can’t smell their own rear end burning from the flame thrower of declining margins as they are forced to grow into markets that aren’t profitable due to poor decisions made years ago where they over-ordered on new aircraft.


#4

Do tell!


#5

I don’t think they over-ordered. If anything, they under-ordered. Southwest has been looking for 737’s from sources other than Boeing because Boeing can’t produce them fast enough.

The above explains these two aircraft:
airliners.net/open.file/1195463/M/
airliners.net/open.file/1276861/M/
Southwest Blog


#6

I don’t think 2 aircraft denotes a trend.

You also don’t know if on the back end SWA will re-assign some of their deliveries to the company they may be leasing those two aircraft from (used aircraft now for new aircraft later).

I think the numbers bear it out that SWA is growing at the expense of margins, which are already poor and getting worse. There simply isn’t a lot of money to be made flying 150 seat jets JAX-BNA or PDX-ABQ, routes that rack up the ASM’s but either under-perform in yield or load factor.


#7

At the time, it did. Unfortunately, I can’t find the article now but one of the reasons for purchasing the two Ford aircraft was due to a lack of aircraft available elsewhere.

I have since learned that, according to the Dallas Business Journal of a few days ago, that Southwest has decided to buy 5-10 rather than 34 new aircraft in 2008.

(Using the word “buy,” I wonder if they mean actually purchase (i.e. sign the check) the aircraft or take delivery of the aircraft in 2008.)


#8

So are they so cheap they coverd most of the foreign reg, saved the ‘V’ and turned it into N271LV? I like it!!!

Found this one linked off the blog… One of these things doesn’t go with the other one…


#9

Not really. Many companies register their aircraft in Bermuda, Cayman Islands, and other companies for tax purposes. In other words, it was Ford who was the cheap one, not Southwest. Regardless of company size, the cost to register an aircraft is just a few dollars while the taxes imposed by governments is high.


#10

The vast majority of SW’s margin decline is due to the expiration of their forward fuel contracts. They locked in fuel prices a few years ago by using options and have paying ‘old’ fuel prices until recently. However, all good things must end and they are now paying closer to market rates like everyone else.


#11

Heh heh, tried this trick with my local FBO, when prices were down, thought maybe I could buy a couple 100 gallons of fuel and “run a tab” on my purchase.

No joy.

Allen


#12

Exactly, that’s why nobody noticed their weak yield. Their fuel costs were so low they didn’t need strong yield to make good profits. Now they do but they’re not getting them. They’re either going to have to cut capacity in pure number of flights or acquire an aircraft in the 90-110 seat class and downgrade flights to that. The other alternative would be to completely cut out parts of their network.


#13

Not really. Many companies register their aircraft in Bermuda, Cayman Islands, and other companies for tax purposes. In other words, it was Ford who was the cheap one, not Southwest. Regardless of company size, the cost to register an aircraft is just a few dollars while the taxes imposed by governments is high.



#14


???
???
???
What’s the point???
It’s not being cheap, it’s being frugal.