1st Q Numbers look great!

[WNMECH]

Nope, I don't think there will be pay cuts coming... but WN's unions had best realign their expectations with the reality of the industry which is that WN employees are extraordinarily high paid compared to their peers and WN is not generating the growth to bring in new employees at lower wage rates.The fact that they cannot remain as highly paid as they are today does not mean that things will get fixed tomorrow... but there will be a rebalancing of labor costs compared to the market.That may mean that WN will continue to drag out negotiations because they have no intention of giving out pay raises. As pay raises come at other airlines, WN's current wage rates will become inline with the industry again.in the meantime, the profit sharing checks should be very large. enjoy them.

You said "WN employees simply CANNOT remain as highly paid as they are today".

That means they will be paid less.

 

[WorldTraveler]

relative to their peers, that will happen.

but not necessarily tomorrow.

the readjustment will take time; for now, WN has it.

they got a nice bump in revenues by eliminating FL as a low cost competitor. The DCA and DAL flying will push yields up which gives them breathing room. Adding Latin flying will also generate higher yields than domestic options.

all of those are revenue growth strategies.

WN might well continue to accept well above average paid employees while flying directly competitive against legacy carriers in markets where their employees make less and WN cannot be as productive as they were with 20 minute turns years ago.

The 40-50% premium that WN employees make on average relative to their legacy peers, again on average, is not sustainable.

Feel free to negotiate that point with the company. I'm just telling you the reality that they are working from - whether they tell you or not.

 

[WNMECH]

The reality is that SWA is leaving hundreds of millions of dollars per year on table by not charging for bags.

There is more than enough money there to fund lavish raises on employees if the company wanted to.

If the going ever gets rough, SWA will take in a huge windfall by charging for bags just like everyone else. This company is not hurting and has plenty of reserve, no matter what you wish to believe.

Just wait till you see the profit sharing checks then.

 

[WorldTraveler]

I am far from disagreeing with you about the bag fees.

WN mgmt. has decided they don't want to abandon their current strategy.

Given that they are absorbing FL and will be soon aggressively expanding into Lstin America I can see why they believe they have an advantage that will be useful as they enter those markets.

I have no idea how many passengers choose WN because of the lack of bag fees. There are people who will leave WN if they charge for bags; that is just economic reality. WN mgmt. has probably also modeled what that is worth.

In the end, I totally agree that WN should go after the revenue that they can... but if they take one more step to look just like other legacy carriers, then it becomes harder and harder to justify salaries that are well above legacy levels.

My guess is WN will drag out changes about bag fees along with settling any contracts.

Obviously, if you guys can get contracts closed with decent raises, it is good for everyone.

 

[swamt]

DL set reasonable estimates; when you are honest with Wall Street, there aren't surprises up or down with what you report.

You continue to think that because WN will report strong earnings, the employees of WN are entitled to pay raises; given that WN employees are the highest paid in the industry, you will find that the company is in the process of breaking those expectations. And they will drag out the process as long as it takes for them to reset expectations about the kinds of pay levels that WN employees will get in light of the competitive environment.

WN employees simply CANNOT remain as highly paid as they are today when they are competing in many of the same markets, using the same aircraft, and generating similar levels of productivity as their peers elsewhere.

As for retro, that is precisely where I can assure you that unions have repeatedly shot themselves in the foot.

Shoot for it but don't be surprised if the company puts you in a waiting game to make their point that they will do things on their terms.

WT, go away this does not concern you...

 

[swamt]

The reality is that SWA is leaving hundreds of millions of dollars per year on table by not charging for bags.

There is more than enough money there to fund lavish raises on employees if the company wanted to.

If the going ever gets rough, SWA will take in a huge windfall by charging for bags just like everyone else. This company is not hurting and has plenty of reserve, no matter what you wish to believe.

Just wait till you see the profit sharing checks then.

Trust me WN, stop entertaining him.  If he was a "true" union activist he would not be on here voicing that a co should, would or could come down on the employees.  He's just trying to interject complete negative input into the SWA current position to try and make Delta look better.  He is obviously not a true union person.  He is always condoning how the co's should react against the unions at all the airlines.  His agenda is further out there than we all know...

 

[700UW]

swamt,
 
Worldtravler is not a union person, he hates unions, what are you talking about?

 

[WorldTraveler]

Trust me WN, stop entertaining him.  If he was a "true" union activist he would not be on here voicing that a co should, would or could come down on the employees.  He's just trying to interject complete negative input into the SWA current position to try and make Delta look better.  He is obviously not a true union person.  He is always condoning how the co's should react against the unions at all the airlines.  His agenda is further out there than we all know...

If telling you the economic reality makes me a union hater, then you have a tough road ahead of you because the company and any mediators you face will say the very same thing.

WN has done a great job of building a strong business. One of those strategies involved paying its employees handsomely.

WN spent the period when the legacies were pinned against the wall in BK throwing even more money to WN employees and part of that was subsidized by fuel hedge gains that masked the reality of the market.

those hedge gains are gone now, WN is having to grow into the same congested, highly competitive markets the legacies have served for years, and it is highly unlikely that WN will receive the long term revenue premiums that came from dominating markets that WN was able to do for years.

WN's employee fortunes are absolutely tied to the company's ability to generate revenue premiums to the industry.

WN cannot continue to pay employees 40-50% more than what legacy carrier employees make.

It will take time to unwind the expectations that WN employees have regarding such high compensation but the company clearly isn't afraid to wait them out - and they aren't going to provide retro pay that will cover the cost of what they could have paid in the past

feel free to let me know when WN gets those pay raises that result in the same types of cost increases - which come not just from salary increases but also increases in the overall seniority of the workforce and productivity.

It is virtually a certainty that the growth in compensation in WN's average employee of more than 12% in 2013 will be the last time that happens in a real long time. .

 

[WNMECH]

WN operates with less employees per A/C than any of the legacies.
As long as WN employees do more with less people, they can be paid that 40-50% premium without any harm to the company bottom line.

 

[WNMECH]

http://finance.yahoo.com/news/southwest-reports-record-profit-465m-131103693.html?.tsrc=applewf

Record profits.

 

[WNMECH]

Free money for employees.

ROIC at 17.1 %

http://finance.yahoo.com/news/southwest-airlines-recognizes-employees-cash-132000064.html?.tsrc=applewf

 

[WorldTraveler]

WN operates with less employees per A/C than any of the legacies.
As long as WN employees do more with less people, they can be paid that 40-50% premium without any harm to the company bottom line.

yes, that is right. And WN achieves part of that by outsourcing more maintenance than any of the legacies - US included.

It will get harder and harder for WN to beat the legacies when they fly longer routes.

Free money for employees.

ROIC at 17.1 %

http://finance.yahoo.com/news/southwest-airlines-recognizes-employees-cash-132000064.html?.tsrc=applewf

extra 200 bucks along with the profit sharing you already got.

swamt is happy.. you made the goal.

congrats.

 

[robbedagain]

congrats to all of the hard working efforts of the employees at SWA!

 

[WNMECH]

yes, that is right. And WN achieves part of that by outsourcing more maintenance than any of the legacies - US included.It will get harder and harder for WN to beat the legacies when they fly longer routes.extra 200 bucks along with the profit sharing you already got.swamt is happy.. you made the goal.congrats.

You will recall Gary Kelly said growth would remain flat until we reach 15% ROIC.

If we maintain this rate, we will be back in growth mode, ordering more 737-MAX and expanding all over.

 

[WorldTraveler]

and that would indeed help bring WN's costs down.

What was WN's guidance regarding growth for later in the year?