Herb Kelleher On Phl Entry

[BoeingBoy]

Excerpted from interview with Herb by Business Week - Jim

--------------------------------------------

Q: The next big thing on your agenda sounds like a move into the Philadelphia market.

A: Love cheese steaks, Mark. I love cheese steaks!

Q: The major carriers that are entrenched there are going to try to come at you with discount fares and all kinds of things that they don't usually do. What's your gameplan?

A: First of all, low costs are very important, but if you don't have a lot of capital, you can't fight a war of attrition. And we're the strongest airline in the industry financially. So if somebody wants to charge the same fares as we do with higher costs and lose money, that's fine. If they want to fight a war, we're ready to go 2 years or 5 years or 10 years -- whatever it takes -- in order to be successful.

 

[delldude]

who was it...marie antionette who said..
let them eat steak,let it be philly steak and cheese

 

[etops1]

screw wn. they don't know what they are getting themselves into by going into phl. there time will come. all good things must come to an end. this low cost mania to shall past.

 

[4merresrat]

Yes, this is obviously the time to take a stand. If we let them encroach here, we are done for , they can go anywhere. No matter what the cost, we must stand up and fight, not like BWI. This is BIG. We will see what dave does, or doesn't do. Should be interesting. Ole Herb's "whatever it takes -5 or 10 years." Sounds like a challenge, or a bluff............................

 

[Bear96]

But Herb is right.

You can talk big all you want to, but if fares go down (and they will) to a level where WN can make a profit and U is still losing its shirt, it is only a matter of time.

And etops1... "this low cost mania too shall pass?" Where have you been? The American public thinks it is their Constitutional / God-given right to have low fares, even if is built on the backs of airline employees. It's the continued Walmartization of America. This "mania" ain't going anywhere!

 

[4merresrat]

But Herb is right.

You can talk big all you want to, but if fares go down (and they will) to a level where WN can make a profit and U is still losing its shirt, it is only a matter of time.

And etops1... "this low cost mania too shall pass?" Where have you been? The American public thinks it is their Constitutional / God-given right to have low fares, even if is built on the backs of airline employees. It's the continued Walmartization of America. This "mania" ain't going anywhere!

Well put, exactly, the general public does believe it is their right to travel, and if not free, well, then cheaply, and how dare a company try and make a profit. It has gotten WAY outta control. THe only way I can see it ending is if an airline or two goes out of business and gets the seat capacity in line. But hopefully not US!

 

[fatburger]

This is the end.............

UAIR management does not have the brain matter to compete with LUV. These bright individuals just brought the fight to their own backyard. Replace senior management right now or EVERY employee needs to start to prepare for a back up plan of life without UAIR.

-fatburger-

 

[4merresrat]

Why so glum? No need to give up yet. What's the harm in standing and fighting? It can't hurt, and who knows, maybe we will end up on top, maybe dave has a plan up his sleeve, maybe his background at CO will help. Maybe he is strategizing as we speak...... All's we can do is HOPE and PRAY!

 

[jack mama]

You can read the 3 part article here:
BW online

Once again, Herb is drilling the fact that his employees and his people are his biggest asset and they make all the difference. Lucky for them that profit sharing has made up for the 25% pay cuts and looser work rules. But I do think he is wrong in saying that hub and spoke with never work. Like we all know, LUV will never be able to serve the small and mid size cities point to point...in fact they already hub over 50% of their flights. Siegel had the figures on one of those weekly meesages.

I wonder if our profit sharing will ever amount to anything....

 

[robbedagain]

I would think that if US now lowered fares to the same cities as that WN will fly from PHL to, then at least we'd have a head start and see how WN would react to that.

 

[shaka]

Unfortunately Dave can not lower the fares right now, he needs all the cash he can gather before Herb invades in May. Herb's pockets are much deeper than Dave's and he can bleed cash for a long time, Dave can not.

 

[BoeingBoy]

Jack Mama,

"in fact they already hub over 50% of their flights. Siegel had the figures on one of those weekly meesages."

Southwest does not hub in the sense that the network carriers do. Try finding a connecting flight thru their web-site - you can't. Yes, you can build your own connection but you can't buy a ticket for say ALB to PHX. You buy two tickets - one from ALB to a "focus" city and another from the "focus" city to PHX.

Southwest's focus cities are rolling hubs taken to the extreme of not even offering connections. More misinformation from the top.

PineyBob,

"in my mind victory is NOT a slam dunk for SWA."

If "victory" for SWA is driving U out of PHL, you're right - though U has to implement many structural changes to survive at all (not just in PHL). However, if "victory" for SWA is a growing presence at PHL, then they may score even if it's not with a slam dunk.

Jim

 

[bwipilot]

I'd be even more succinct to say that SWA's determination of victory is to simply make a profit. SWA may not kick U's butt in the battle for PHL passengers, but will probably do very well with passengers from MDW, MCO, TPA, LAS, PHX and other cities where SWA has a large presence. Those passengers have often flown into BWI and driven up to Philly/NJ/DE. Been asked many times when SWA would fly to PHL before it was announced. Didn't think SWA would do it. Thought Charlotte, PIT, MSP were before PHL. SWA doesn't define success as driving an airline from an airport--just making money with every new station/plane/flight. Often SWA comes into an airport and the original airlines keep the same numbers of pax. SWA just drives the number of passengers in/out of the airport through the roof. An example would be Providence. Admittedly, PHL is U's big hub and hence a lot more is at stake. Good luck to U--too many friends to see the ship sink.

 

[4merresrat]

Even if the worst scenario occurs and WN triumps in PHL, I hope we atleast cause some major damage to their bottom line, I hope we hurt ole Herb where it counts in his pocket book, atleast we can send their profits plunging!!

 

[TomBascom]

But Herb is right.

You can talk big all you want to, but if fares go down (and they will) to a level where WN can make a profit and U is still losing its shirt, it is only a matter of time.

And etops1... "this low cost mania too shall pass?" Where have you been? The American public thinks it is their Constitutional / God-given right to have low fares, even if is built on the backs of airline employees. It's the continued Walmartization of America. This "mania" ain't going anywhere!

Well put, exactly, the general public does believe it is their right to travel, and if not free, well, then cheaply, and how dare a company try and make a profit. It has gotten WAY outta control. THe only way I can see it ending is if an airline or two goes out of business and gets the seat capacity in line. But hopefully not US!

"How dare a company try and make a profit?"

You might want to think about that -- SW is all about being profitable.

"The public", business travelers in particular, are simply tired of being arrogantly gouged. "If I say it's $1,900 to SFO and you need to be there tomorrow then you'll pay $1,900" and all that bull. It doesn't take a degree in rocket science to recognize this stuff.

We've got nothing against profits. Most of us out here in "the public" recognize the need to make a profit just as we recognize the need for a fair and livable wage.

The problem with US Airways is that the company has never understood how to make a profit the old fashioned way -- by having a viable business. They have essentially counted on "business travelers" to be unwillingly to admit to seeing what was going on all around them. For a while it was a cozy arrangement -- business travelers got some nice "perks" and willingly participated in the myth that SW wasn't a "business" airline. Then US and their legacy friends started pushing the envelope while putting the screws on business travelers -- more and more restrictions, higher and higher fares, fewer and fewer perks. Meanwhile the business travelers customer's (who ultimately pay the bills) are starting to question costs as they become aware of and gain insight into their supply chains -- why are you billing me $2,000 for this trip? Suddenly the deal isn't so good... It's not so easy to wink and say "SW isn't a business airline" to the bean-counter in the customer's accounting department. Especially when the conversation happens in the boardroom.

What, exactly, is US (or any legacy carrier) offering that SW doesn't? The list is very, very short and not at all convincing. And the list of things that SW does better is pretty impressive to a customer. The lack of sufficient positive differentiation (at any price point ) is what has brought the problem about and unless it is addressed it will ultimately doom the airline. The surplus negative differentiation will only hasten the downfall.

That has to change fast. A lot of "sacred cows" are going to have to go away for it to happen. There is nothing special about the backs of airline employees -- you all put your shirts on just the same as I do and you have no more of a target painted on your shirt than I do mine (which is to say that we all have a target on us when it comes to watching costs...)

And another thing... the only "excess capacity" that this industry suffers from is an excess of over-priced and overly-restricted walk-up fares. Those of you who buy into that and this balogna about the public only caring about fares are drinking management kool-aid that only serves to strengthen their case against labor costs.