LUVs take on the AA BK

[fltguymk]

What about preferential bidding? Separate bids for Dom/Int? Prohibiting SA based FA's from operating north of MIA?

Part of the point in the note is that WN is no longer the benchmark being sought...

Preferential bidding is one thing... BUT!! APFA proposed merging Dom and INTL a couple of years ago. Most of the membership wants it. Another example of how our Union was trying to increase our utilization. AA balked and said the APFA had to pay for training all the non over water FA's! Another ex. of how the negotiating team for AA has their heads up their a--!

Uh and NO!!!! We will not allow foreign nationals fly within the US... DUH!!

Very refreshing to have the CEO of Southwest to now claim "they have the industries highest labor rates!"

 

[damajagua]

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Southwest, Eyeing AMR, Fights ‘Cost Enemy’
Q
By Mary Schlangenstein - Dec 6, 2011 12:42 PM ET

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Southwest Airlines Co. (LUV), the biggest fare discounter, said it faces more pressure to trim labor and operating costs since American Airlines joined other larger rivals in using bankruptcy to pare spending.
Southwest’s cost advantage over so-called legacy carriers such as American and Delta Air Lines Inc. has fallen by half and its fares have moved closer to competitors’, Chief Executive Officer Gary Kelly told employees in a memo yesterday. As a result, Dallas-based Southwest faces a more serious threat from now-profitable peers, he said.
With American’s Nov. 29 bankruptcy filing, Southwest is the only major U.S. airline never to have sought court-supervised restructuring. Southwest has relied on higher productivity from its employees and luring more passengers with low fares to sustain its record of 38 consecutive annual profits.
“The sloth-like industry you remember competing against is now officially dead and buried,” Kelly said. “We fought them and we won. Now the enemy is our own cost creep, our own legacy- like productivity and our own inefficiencies. Fighting this cost enemy is an imperative.”
Southwest has the industry’s highest labor rates, and Kelly urged workers to take advantage of opportunities to “improve our productivity, eliminate waste and preserve our pay rates.”
American and parent AMR Corp. (AMR) filed for bankruptcy in part because they failed to negotiate new contracts with employees that would boost productivity and trim labor costs that as a percentage of revenue are the highest in the industry.
Southwest was unchanged at $8.47 at 12:40 p.m. in New York. The shares gained 7.6 percent through yesterday from the day before AMR’s filing.
Not Seeking Concessions
Kelly’s message was in response to questions from employees about how Fort Worth, Texas-bases American’s bankruptcy would affect Southwest and wasn’t a call for concessions from workers, Chief Financial Officer Laura Wright said at a Rodman & Renshaw airlines conference today in Boston.
The CEO’s memo lays out “how important it is for us to retain our spot at the top in terms of low costs,” she said. “That was really kind of the battle cry. I wouldn’t say that there was anything in there that was asking for concessions.”
Southwest is preparing to negotiate new labor contracts as it integrates workers from the May acquisition of AirTran Holdings Inc.
To contact the reporter on this story: Mary Schlangenstein in Dallas at [email protected]

 

[damajagua]

I guess LUV is no longer low cost.
WT was right in his assessment of LUV not being such
a formidable competitor against Delta @ ATL.
AA will come out of bankruptcy ready take on the competition.
AA should emerge from bankruptcy prior to 2014 when
LUV will be able to fly anywhere it wants too from DAL.
AA will be at a more playing field by then and go head to head
to defend its home turf.

 

[WorldTraveler]

I guess LUV is no longer low cost.
WT was right in his assessment of LUV not being such
a formidable competitor against Delta @ ATL.
AA will come out of bankruptcy ready take on the competition.
AA should emerge from bankruptcy prior to 2014 when
LUV will be able to fly anywhere it wants too from DAL.
AA will be at a more playing field by then and go head to head
to defend its home turf.

thank you.
Yes, not only was I right but when WN is faced w the prospect of losing many opportunities to grow that AA has afforded them over the years, they all of a sudden are realizing there are some major changes needed, esp. in light of the Wright Amendment showdown which will be one of the biggest competitive events in the next 5 years of the industry.
Neither can afford to miscalculate and WN has no choice but to position itself to win.
.
Who would have ever thunk we would be seeing a letter like this from WN?

 

[damajagua]

thank you.
Yes, not only was I right but when WN is faced w the prospect of losing many opportunities to grow that AA has afforded them over the years, they all of a sudden are realizing there are some major changes needed, esp. in light of the Wright Amendment showdown which will be one of the biggest competitive events in the next 5 years of the industry.
Neither can afford to miscalculate and WN has no choice but to position itself to win.
.
Who would have ever thunk we would be seeing a letter like this from WN?

I wonder if the will abandon their no bag fee campaign at one point.

 

[signals]

If you read between the lines, Kelly is saying that even WN faces some tough decisions ahead, and will have to do what is required to compete and survive. Although this letter seems to have been timed purposely because of the AA BK, WT has said this all along...but we didn't listen.

So I guess that this is the signing of the Peaceful Coexistance Agreement

 

[WorldTraveler]

If you read between the lines, Kelly is saying that even WN faces some tough decisions ahead, and will have to do what is required to compete and survive. Although this letter seems to have been timed purposely because of the AA BK, WT has said this all along...but we didn't listen.

So I guess that this is the signing of the Peaceful Coexistance Agreement

WN WILL remain competitors to the network carriers but the notion that WN has what it takes to "beat up" any of them is quickly becoming a fable - like what you tell your grandchildren.
WN IS a well-run airline but too many people lived on what WN ONCE did and didn't perceive that the industry was RAPIDLY changing and what WN once did was no longer possible.
.
As for bag fees, many people don't realize that WN already gets a higher percentage of its revenue from ancillary fees than do AA or UA... I believe DL and US get a higher percentage of ancillary revenue to total revenue than WN but the notion that WN doesn't make alot of money on ancillary fees is just not accurate. The DOT reports the percentage of fees and WN is right up there with the best of them....

BTW, Signals, I respect you greatly for being able to admit that someone else did have the facts.... I wouldn't mind getting rid of a boatload of those negative votes that I "earned" for standing up for what I believed.

 

[eolesen]

Uh and NO!!!! We will not allow foreign nationals fly within the US... DUH!!

Not proposing that they do, but there's no good reason a LIM/BOG/wherever based FA work a sequence to PTY, SDQ, PAP, etc... IIRC, they only can do MIA turns to/from their bases. The crew bases there are tied to AA's authority to operate from those countries, so if you can't get rid of them, you might as well get more utilization out of them internationally.

Back to the Kelly letter... I think this will be an interesting time of reckoning for WN. They've always managed to stay innovative, and the employees seem to be up to meeting challenges. Let's see if this was really a shot across the bow as some have said, or just a simple "we have to stay focused on the game" type message.

 

[WorldTraveler]

Not proposing that they do, but there's no good reason a LIM/BOG/wherever based FA work a sequence to PTY, SDQ, PAP, etc... IIRC, they only can do MIA turns to/from their bases. The crew bases there are tied to AA's authority to operate from those countries, so if you can't get rid of them, you might as well get more utilization out of them internationally.

Back to the Kelly letter... I think this will be an interesting time of reckoning for WN. They've always managed to stay innovative, and the employees seem to be up to meeting challenges. Let's see if this was really a shot across the bow as some have said, or just a simple "we have to stay focused on the game" type message.

other airline execs had a few tough words to say at one time and no one listened.... this may not be the final straw for WN employees but the reckoning will come eventually...
given that WN already is fairly efficient and outsources alot of maintenance functions, it will be much harder for them to wring further efficiencies out - and if they do, then the industry itself has a new template they can use for their own improvements.

 

[signals]

WN WILL remain competitors to the network carriers but the notion that WN has what it takes to "beat up" any of them is quickly becoming a fable - like what you tell your grandchildren.
WN IS a well-run airline but too many people lived on what WN ONCE did and didn't perceive that the industry was RAPIDLY changing and what WN once did was no longer possible.
.
As for bag fees, many people don't realize that WN already gets a higher percentage of its revenue from ancillary fees than do AA or UA... I believe DL and US get a higher percentage of ancillary revenue to total revenue than WN but the notion that WN doesn't make alot of money on ancillary fees is just not accurate. The DOT reports the percentage of fees and WN is right up there with the best of them....

BTW, Signals, I respect you greatly for being able to admit that someone else did have the facts.... I wouldn't mind getting rid of a boatload of those negative votes that I "earned" for standing up for what I believed.

OK what's ancillary fees? I always felt that WN charged extra somewhere to make up for low fees.

As far as the ratings-believe it or not, I have been + you for quite awhile

WT, I thought I was your biggest critic. Imagine my surprise to find that I'm at the back of the line that is somewhere in S America! B)

 

[Maark767]

I wonder if the will abandon their no bag fee campaign at one point.

I think its a matter of time.

 

[FWAAA]

As for bag fees, many people don't realize that WN already gets a higher percentage of its revenue from ancillary fees than do AA or UA... I believe DL and US get a higher percentage of ancillary revenue to total revenue than WN but the notion that WN doesn't make alot of money on ancillary fees is just not accurate. The DOT reports the percentage of fees and WN is right up there with the best of them....

Uhh, no. That is not accurate. Many people "don't realize it" because it simply isn't accurate. It's false. WN charges no first or second bag fees (although FL does) but WN does charge for the 3rd or more bag or for overweight or oversized bags. WN charges no change fees. WN's ancillary revenue also includes its early bird boarding fees plus unaccompanied minor and pet fees, all of which are much smaller than the bag fees. For the third quarter, all of those items comprised just 6.5% of passenger revenue, including FL's substantial bag fees. AA's percentage is much higher (Q3 was 11.7%). UA's percentage is also higher than WN's percentage.

BTW, Signals, I respect you greatly for being able to admit that someone else did have the facts.... I wouldn't mind getting rid of a boatload of those negative votes that I "earned" for standing up for what I believed.

Good luck with that. Might help if you didn't authoritatively post false info and then backpedal or fail to own up to it when it's shown to be false.

 

[BoeingBoy]

OK what's ancillary fees? I always felt that WN charged extra somewhere to make up for low fees.

Basically, anything charged passengers except the ticket. "Ancillary revenue includes baggage fees, reservation change fees and miscellaneous operating revenue, including pet transportation, sale of frequent flyer award miles to airline business partners and standby passenger fees. Revenue from seating assignments and on-board sales of food, drink, pillows, blankets, entertainment, or any other ancillary items are reported as Transport Related Revenue and cannot be identified separately."

It's a good example of how statistics can be somewhat misleading. Yes, WN collects a higher percentage of revenue from ancillary fees than some of it's legacy competition, but that's because their revenue (and expenses) are lower than some of their legacy competition due to charging "reasonable" fares and having a more efficient operation. For example, WN collected $202 million in ancillary fees in the 2nd quarter, 4th highest behind DL, AA, & US. But it's operating revenue was lower than all three, considerably lower than DL & AA. 1 is a larger percentage of 4 than 2 is of 10, but 2 is still larger than 1 no matter how you spin it.

Take an extreme example - Spirit. They were #7 in ancillary fees collected with only $42 million - well under 10% of what DL collected ($681 million), behind all but FL, AS, & B6. But because they aren't that big and charge low fares, they were #1 in ancillary fees as a percentage of revenue.

In other words, that ancillary fees as a percentage of operating revenue is affected by 2 things, not just the amount of ancillary revenue collected but also by operating income. So it says nothing special without looking at the big picture - both numbers. Somewhere there's a statistic to "prove" almost anything...

Jim

 

[NYCDelta]

Yes, WN collects a higher percentage of revenue from ancillary fees than some of it's legacy competition, but that's because their revenue (and expenses) are lower than some of their legacy competition due to charging "reasonable" fares and having a more efficient operation.
Jim

Unfortunately, WN doesn't always have "reasonable" fares out of Chicago. When I take vacations, I always buy a confirmed ticket and have only had the pleasure of flying WN once. AA & UA have always been cheaper out of ORD when I needed to travel.
Having said that, the one time I did fly WN I paid the extra $10 for early boarding and it was well worth it. The plane was clean, the crew professional, and we arrived on time with our baggage. I was quite impressed.

 

[BoeingBoy]

Unfortunately, WN doesn't always have "reasonable" fares out of Chicago. When I take vacations, I always buy a confirmed ticket and have only had the pleasure of flying WN once. AA & UA have always been cheaper out of ORD when I needed to travel.

The same is true for a lot of places and most legacy competitors, although with "reasonable" you have to ask "Compared to what?" The question I always have when this comes up is "What are carriers with higher costs than WN doing charging lower fares than WN?" Competition means the legacies have to match the lowest WN fare, but undercut WN?

Of course, at the other end of the fare structure - the highest fare end - WN can be a lot less than it's legacy competition. Right now, with a two-week advance and traveling on Saturday, the highest WN coach fare RDU-LAX is $497 one-way. US is charging as much as $2310, UA $1440, AA $1302, DL $1014. That's what pays for those "less than WN" fares.

Jim