Southwest Airlines CEO Gary Kelly lays groundwork for future growth

[swamt]

it's a given that it will require an act of Congress... the question is whether lawmakers can show that N. Texas is better off expanding int'l services from N. Texas or protecting a single airport.

Of course there are clearly two camps as to how the domestic expansion after Wright will play out but I fully expect that WN will make every effort to show its value... Virgin gives extra reason to ensure that pricing is very competitive.

I have less belief that WN will win over the right to expand the terminal but adding int'l flights using the same aircraft has little impact on the communities.

it will take years for the process to play out and it is doubtful that WN will make any move until they are well into a year of expanded operations at DAL.

And of course opening or reopening Pandora's box is exactly what WN wants to do - after they lock up all of the gates that are currently available.

I agree with your assumption.  But I think it would be longer than 1 year.   I could also see just an amendment of some sort where SWA could get it changed to open international gates at DFW without giving up any gates at LF, sort of another compromise if you will...

 

[FWAAA]

I agree with your assumption.  But I think it would be longer than 1 year.   I could also see just an amendment of some sort where SWA could get it changed to open international gates at DFW without giving up any gates at LF, sort of another compromise if you will...

The settlement agreement (the Five-Party Agreement) requires unanimous approval (of all the parties) to change.  So what do you suppose AA and Fort Worth and DFW Airport would demand from WN and the City of Dallas to give their consent to such a change?   
 
I realize that you're happy that WN will finally be permitted to fly beyond the Wright Amendment perimeter, but IMO,  there is no way that AA, Fort Worth and DFW Airport are going to entertain any changes to that Agreement for quite a long time.    WN can fly nonstop international flights from HOU and FLL (or any other big city gateway).   Just not Dallas Love Field.   And if those three parties would be willing to allow WN to fly some international flights, my guess is that the price they would demand would be far more than WN would be willing to pay.  
 
Yes, it could happen.   There's space for expansion.   It's just very unlikely to happen.   About as likely as blue, brown and orange 777s with 375 crappy (d)Evolve seats flying across the oceans in our lifetimes.
 
I'm guessing that Gary Kelly is more than content to spend the next few years building up DAL to the 250 daily domestic departures that you predicted a few months ago.  WN has proven that its passengers are more than willing to endure multiple stops on short hops to get where they're going (to save a few dollars) and I'm confident that leisure passengers will put with a stop at HOU on their way to/from Cancun and other former FL international destinations.  

 

[swamt]

I have already stated it would be years, IF, it would even happen.  Like I have said before (as well as you have too)  SWA may be very content with what they have once they start seeing the results.  Instead of sinking more money into fighting they could very well be ok with HOU being big international and connecting DAL to HOU.

 

[swamt]

More growth coming.  And you think that 15% ROIC or better is not at the top of the list?  
LUV seeing that we will be the 2nd largest at Washington so soon.  Also LUV seeing DAL will end up being larger than originally announced.  Mr. E was right on about the most pressure over the next few years will be on AA with the DAL and Washington growth by SWA.   LUV reading all the good news for the airline industry for a change.  One article posted that SWA is looking at new high stock to reach $32 per share, that would be fantastic if it hit it.  Here's the growth article:
 

Southwest Airlines Co. Is About to Hit a Major Milestone (LUV)

 

[eolesen]

I think you're putting too much faith into Adam Levine-Weinberg's analysis. His degrees are in political science, not finance or economics.

 

[WorldTraveler]

More growth coming.  And you think that 15% ROIC or better is not at the top of the list?  
LUV seeing that we will be the 2nd largest at Washington so soon.  Also LUV seeing DAL will end up being larger than originally announced.  Mr. E was right on about the most pressure over the next few years will be on AA with the DAL and Washington growth by SWA.   LUV reading all the good news for the airline industry for a change.  One article posted that SWA is looking at new high stock to reach $32 per share, that would be fantastic if it hit it.  Here's the growth article:
 
Southwest Airlines Co. Is About to Hit a Major Milestone (LUV)

actually, if the E you are referring to is the forums user who posted in this thread, he has steadfastly maintained that DAL would have little affect on AA and that DAL is really too small of an operation to have much of an impact on the N. Texas market.

I am the one who has repeatedly said that DAL and DCA would be a huge opportunity for WN -but because you are fixated on trying to prove me wrong, you have missed all of that.

LUV is doing well because the entire industry is doing well, because WN is starting service in a number of high profile markets where yields have long been high, and because WN is pushing its costs down by using bigger aircraft.

Problem is that you can't admit that those bigger aircraft make a lot of routes to smaller cities no longer viable or if they remain, they will be at frequencies far below what business people will accept.

WN is cutting frequencies in dozens of markets including in ATL where adding 30 more seats to the aircraft will do nothing to convince business people to fly with them but eliminating a frequency or two in a market will make their schedule much less viable.

And as much as you want to believe otherwise, service that is cut won't come back in the future.

WN will do well but you can't seem to accept that they are walking away from key parts of what built them, they are stretched very thin trying to serve too many markets, and they don't have the cost advantage to push against the legacy carriers that they once had.

 

[eolesen]

http://crankyflier.com/2014/05/27/pondering-southwests-big-schedule-change-for-dallas-washington-and-airtran/

A little more color on WN's upcoming schedule change, and a very good analysis on the larger impact in Washington. If you ask me, the strategy at DCA/IAD/BWI is going to be far more successful than what they're doing in DAL.

DAL is pretty much symbolic. And no, I don't think it is going to be nearly the panacea that so many think it will be. My guess is VX will start to pull back after 18-24 months, and WN still needs to do something other than simply being half-pregnant in some of those markets (e.g. SNA and FLL). They're going to have to drop a few more frequencies in some markets, or simply decide not to serve some of them at all (personally, I see TPA and BNA as a waste of gate time).

WAS, however, will be more fun to watch. Aside from DCA, they don't have any handcuffs on the number of gates or flights they can pump thru there, and I suspect they're probably not even close to done buying or lease slots at DCA.

UA's getting hit pretty well from all sides; they're losing US's flyers and Star Alliance feed (not insignificant at IAD), they've got F9 throwing in nuisance markets at DEN and now IAD, AA seems to be hitting on all cylinders for the time being, and UA's labor unions just don't seem interested in doing Smisek any favors after almost four years without any significant progress on an integration.

At the risk of mentioning them, I'm somewhat surprised DL is spending this much time attacking AS in SEA -- they would be better served looking to take on UA while they're down.

 

[swamt]

actually, if the E you are referring to is the forums user who posted in this thread, he has steadfastly maintained that DAL would have little affect on AA and that DAL is really too small of an operation to have much of an impact on the N. Texas market.

I am the one who has repeatedly said that DAL and DCA would be a huge opportunity for WN -but because you are fixated on trying to prove me wrong, you have missed all of that.

LUV is doing well because the entire industry is doing well, because WN is starting service in a number of high profile markets where yields have long been high, and because WN is pushing its costs down by using bigger aircraft.

Problem is that you can't admit that those bigger aircraft make a lot of routes to smaller cities no longer viable or if they remain, they will be at frequencies far below what business people will accept.

WN is cutting frequencies in dozens of markets including in ATL where adding 30 more seats to the aircraft will do nothing to convince business people to fly with them but eliminating a frequency or two in a market will make their schedule much less viable.

And as much as you want to believe otherwise, service that is cut won't come back in the future.

WN will do well but you can't seem to accept that they are walking away from key parts of what built them, they are stretched very thin trying to serve too many markets, and they don't have the cost advantage to push against the legacy carriers that they once had.

Sorry bout that WT.  I thought it was E that posted the most disruption to AA in the local N. Tx. market, my bad.  Over the next few years will be very interesting. Now it seems the analyst are looking at UAL to be the worst hit, overall, rather than AA, but not just in the N. Tx market.  
I have always said that SWA will in fact change their schedules and flights to adjust for the W/A repeal.  I also said they will cut flights from the smaller markets, or better yet, the less profitable routes in order to expand the Dallas market, post W/A.  The reason they have to do so is because Boeing cannot provide enough aircraft for the growth that SWA wants to do.  This is why SWA is looking at any and all used aircraft right now.  It's not that SWA doesn't have the cost advantage, as we all know they do, but they do not have enough aircraft to expand even further, or quicker.  What SWA has as a disadvantage against the legacies is a single class cabin, that's all.  With VA coming to LF and offering the 3 classes of seating, coach, bis, and first class is in fact an advantage to what SWA offers out of LF.  VA does offer a very good product.  Once again it will get very interesting...

 

[WorldTraveler]

and yet WN has long been able to grow WAS via BWI so they are clearly maxed out.

Further, the DOJ argued, supported by many people here, that BWI is not the same market as DCA. That was the whole basis for giving them all of the slots.

Toss BWI out of the mix so that what WN does there doesn't matter.

WN will have about 11-12% of the seats at DCA and a token presence at IAD.

As for DL and the west coast and AS, DL's growth IS focused on UA. DL opportunistically has grown its network in key industry markets relative to AA and UA: AA has been the target of most of DL's NYC growth. The west coast is coming at the expense of UA's dominant position.

DL was going to grow int'l from the west coast without adding its own domestic flights but AS wasn't interested in supporting DL's growth. So AS is now paying for their decision to not make domestic seats available. UA was always the target and still is.

And, no, swamt, WN does not have a cost advantage. DL and UA have a bigger cost advantage relative to UA as WN has to AA and DL. WN's cost advantage relative to AA and DL- which is less than 2% between the two - is less than 5%.

WN simply is not going to move the market with that level of cost difference.

WN's growth relative to AA is coming by going into markets where WN has a structural advantage and from which AA cannot respond - that is the essence of what DAL and DCA are - restricted access, high value markets which AA cannot defend.
Ironically, that has been the basis of AA's network strength for years. DFW, LHR, and much of Latin America have been limited access markets for years where AA has had a structural advantage that other carriers could not challenge.

IN all three major areas, other carriers are attacking AA's strengths. But in WN's case they are using the same strategy that AA used to gain so much of AA's own network strength.

 

[MCI transplant]

Any word of WN going to Porto Rico, or the U.S. Virgin Islands?

 

[SharoninSAT]

Any word of WN going to Porto Rico, or the U.S. Virgin Islands?

 
WN service to San Juan (SJU) began Apr. 14, 2013.
No word on service to the U.S. Virgin Islands.

 

[MCI transplant]

Thank you sir!-------The islands of ST.Thomas, St. Croix, and St. John, are all just a short flight from SJU!