Southwest declining, JetBlue on the rise
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ELP_WN_Psgr
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I don't think so.
The article is almost 4 months old.
But here's the real deal.
Southwest has a mature labor force with much higher labor costs than JetBlue.
Ex-fuel, JetBlue has about a 1 cent CASM advantage.
Until you correct that for average stage length.
JetBlue's ultra-low CASM has been achieved with an average stage length of roughly 1300 miles, over twice that of Southwest (617 miles, IIRC).
Once you correct for the average stage length, Southwest enjoys an advantage DESPITE higher labor costs.
You cannot say enough about the advantage the single fleet type gives Southwest.
Neeleman felt he was smarter than the guys in Dallas, now he owns two foreign aircraft models....the Airbus, which is a decent enough aircraft although I've had a whole lot of A&P mechanics tell me it isn't built to last as long as a Boeing (which probably means minimal residual value at the end of the service life, which probably means JetBlue ought to be depreciating them a little bit steeper than they are, which means their costs are higher than they report)...and the Embraer 190...which some people call the 180 since it taxiies out to the active, does a 180, and returns to the gate.
JetBlue has admitted the Embraer's will be more expensive to operate than their Airbus, which will raise their CASM. Having two feet types complicates everything, and in trying to cut costs, simplicity is everything.
Remember now, I am talking about CASM ex-fuel. When you throw fuel into the equation, the guys from Dallas have a significant advantage.
So while Southwest's fuel hedges dwinde to nothing over the next 3 or 4 years, JetBlue's fleet ages...requiring maintenance that they have heretofore not really had to deal with. Their workforce are going to wonder when they should expect a bigger slice of the pie....sooner or later, most airline employees are going to want to quit being at will employees and are going to look to collective bargaining. JetBlue's labor costs will rise. Pilots on the Embraer are going to want to upgrade to the Airbus and that will require training which is going to cost money....then the First Officer on the Airbus is going to want to step down and be a Captain on the Embraer and that is going to require training yada yada yada.
Bottom line...neither carrier is doomed, but JetBlue has a lot of work to do if they hope to emulate the past, present and future success of Southwest Airlines Co.
ELP
Excellent post!
ELP
Excellent post!
ELP,
Thank you for the informative answer. I understand the article better now.
While SWA has passed Econ 101. Their physics class marks have been less than stellar. Perhaps some detention will improve the performance in the future.
Also, don't forget the citizenship award they missed out on for the failure meet dress code while in class.
Finally with the SWA being graded on the curve (hedges) it does make them look alot better than the other students. Take away the curve and perhaps their grades would probably get them kicked off the football team.
Thanks again for entertaining us with your (consistently) "glass-half-empty" perspective, Mag.
wnbubbleboy
Veteran
Here's an example of the return on our "Mature" work force.
At Southwest we have executed BIG savings in warranty costs for aircraft parts which is a TEAM effort from our warranty people to the mechanic's installing these items. There is a vested interest in saving the company money.
For example, tray table latches we get by the hunderds each month here in BWI alone. They are covered under warrenty unit for unit that we send back. The cost of each latch is $24.00 belived it or not. They could be easily trashed by the mechanics as they walk from the airplane but they get them back to us for the company's benifit.
These "Oldtimers" know bottom line costs are shared by us all.
At Southwest we have executed BIG savings in warranty costs for aircraft parts which is a TEAM effort from our warranty people to the mechanic's installing these items. There is a vested interest in saving the company money.
For example, tray table latches we get by the hunderds each month here in BWI alone. They are covered under warrenty unit for unit that we send back. The cost of each latch is $24.00 belived it or not. They could be easily trashed by the mechanics as they walk from the airplane but they get them back to us for the company's benifit.
These "Oldtimers" know bottom line costs are shared by us all.
Step one: Insert shoe in mouth
Step two: chew
2Q profits on LUV Doubled
Step three: dont choke..
magsau,
Dont hate the player, hate the game dude. Southwest cant help it if UAL offers an inferior product even after 2 years of BK.
Your right. We can not get ourselves to sink low enough in the food chain to compete for those SWA people. I suppose we all have standards. The Street Walker Airlines is really classy. Perhaps you could become the offical airline of clear heels? Maybe have some ticket promotion tied to the number of tattoos a person has?
lowfareair
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...but I guess your airline can sink low enough to hire people who cannot tell the difference between 'your' and 'you're'?
Just remember that the airline who apparently doesn't need those people had a $400 million dollar smaller pre-tax profit than the airline that enjoyed one of its best quarters ever. I bet it would be even more interesting to compare the RASMs for both when UAUA releases full earnings in a week.
ELP_WN_Psgr
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I am not sure what good, if any, the "my airline is bigger than your airline" arguments ever do.
Back arond 1998 or 1999 there were a lot of people on similar message boards denigrating Southwest for not making anywhere near as large a profit as the Americans and Uniteds and Deltas of this world.
But let's stop and think about thisd rationally, if we can.
Regardless of how much profit United made.
Southwest made a profit this past quarter. A healthy one.
They made that profit the old fashioned way - they earned it.
They were able to balance the books and come out ahead without balancing them on the backs of their labor. Back then all the other airline employees were ridiculing the Southwest folks for working too cheaply. The Southwest folks, by and large, were reasonable happy working for a company that paid them well, if not extravagantly, and had never laid anyone off.
United...heck, many of the legacy carriers...have laid off bunches of people, chopped wages for those who remain, and have dumped their pension plans into the government's lap. Which means....they dumped their pension plan liabilities into the taxpayers' laps.
Southwest's model is all based on making money without squeezing it all from passengers who have few options. United doesn't get away with milking folks for all they are worth quite like they used to...but they still charge domestic walk up passengers more than $329 or so one way for a transcon.
So United made money this quarter. Good deal. I hate having to pay the pension default via my taxes but oh well. But a quarter or two of profit is nothing to really brag about. Come see me when you have reeled off 33 consecutive profitable years or 50 consecutive profitable quarters. Then we'll talk.
