Southwest Mortgages 21 Planes

[BuffaloJoe]

Southwest Mortgages 21 Boeing 737-700's

Gambling or Smart Move?

 

[HPMGR1]

A brilliant move more than likely. WN isn't well known for making big mistakes. Yes, It bolsters their cash position, but highly doubtful that was their single intent. With the credit rating and the aircraft to boot, I would bet there are some very attractive interest rates on this loan. I would think that Gary might have been thinking 15 at most and grimiced a little at 21. Nonetheless, who is in a position(or will be) to go out and pick up 21 737's if there was a default. The loan just gets renegotiated. There may be no immediate plans for the cash, but I can assure you that Gary and Co. are not just sitting on the sidelines watching the game. How many times in our own personal lives have we said, "If I just would have had the money to buy that Google stock, or get into the depressed housing market before the next boom" Difference is, Gary will have the money.

I know Gary Kelly, Gary Kelly is an aquaintance of mine, sir, you are no Gary Kelly.
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(Insert any aviation finance guru's name)

 

[SolidCactus]

It is a smart move. In business, you need to make sure you have money - BEFORE you need it, because when you need it, nobody will give it to you That's business rule No. 1. If fuel costs keep rising, they will be in the right position to weather the storm...

 

[does this plane go to paris]

It is a smart move. In business, you need to make sure you have money - BEFORE you need it, because when you need it, nobody will give it to you That's business rule No. 1. If fuel costs keep rising, they will be in the right position to weather the storm...

Do they need the money, "BEFORE" because they are buying something?

I'm thinking that UAUA is in some major kind of hurt right now. Tilton has been looking to sell that thing since he signed on. Parker at LCC is gunning to be the next Lorenzo and create the world's biggest airline(for ego's sake in my humble opinion).

When the original US/east and United tried merging pre 9/11, they had to create a new airline, DCAir to help sell it on Capitol Hill.

The DOJ will still need them to sell parts and landing spots and the new company will need more money to start. This could be a prime move for WN to get into DCA or LGA or both and start a shuttle service. And as the previous poster stated, Gary Kelly is indeed one smart guru and I have full confidence in him as does Herb, Colleen and the BOD.

 

[Dan Webb]

I think this indicates a big move by WN personally. They have over $3bn of cash on hand (according to 1Q numbers).

 

[BuffaloJoe]

I think this indicates a big move by WN personally. They have over $3bn of cash on hand (according to 1Q numbers).

So this will give WN close to $4billion cash on hand. What is the cost difference between the 300's and 700's? Park the 300 & 500's and go all NG. Wouldn't it be smarter to go up to the 800/900? I know it means an extra FA but 2 passengers will pay that costs. Put them on High Yielding, high traffic routes.

 

[Dan Webb]

So this will give WN close to $4billion cash on hand. What is the cost difference between the 300's and 700's? Park the 300 & 500's and go all NG. Wouldn't it be smarter to go up to the 800/900? I know it means an extra FA but 2 passengers will pay that costs. Put them on High Yielding, high traffic routes.

I personally think a move to the 738/739 would be good for WN. WN pulled back on the longer flights due to higher costs on the 73G but I'm guessing the 738/739 would be a better moneymaker on these longer stages.

 

[mga707]

So this will give WN close to $4billion cash on hand. What is the cost difference between the 300's and 700's? Park the 300 & 500's and go all NG.

The cost difference depends on the length of the route. On shorter routes there is little or no difference.
That, plus the fact that the newest of WN's -300s was only delivered 11 years ago (1997) means that we'll see WN -300s for some years to come. Herb always gets his money's worth out of an airplane.

 

[ramper_in_las]

So this will give WN close to $4billion cash on hand. What is the cost difference between the 300's and 700's? Park the 300 & 500's and go all NG. Wouldn't it be smarter to go up to the 800/900? I know it means an extra FA but 2 passengers will pay that costs. Put them on High Yielding, high traffic routes.

From my limited understnding of this issue, WN will not utilize 800's or 900's for the fact of the logistic problems of adding an extra FA to a limited number of aircraft. Or in other words it does not fit the WN business plan.

 

[BuffaloJoe]

From my limited understnding of this issue, WN will not utilize 800's or 900's for the fact of the logistic problems of adding an extra FA to a limited number of aircraft. Or in other words it does not fit the WN business plan.

So what your saying is that the salary cost of 1 FA outweighs 12-21 more seats? Rather have high frequency flights than cut back on flights and save fuel. They operate the 500 and the 300 so why not add seats. Plus the fuel burn for an 800 is better than a 500. There are routes where WN can fill up a 800 no problem on a regular basis. The only additional cost would be that 1 FA. Training and ops cost should be the same based on the passenger load.

 

[KCFlyer]

So what your saying is that the salary cost of 1 FA outweighs 12-21 more seats? Rather have high frequency flights than cut back on flights and save fuel. They operate the 500 and the 300 so why not add seats. Plus the fuel burn for an 800 is better than a 500. There are routes where WN can fill up a 800 no problem on a regular basis. The only additional cost would be that 1 FA. Training and ops cost should be the same based on the passenger load.

Okay...you've got a flight crew for a 700 ready to go - plane gets pulled because of a mechanical, so they sub an 800 - oops...can't fly - one FA short. Flight cancelled.

 

[FWAAA]

So what your saying is that the salary cost of 1 FA outweighs 12-21 more seats? Rather have high frequency flights than cut back on flights and save fuel. They operate the 500 and the 300 so why not add seats. Plus the fuel burn for an 800 is better than a 500. There are routes where WN can fill up a 800 no problem on a regular basis. The only additional cost would be that 1 FA. Training and ops cost should be the same based on the passenger load.

No, it's not really the salary of the additonal FA, it's the screwing up of the established plan - WN has over 500 airplanes and each and every one of them requries exactly THREE FAs. The operational complexity of having a few planes that need FOUR FAs is just not what WN does. It's about not having that extra FA where they need them when they need them. It's complexity, and WN has proven that keeping it simple is helpful when you're trying to make profits with tiny margins.

ADHA-Dave Neeleman didn't learn that lesson from his time at WN following the sale of Morris Air to WN. Too bad he didn't learn that one - since his E190s helped contribute to making what was a profitable airline into a money-losing airline just as the legacies began making profits. What a stupid idea - take a single fleet type airline and double the fleet types.

The 737-500 is probably going to sit down if fuel stays at $3.50/gal or goes higher. Look for them to be parked after Sept 1. So will some of the older 733s.

 

[BuffaloJoe]

KCFLYER
Point taken about the replacement.
FWAAA
I understand it now, they want to schedule 5 (2FO/3FA) and they don't care if its a 300-500 or 700.

 

[hp_fa]

Two thoughts.

First, I agree with FWAAA. Southwest has made it's mark by having total operational flexibility and this would have the effect of adding a potential wrench into the operation. Maybe the effect is as little as having one or two more reserves sitting at the airport at their hubs, but no matter how it is resolved it adds a cost and makes things just a little less flexible.

Second is the mortgage of the planes. How is it smart to take on debt for planes that were already owned? It just means more money flowing outwards over time because that interest is a cost that otherwise would not have to been paid. Call me a contrarian, but I see a downside to this "brilliant move."

 

[ramper_in_las]

Second is the mortgage of the planes. How is it smart to take on debt for planes that were already owned? It just means more money flowing outwards over time because that interest is a cost that otherwise would not have to been paid. Call me a contrarian, but I see a downside to this "brilliant move."

Sit back, relax, and watch the ride!!! I'm sure we all will learn some ecomomics 101.