Southwest Mulls Growth Plans
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By Elizabeth Souder,
Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--
Southwest Airlines Co. executives tentatively expect to add 10% more capacity to the network in 2005, but they are delaying final planning to see what happens with some of their competitors.
In fact, if a competitor like bankrupt US Airways Group Inc. liquidates, or some other large opportunity comes up, Southwest may double its growth plans, executives said.
"We have not made plans for next year because we are wondering if something is going to happen that's fairly dramatic and whether we would want to respond," said the airline's new chief executive, Gary Kelly, during a conference call Thursday. "We'll wait as late as we can - then we'll proceed with our natural growth plan."
That natural growth plan would involve growth in the airline's newest destination, Philadelphia, if Southwest can get more gate space. Otherwise, the airline could add from one to three new destinations, Kelly said.
Two issues may constrain growth: airplanes and oil prices.
If another airline liquidates, or some other large opportunity comes up, Southwest may have to scramble to get enough airplanes to take advantage of the situation. The airline will add 29 Boeing 737 airplanes to the fleet next year, and could digest a maximum of twice that growth, Kelly said.
"Doubling that is about as much - I would put that at the outside boundary - that we could contemplate," Kelly said. "That would be a lot of new people to train, deploy; a lot of new markets to develop."
He said he could just order more airplanes from Boeing if he is able to plan growth far enough in advance for the manufacturer to make the airplanes. Otherwise, Kelly said, he could buy or lease used airplanes, since Southwest gets frequent offers of used aircraft. Also, if another airline is pulling out of markets that Southwest wants to serve, Southwest could buy airplanes from that shrinking airline, so long as the aircraft are 737s. Southwest only flies 737s.
"We might have to spread our wings a little bit and add a little bit different aircraft type to our fleet," such as 737-800s, Kelly said. But he has no interest in buying airplanes outside of the 737 family because that would involve a second set of expenses, such as pilot training costs and maintenance costs.
Another issue that could constrain growth is high oil prices. Southwest Airlines has hedged 80% of its jet-fuel needs for next year. But adding more airplanes means adding to the airline's unhedged fuel needs, Kelly pointed out.
"It affects the way we think about expansion," he said. "I don't think we want to take too large a risk with the new markets. If there are some good aircraft deals out there, I think we would be interested. If the aircraft are expensive, I think we should pass in this environment."
The only specific growth Kelly mentioned was in Philadelphia, where Southwest operates out of four gates and has asked the airport for more. By the end of this month Southwest will be operating at full capacity in Philadelphia. Eventually, the airline would like to have as many as 25 gates, Kelly said. That is the sort of capacity Southwest might add if US Airways, which operates a hub in Philadelphia, liquidates, he said.
When asked how much the airline would like to grow in Philadelphia next year, Kelly said: "Could we double flights in Philadelphia? The answer is yes, if we had the gate capacity. If we did double it, would we open up a new city? I don't think so, because that (doubling in Philadelphia) would in essence be the equivalent of a couple of new cities."
--------------------------------------------------------------------------------
By Elizabeth Souder,
Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--
Southwest Airlines Co. executives tentatively expect to add 10% more capacity to the network in 2005, but they are delaying final planning to see what happens with some of their competitors.
In fact, if a competitor like bankrupt US Airways Group Inc. liquidates, or some other large opportunity comes up, Southwest may double its growth plans, executives said.
"We have not made plans for next year because we are wondering if something is going to happen that's fairly dramatic and whether we would want to respond," said the airline's new chief executive, Gary Kelly, during a conference call Thursday. "We'll wait as late as we can - then we'll proceed with our natural growth plan."
That natural growth plan would involve growth in the airline's newest destination, Philadelphia, if Southwest can get more gate space. Otherwise, the airline could add from one to three new destinations, Kelly said.
Two issues may constrain growth: airplanes and oil prices.
If another airline liquidates, or some other large opportunity comes up, Southwest may have to scramble to get enough airplanes to take advantage of the situation. The airline will add 29 Boeing 737 airplanes to the fleet next year, and could digest a maximum of twice that growth, Kelly said.
"Doubling that is about as much - I would put that at the outside boundary - that we could contemplate," Kelly said. "That would be a lot of new people to train, deploy; a lot of new markets to develop."
He said he could just order more airplanes from Boeing if he is able to plan growth far enough in advance for the manufacturer to make the airplanes. Otherwise, Kelly said, he could buy or lease used airplanes, since Southwest gets frequent offers of used aircraft. Also, if another airline is pulling out of markets that Southwest wants to serve, Southwest could buy airplanes from that shrinking airline, so long as the aircraft are 737s. Southwest only flies 737s.
"We might have to spread our wings a little bit and add a little bit different aircraft type to our fleet," such as 737-800s, Kelly said. But he has no interest in buying airplanes outside of the 737 family because that would involve a second set of expenses, such as pilot training costs and maintenance costs.
Another issue that could constrain growth is high oil prices. Southwest Airlines has hedged 80% of its jet-fuel needs for next year. But adding more airplanes means adding to the airline's unhedged fuel needs, Kelly pointed out.
"It affects the way we think about expansion," he said. "I don't think we want to take too large a risk with the new markets. If there are some good aircraft deals out there, I think we would be interested. If the aircraft are expensive, I think we should pass in this environment."
The only specific growth Kelly mentioned was in Philadelphia, where Southwest operates out of four gates and has asked the airport for more. By the end of this month Southwest will be operating at full capacity in Philadelphia. Eventually, the airline would like to have as many as 25 gates, Kelly said. That is the sort of capacity Southwest might add if US Airways, which operates a hub in Philadelphia, liquidates, he said.
When asked how much the airline would like to grow in Philadelphia next year, Kelly said: "Could we double flights in Philadelphia? The answer is yes, if we had the gate capacity. If we did double it, would we open up a new city? I don't think so, because that (doubling in Philadelphia) would in essence be the equivalent of a couple of new cities."
:blink: Oh yea, I forgot, were you ever in 28 Palms or at Camp Lejune in SC? 
