Southwest Raises Fare

[Borescope]

Southwest Airlines Raises Fares by Up to $10 for One-Way Ticket to Offset Jet Fuel Costs

DALLAS (AP) -- Southwest Airlines Co. led a broad fare hike across the airline industry, raising fares by up to $10 for a one-way ticket as the company seeks to offset an expected $600 million jump in its jet fuel costs.

Here it comes.............

 

[corl737]

Southwest Airlines Raises Fares by Up to $10 for One-Way Ticket to Offset Jet Fuel Costs

DALLAS (AP) -- Southwest Airlines Co. led a broad fare hike across the airline industry, raising fares by up to $10 for a one-way ticket as the company seeks to offset an expected $600 million jump in its jet fuel costs.

Here it comes.............

Seems like it's the first time in recent history that an airline management has been proactive in addressing issues before they become problems. I can't guarantee that SWA mgmt won't come asking for our help, but it will be the last resort instead of the first.

 

[1 VF-1 2NV]

Southwest Airlines Raises Fares by Up to $10 for One-Way Ticket to Offset Jet Fuel Costs

DALLAS (AP) -- Southwest Airlines Co. led a broad fare hike across the airline industry, raising fares by up to $10 for a one-way ticket as the company seeks to offset an expected $600 million jump in its jet fuel costs.

Here it comes.............

It's about time...I mean the hedges disappearing 😛 .

 

[KCFlyer]

It's about time...I mean the hedges disappearing 😛 .

Maybe you missed corl737's post....the hedges ARE disappearing...they haven't disappeared yet. So a fare increase BEFORE they disappear is a novel move in the airline industry. I've read these boards for years, yet I can't find a single Southwest pilot who was "Oh boy...you suckers are taking it in the shorts...wooo hooo" - yet you guys seem to be foaming at the mouth in anticipation of SWA pay and benefit cuts. And quite frankly, if a SWA pilot on another board that I don't read HAS been doing that....can you blame him? After all, for YEARS they've read how they've been "dragging down the industry", and in several cases, have had their skills tied directly to their paychecks. Except of course when their paychecks were higher than yours.

 

[whlinder]

The $299 cap is now $309.

We always hear how fare increases, particularly at the low end, can really reduce the amount of leisure travel. Yet RPMs still seem to be increasing across the industry. I wonder when we'll hit the price point where leisure travel demand (quantity demanded) declines and RPMs start to slip.

 

[ramper_in_las]

It's about time...I mean the hedges disappearing 😛 .

anyone know if wn is working on more hedges for the future???

 

[Busdrvr]

anyone know if wn is working on more hedges for the future???

I doubt they'd make it public if they were trying to right now, but in all likelyhood, no (with the possible exception of buying some "puts"). SWA considers oil to be a "mean reverting" commodity, ie it's price tends to correct back to it's long term average over time. whent he price is near, or below the long term average, they buy hedges. Currently, oil is in "contango". You would pay more for oil to be delivered in a year than you would for oil to be delivered today. I'd expect SWA is on the sidelines waiting for the futures prices to go down before they try to lock in again.

 

[Ch. 12]

The $299 cap is now $309.

We always hear how fare increases, particularly at the low end, can really reduce the amount of leisure travel. Yet RPMs still seem to be increasing across the industry. I wonder when we'll hit the price point where leisure travel demand (quantity demanded) declines and RPMs start to slip.

That's b/c the consumer has grown to expect no more than $199 RT transcons. Hopefully the recent trend may be a sign that the consumer is starting to wisen up and realize that low fares can't last forever. I guess maybe there was an upside to post-Katrina gas station greed (i.e. $4.00/gal gas). It left enough of a ripple that airline fares could creep up slightly.

 

[nycbusdriver]

Thank you, SWA!

I think SWA decision to raise fares will have an enormous impact on the profitability of USAirways. There was speculation running around that USAirways would possibly eke out a profit in 2006. With this fare increase it will almost guarantee that profit (barring fuel going even significantly higher and/or another security issue.)

Was it my imagination, or did SWA just blink?

 

[swflyer]

:blink: Interestingly, this reporter doesn't seem to mention "employee costs" as a reason for the hike. <_<

Forbes.com
Faces In The News
Kelly's Southwest Hikes Fares As Fuel Options Ebb
Greg Levine, 03.13.06

New York - Absolute, category-killing dominance is a tough act to keep up.

Just ask Gary Kelly. He's the chief executive of Southwest Airlines (nyse: LUV - news - people ), the discount carrier that managed to sustain profitability throughout the tormented 21st century to date.

That pinnacle, that ne plus ultra status might be slipping.

On Monday, Kelly's carrier said it would raise its fares, tacking on an extra $2 for short, so-called puddle-jumper flights and $10 for "walk-up" unrestricted fares.

The latter has now been driven above the $299 cap that Southwest had set since 2002, according to company spokesman Ed Stewart. He was quoted in media reports as musing, "There comes a point where you have to be realistic. Even the most savvy of analysts would agree that fuel is something we just have to keep an eye on."

The spokesman referred to the fuel options that have been key to Kelly's vision: the deals the CEO presided over almost presciently, before the current era of "chronic spikes" in fuel prices that seem like they're here to stay. The options that have kept Southwest somewhat insulated from the brutal market conditions that have slammed so many of his discount and legacy rivals.

But those options are slowly and surely expiring, gradually exposing Kelly's company to the rigors of an oil-based world.

Of course, Southwest is far from alone in enacting fare hikes of late. And according to The Business Journal, AMR's (nyse: AMR - news - people ) American Airlines, Delta Air Lines, UAL (nasdaq: UAUA - news - people ) unit United, US Airways (nyse: LCC - news - people ), Continental Airlines (nyse: CAL - news - people ), and Northwest Airlines all followed suit, raising fares after Southwest's late-Friday move.

But Kelly, his employees, investors and company's customers need not despair just yet.

After all, Southwest shares gained 1 cent, closing at $17.14 Monday on the New York Stock Exchange. That topped the Amex Airlines index, which lost 60 cents and sank 1.2%. The discount carrier may slip from Olympus, but it's still champ.

 

[corl737]

Was it my imagination, or did SWA just blink?

Rather than "blink" I think it is a sign that SWA management has their sights keenly set on the situation and is being proactive. They've been pretty successful about knowing how to price their product so as to be both competitive and profitable. A $50 increase would definitely have been a "blink" but $4-$10 seems more like a "squint." 🙂

 

[insp89]

Rather than "blink" I think it is a sign that SWA management has their sights keenly set on the situation and is being proactive. They've been pretty successful about knowing how to price their product so as to be both competitive and profitable. A $50 increase would definitely have been a "blink" but $4-$10 seems more like a "squint." 🙂

corl, That "squint" may be the difference between a profit or loss for some of Southwest's competitors. 😉

 

[ramper_in_las]

I doubt they'd make it public if they were trying to right now, but in all likelyhood, no (with the possible exception of buying some "puts"). SWA considers oil to be a "mean reverting" commodity, ie it's price tends to correct back to it's long term average over time. whent he price is near, or below the long term average, they buy hedges. Currently, oil is in "contango". You would pay more for oil to be delivered in a year than you would for oil to be delivered today. I'd expect SWA is on the sidelines waiting for the futures prices to go down before they try to lock in again.

thanks, that is a good bit of information. B)

 

[Busdrvr]

Except one mistake, SWA may be buying CALLS, not Puts, brain phart....

 

[ramper_in_las]

Except one mistake, SWA may be buying CALLS, not Puts, brain phart....

i wouldn't have noticed the difference...lol