Southwest's Plans

[USA320Pilot]

Southwest's Plans

ARLINGTON (theHub.com) - Southwest Airlines' chief financial officer said yesterday the low-cost airline believes Philadelphia could become one of its biggest operations. Gary Kelly told financial analysts Philadelphia has the potential to rival its operation at Baltimore/Washington, its biggest East Coast destination. Southwest began service in Baltimore in 1993 and now offers 162 daily flights, making the city its third largest operation behind Las Vegas and Phoenix. "Can we do that with Philadelphia in theory? We don't have a plan that says 162, but it is that kind of potential, and we'll see where things play out," the New York Times quoted Kelly as telling the analysts.

Southwest starts Philadelphia service on May 9 and will reach 28 departures a day to 14 cities by July. Its original plan, announced last fall, was to serve six cities with 14 daily departures. Kelly said Southwest's expansion in Philadelphia is the first time in the company's history that it added flights in a new market before starting service there. He said advance reservations were the strongest ever for the airline in a new city.

Meanwhile, Frontier Airlines, another low-cost, low-fare carrier, will begin service between Philadelphia and Denver and Los Angeles on May 23. Delta Air Lines yesterday announced it would offer 15 flights a day from Atlanta to Philadelphia beginning June 1, up from 11 now. In its report on these developments today, the Times said "Delta's action illustrates the new-found seriousness with which the industry is viewing Philadelphia."

 

[a320schoolbusdriver]

UAIR can't compete with LUV with or with-out concessions.
Might as well get it overwith!

 

[700UW]

Could!

Main Entry: could
Pronunciation: k&d, 'kud
Etymology: Middle English couthe, coude, from Old English c'uthe; akin to Old High German konda could
past of can
— used in auxiliary function in the past <we found we could go>, in the past conditional <we said we would go if we could>, and as an alternative to can suggesting less force or certainty or as a polite form in the present <if you could come we would be pleased>

 

[geo1004]

The simple reality:

WN's costs are so low that they can start up an operation in PHL and offer flights at such a price that the flying public will ensure their success.

US's costs are so darn high that they can not compete without loosing money on each flight.

WN is going to eat US's lunch at PHL. It may not be in their business plan to "kill US Airways" but by coming into PHL and doing what they do best they are going to just that.

Scenario #1 is a continuation of the current back and forth between labor and management. If that's the case, everyone at US will be out of a job when the place gets chopped up and sold off.

Scenario #2 is that some serious cost-chopping takes place and in the process a significant portion of of US's employees either loose their jobs or they perform their jobs at a fraction of what they used to make.

Either way

 

[700UW]

US has the lowest labor costs, so it is not labor, it is management who has no clue on how to run an airline.

 

[geo1004]

US has the lowest labor costs, so it is not labor, it is management who has no clue on how to run an airline.

700UW, you've got to stop saying this.

This is only true if you look at the piece of paper with the payscales written on it. US has veeeeery few junior employees left so no one is getting payed at those entry level scales. Just about everyone at US has years and years of seniority so when it comes time to pay the paychecks US's labor costs are non-competetive.

A simple example (hypothetical) why the "WN employees make more than US's" theory is moot:


Company #1: LUV?

Everyone starts at $25,000 a year and gets an additional $1,000 for every year of service. Company #1 has one employee with less than one year seniority (earning 25k/yr), one employee with five years (30k/yr), one more with 10 years (35k/yr), and one more with 20 years (45k/yr). The total labor cost for the company's 4 employees is $135,000.

Company #2: US?

Everyone starts at $23,000 a year and gets an additional $1,000 for every year of service. Company #2 has zero employees with less than one year seniority (earning 23k/yr), one employee with five years (28k/yr), one more with 10 years (33k/yr), and two more with 20 years (43k/yr). The total labor cost for the company's 4 employees is $147,000.


EVERY employee at Company #2 can point his or her finger at their exact counterpart at Company #1 and say that Company #1 employees make more. That's true. But come payday, the seniority of the employees at Company #2 COST more. Company #1 retains the advantage and an can afford to charge less for the same product and still make a profit.

 

[700UW]

Is it the employees fault that US has laidoff 20,000 employees?

NOPE!, Management did!

Southwest has been around since 1971, I do believe they have a lot of senior employees, you all spout about they have junior employees but never have any factual information on that.

 

[geo1004]

No. But it is the labor contract's fault for ensuring that US Airways' labor costs are so high. Keep the highest paid with the most vacation/sick time.

 

[700UW]

Where have you been?

The employees have given back over $1.2 billion and they are the lowest paid except CO out of the major airlines larger then US.

And even non-union airlines layoff employees by seniority.

 

[a320schoolbusdriver]

Why We Can't Competewith LUV!!
It has nothing to do with wages. Pay cuts will only buy a little time:

Southwest has built one of the strongest balance sheets is the industry. And while this quarter's profit was a mere $26 million, it was up 8.3% from last year.
As importantly, those years of profitability have Southwest net cash (cash minus debt) positive.
JetBlue is not. Then there is U.S. Airways which is $16 billion in the hole. How will it ever defend its Philadelphia hub from Southwest while paying interest on a debt that size?

This year, Southwest's biggest advantage may be the more than 80% of its jet fuel needs it has hedged at a bargain price of $24 a barrel. That translated into a $63 million gain in the first quarter alone.

 

[geo1004]

And which of these airlines is posting a profit? None of them. That's the problem with the legacy carriers. They keep returning to a broken business model.

 

[700UW]

http://www.southwest.com/swatakeoff/labor_relations.html

WN is the highest % of unionized employees then anyother airline.

From WN itself:


Herb's Take on Hot Topics
Low Costs, Low Fares, and Labor Relations

--------------------------------------------------------------------------------

It’s simple accounting: Southwest Airlines remains profitable when other airlines cannot because our sales revenue exceeds our cost of doing business. Since 9/11, all airlines must offer low fares to be competitive. But, only those that have low costs can hope to do well in the future.

Maintaining a low cost structure is no simple task. It requires 35,000 People doing thousands of small things every day. But, the key word is People. Our People are the best. They are productive, friendly, service oriented, smart, and good. And, we think they are also happy to be with a Company that treasures their job security.

Many observers of Southwest Airlines assume that our outstanding relationship with our People is due to a non-union work force. Nothing could be further from the truth. As a percentage of total Employees, Southwest is probably the most heavily unionized airline in America. More than 4 out of 5 Employees at Southwest are union members.

While other airlines are shedding employees and asking those that remain to take sizeable pay cuts, Southwest has negotiated nine new contracts with higher compensation and enriched benefits for the following groups

More from WN, dave can take a lesson:

Incredibly, most of these contracts were implemented after the horrendous economic catastrophe of September 11, 2001. Negotiations with the Transportation Workers’ of America, AFL-CIO, representing our stellar Flight Attendants, are currently underway. Southwest has every intention of extending a contract to this group of Employees that makes Southwest an even better place to work while protecting our shareholders’ investment and preserving all Employees’ job security.

Southwest is proud of our reputation as a great place to work. Our People are wonderful. We strive to honor them; to treat them with respect; and, to reward their productivity. We must do so, however, in a way that preserves our low cost structure. If we lose that, we lose everything. Our cherished job security will vanish. That is why our excellent relationship with our Employees and the labor organizations that represent them must endure.

 

[geo1004]

WN is the highest % of unionized employees then anyother airline.

True. But most of their employees are far less senior than US's - hence US's labor costs are higher.

WN also has a very simple business plan - one fleet type, no Express flights averaging half-empty, and much more efficient work rules for the employees on the property.

 

[700UW]

True. But most of their employees are far less senior than US's - hence US's labor costs are higher.

WN also has a very simple business plan - one fleet type, no Express flights averaging half-empty, and much more efficient work rules for the employees on the property.

Please provide factual data that WN's employees are junior!

And the last time I checked the employees at US don't make fleet decision, corporate executives do!

 

[a320schoolbusdriver]

This company is trying to compete with a fine oiled machine!
It has nothing to do with the employees, the folks running this place for years have been maxing out the credit cards!
Debt Debt Debt
Here is one good example of stupidity:
Wolf and Gangwal buying back over $1.5 billon of US Airways stock instead of using the money as operating capital or paying down debt or just having it around for a downturn.