SW: Just how do they do it?

[KCFlyer]

Tom - try this - price out a PHL-LAX flight on U, leaving 4/17 and returning 4/24. Then, look at the mileage between the two cities, multiply it by 2 (to get the round trip mileage), and muliply that by .10 (hoped for CASM). $49 doesn''t even come clost to covering those losses.

 

[a320av8r]

1- They don''t have the debt load everybody else has.

 

[KCFlyer]

Tom...I couldn''t find this on the web, but another post had a link. THIS is why the perks aren''t helping U:

Revenue per ASM 10.38 ¢
Cost per ASM 12.10 ¢

 

[Light Years]

Minimum F/A staffing for the A319 and A320 is three- one, the A works up front. The B and C work in the back, although the C''s jumpseat is up front next to the A. The 737s are the same.

 

[JS]

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TomBascom wrote:

That''s why you bump people and hold open those upgrades until the last minute. Selling another 6 seats in advance at a money losing fare is more of a problem...
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1) Bumping people costs money

2) Cheap fares are capacity-controlled. If the flight sells out, the airline didn''t miss out on 6 cheap fares, they missed out on 6 expensive fares. Even if it''s only the 6 cheap fares lost, we''re talking a lot more than 49 bucks a head.

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I doubt it. It sounded like simplisticly wishful thinking then and it still does now.

The goodwill that they get from MRTC more than offsets the money that they''d lose from selling more seats at a loss.
----------------​

Got any data to support that?

 

[Singleflyer]

sfb,

I agree that the UA fare is low because of the competition from SWA in the MHT market. But I fly from MHT because it is 8 miles from my home. You are also right there are direct flights on SWA to MDW from MHT, but what is more important to me is the time of those flights. If I can get a later flight I will, again it is the value of the flight and not the cost. What my point is, the SWA model does not work for all flyers. As Pineybob points out there are many other costs associates with a business trip, airfare is just one factor. And I see it in most cases the value is not with SWA. I thought there was value when I booked a direct flight from BWI to MHT on a 737. But SWA cancelled the flight, would charge me more 2 1/2 days later. No value there. But if time is not important to the traveler, and they don''t mind landing in a city close to there destination then SWA could work very well for them. Their model just does not fit my travel needs, and value.

 

[TomBascom]

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On 3/27/2003 5:51:36 PM Light Years wrote:

Minimum F/A staffing for the A319 and A320 is three- one, the A works up front. The B and C work in the back, although the C''s jumpseat is up front next to the A. The 737s are the same.

----------------​

Is the actual staffing 3 or 4?

 

[TomBascom]

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On 3/27/2003 4:28:04 PM KCFlyer wrote:

Tom - try this - price out a PHL-LAX flight on U, leaving 4/17 and returning 4/24. Then, look at the mileage between the two cities, multiply it by 2 (to get the round trip mileage), and muliply that by .10 (hoped for CASM). $49 doesn''t even come clost to covering those losses.

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Route by route examples aren''t going to resolve the issue -- we can both find data points to support whatever.

The point that I think you''re making is that if they''re losing money they''re losing more by providing "amenities".

I agree. I just don''t think the amenities in question amount to spit in the ocean of red ink that selling unprofitable tickets results in. Cutting back so-called amenities is, at best, a feel good measure. It has no real impact on costs.

My point is that if the basic fare is break-even and that the willingness stipulated way back in the thread to spend an additional $49 to fly on a airline that provides such is real then those amenities are attracting additional profit to the airline -- they are not costing it anything.

Of course if they''re going to sell tickets at a loss they''re going to lose (slightly) more by offering a bag of peanuts too. And if they try to make up for it on volume it just gets worse. We have no disagreement there.

We might disagree over whether or not the typical "preferred" cockroach is buying a profitable ticket. I think we generally are. I''m fairly sure that I, personally, didn''t have any out and out money losing fares last year. I may have had a few that were borderline -- almost all were discount fares of one sort or another -- but on the whole they should have been modestly profitable. I doubt that I''m atypical in that regard. A business traveler doesn''t need to sweat the fare down to $39 -- he''ll take it if it''s thrust on him but once you''re down in the $250 range (or sub $500 for a trans-con) it''s probably going to be approved by who ever needs to sign off on it. On the other hand $1,000 is almost always going to raise eyebrows.

Somewhere on US''s website there is some data that says that the average customer trip is around 800 miles. With a CASM around $0.10 that means that they need about $80 of revenue to break even on that seat. If they can''t get it down to $0.10 and it stays at $0.12 they still only need $96. If the planes are only 60% full they still only need $128 to $155 to be breaking even. $49 is a lot of incremental revenue in that picture -- it''s about between 3% & 5% to the bottom line depending on how full the plane is and what the actual CASM turns out to be.

The difference between profit and loss is a very small shift in the average ticket price. Right now US has a ridiculous pricing scheme that very strongly steers customers to buying unprofitable fares. Reducing the business friendly differentiators will accelerate that trend (as it has been for some time) and have a more negative impact on profitability than any savings that might be generated.

The real problem is that zero effort has been put into providing any sort of incentives or support for buying more expensive tickets. Instead the gap between low fares and high fares gets wider, amenities for those few who still actually pay for them are reduced, those people ask themselves why they should pay so much, the company dreams up new punishments for freeloaders who buy discount tickets and the spiral continues.

The real thing that the business paying the freight would actually pay for -- flexibility at a fair price -- is anathema to the airline. They are addicted to those ever so scarce big wads of cash. Rather than earn an honest living they want big score.

To the airline "my dates are flexibile" means that the PAX bends over and submits to an arcane and convoluted set of rules and restrictions which are designed solely for the purpose of confiscating money from the customer. The traditional airline''s idea of a "fair price" is something that even a congressman would blush to ask.

Contrast that with Southwest and you quickly see why people who fly Southwest like Southwest. But nobody at Fort Fumble will ever do that -- that isn''t the lesson that they want to learn. It''s too bad because if they did learn that lesson they could really do well.

 

[TomBascom]

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On 3/27/2003 7:55:05 PM JS wrote:

----------------
TomBascom wrote:

That's why you bump people and hold open those upgrades until the last minute. Selling another 6 seats in advance at a money losing fare is more of a problem...
----------------​

1) Bumping people costs money

2) Cheap fares are capacity-controlled. If the flight sells out, the airline didn't miss out on 6 cheap fares, they missed out on 6 expensive fares. Even if it's only the 6 cheap fares lost, we're talking a lot more than 49 bucks a head.
​

A bump doesn't cost much. A free pass for an empty seat isn't much of a burden -- that's why they're so strongly preferred (by the airline) over a $200 voucher (us customers would much rather have the voucher...)

If flights are sold out to the point where no walk-up full fares can be purchased then there is a serious inventory management problem that needs to be fixed. If this is happening on a noticably regular basis then the wrong persons are in charge of inventory.

In todays environment it can't be happening across the board but if someone is asleep at their desk I suppose that it might be happening every Monday morning in PHL on flights to the West Coast or something like that. If it is the answer isn't "cut F across the board because it's too costly!" -- the answer is to reduce advance sales of discount tickets on those flights. Better yet do that and drop full fares out of the stratosphere -- I'll bet you could fill the plane at a much higher average fare that way.

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I doubt it. It sounded like simplisticly wishful thinking then and it still does now.

The goodwill that they get from MRTC more than offsets the money that they'd lose from selling more seats at a loss.
----------------​

Got any data to support that?

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The math is fairly straightforward -- any amount of goodwill is a positive. Any money losing seat is a negative.... MRTC has been a strong source of goodwill. Customer's like it a lot. Squeezing seats together to sell more of them at a loss isn't going to help their situation. You know that they'll be sold at a loss because everyone keeps harping about "over capacity" -- when supply exceeds demand and more supply is added the price goes down. They're already losing money so that means they'd lose more faster. Making it up on volume won't work.

 

[2clippedwings]

On 3/27/2003 5:51:36 PM Light Years wrote:

Minimum F/A staffing for the A319 and A320 is three- one, the A works up front. The B and C work in the back, although the C''s jumpseat is up front next to the A. The 737s are the same.

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Is the actual staffing 3 or 4?
Tom, actual staffing is 3

 

[RES4LUV]

< I thought there was value when I booked a direct flight from BWI to MHT on a 737. But SWA cancelled the flight, would charge me more 2 1/2 days later. No value there.>

Singleflyer---Sorry but I think you''re giving some bad information here.If Southwest cancelled a flt. due to weather you have 3 options:

1.Re-book on any available flt. within the next 24 hrs.(no matter what your fare was)Or,fly stand-by on sold out flts.

2.Re-book for another day of your choice (no fare increase if your original booking class is available)

3.Request a full refund.

So--Sounds like you wanted a flt. 2 1/2 days later that didn''t have your discount fare available? Sorry, but "weather happens"

Getting back on topic--IMHO "Southwest Does It" by:

Treating the pax like friends.
Keeping it simple.(fares,rules,aircraft etc.)
Assuming all the other airlines are out to get us.

Treating employees like friends.

 

[JS]

Tom, you keep referring to money-losing fares. At the margin, there are no money-losing fares.

6 to 12 seats per aircraft is a marginal measurement, not an average. That means that selling an additional 6 seats at the lowest fare will increase profit for each flight, all else being equal.

I'm sure there are some people out there who fly AA now but didn't in the past prior to MRTC. I personally don't know any. All the people I know fly the same airline now and did in the past to maintain elite status, or fly any old airline as long as it's non-stop. They also rarely pay full fare. Who does these days?

"Goodwill" is nice but it doesn't pay the bills. In order for MRTC to be a good business decision, the number of additional high fares sold as a result of MRTC has to be more than the low-fare revenue lost from the missing seats. Is that the case? I'm placing my bets on "NO".

This is a very rough analysis, but consider AA, DL, NW and CO -- about equal financially prior to 9/11 (compared to UA and US). Which of those four airlines has More Room and which of those airlines is next to declare bankruptcy?

 

[TomBascom]

----------------
On 3/28/2003 9:31:25 AM JS wrote:

Tom, you keep referring to money-losing fares. At the margin, there are no money-losing fares.

6 to 12 seats per aircraft is a marginal measurement, not an average. That means that selling an additional 6 seats at the lowest fare will increase profit for each flight, all else being equal.

​

Ok, good point. But it will only matter if the flight has fewer than 6 (or 12) seats unsold. What percentage of flights fit that profile?

I''m sure there are some people out there who fly AA now but didn''t in the past prior to MRTC. I personally don''t know any. All the people I know fly the same airline now and did in the past to maintain elite status, or fly any old airline as long as it''s non-stop. They also rarely pay full fare. Who does these days?
​

Darned near nobody pays full fare on the traditional majors. Interestingly SWA has the highest percentage of full fares sold in the industry... that suggests to me that lowering the price of full fare will result in a larger number of them being sold -- do it right and the average fare goes up.

"Goodwill" is nice but it doesn''t pay the bills. In order for MRTC to be a good business decision, the number of additional high fares sold as a result of MRTC has to be more than the low-fare revenue lost from the missing seats. Is that the case? I''m placing my bets on "NO".
​

For it to negatively impact the revenue from the lost low fare seats you have to turn away customers in greater numbers than prior to MRTC. According to the airline bigwigs we have a severe over capacity problem. So I''ll double the stakes and bet that "NO" that hasn''t happened, MRTC has not resulted in significant lost revenue.

This is a very rough analysis, but consider AA, DL, NW and CO -- about equal financially prior to 9/11 (compared to UA and US). Which of those four airlines has More Room and which of those airlines is next to declare bankruptcy?
​

I''m not in a position to judge how accurate an assesment of those airlines financial condition is -- but I''m skeptical that anyone other than Arthur Andersen would have found them to be roughly equal

 

[Singleflyer]

Res4LUV

I agree weather happens. That is not my point. It was SWA''s approach in helping a paying customer. I don''t know the fare basis of the ticket I purchased, but it was purchased one hour before flight time. The agent told me, the next available fligh she could confirm me on was 2 1/2 days later. She also told me I could stand by for an earlier flight that that one, but all flights for theat day would probably be cancelled. I opted for a full refund, through my travel department.

Any other airline I have flown has tried first to accomadate me on their airline first on another carrier second. SWA does not have that policy and therefore it is up to the PAX to fend for themselves in those situations. As I stated another carrier was able to get me home that day and they had the same local weather as SWA had in BWI.

The policy of not transferring you to another carrier when SWA cannot fly that day is just another reason their operating model is not for every flyer, and is not always focused on customer satisfaction

 

[W:EXCH:INVOL]

KC said: And lately, Priceline and Hotwire customers are not easily given any "interlining" consideration in the event of a flight cancellation on the "major" airlines.


I don''t know where you''ve heard this, but I can assure you it''s not happening in my station.

INVOL