WN to add 15 new cities from DAL.

[WorldTraveler]

I'm sure they are keeping an eye on MEM...that is what any decent airline should do.

DL who operated a hub at MEM using RJs but couldn't find the traffic necessary to even make RJs work but we are supposed to believe that WN will come along and use mainline jets in a more heavily point to point focused operation?

The problem with MEM wasn't the cost of RJs it was and is that the market is just not that big. DL could have easily put in more efficient large RJs or any number of its mainline aircraft if the market were there.

Sure, CLE and other cities might represent opportunities for WN but for now WN is up to its eyeballs trying to cover its traditional network plus all of the new flying that is on its plate at DCA and DAL.

Add in that the full legality of the Wright Amendment and the amendments to it could push WN into the very same lengthy legal battle that it engaged in for years and WN's plate is overflowing.

And while WN tries to cover all of these new opportunities, it will have no choice but to reduce its flying in some of its traditional cities, precisely why we have seen them pull down 18 cities since the FL merger rather than being willing to take the time to develop those cities into markets that could work for WN.

 

[Kev3188]

At the risk of cross pollinating, here's a list of what UA plans to pull down at CLE. Might offer a little insight as to what other carriers may take a look at going forward...

http://airlineroute.net/2014/02/11/ua-cle-s14cxld/

 

[WorldTraveler]

it is helpful, Kev.

CLE is a bigger market than MEM but the principle is still the same. Most of what is being cut is small RJs fying markets which would not support another carrier flying the same route. The problem w/ UA's network is that so much of it is made up of small RJs connecting to small RJs which compound the cost problem. The number of seats that any competitor can expect to fill from CLE on a point to point basis to one of the cities that UA is dropping is alot less than what UA is currently offering on a hub basis.

There will be carriers that will try to increase in CLE because of backlash against UA and they or might not have success. Success in growing a carrier's presence at CLE is more related to the strength of the individual route that is currently flown. ie. if WN currently does very well on one of its routes from CLE, it might be worth adding more capacity to try to gain more of the market based on a currently successful route. The same could be true for AA or DL.

Specific to WN, it doesn't change that they have so many strategic objectives on their plate right now that they have virtually no bandwidth to pursue anything else new without dismantling or reducing their existing network - which opens up opportunities for other carriers.

 

[eolesen]

I suspect you're underestimating their bandwidth.

DL's not the only airline who picks up used aircraft. As of their current 10K filing, WN has added two -700s on leases, and is buying 15 -700's (mostly from Westjet if I recall).

WN's public statements and filings already express an interest in continuing to pick up -700's to accelerate the planned retirements of the -300 and -500 fleet.

If necessary, they can just as easily defer those retirements as they did when the decision to sell the 717's came about. Certainly, the additional slots at DCA and LGA would drive a requirement for more block hours, as will the October DAL schedule.

 

[WorldTraveler]

e,
the question is not just about acquiring used aircraft. It is also about being able to profitably place them in service. I don't doubt WN's bandwidth at all and in fact have said for years that they would use that bandwidth to their advantage in building DAL.
It doesn't change, however, that they are removing about 75 717s from their fleet this year in a contract that DL is not about to modify. As part of the 717 deal, WN looked very closely at what they had to do to rebuild ther fleet after getting rid of the 717s and had already decided to defer many retirements. After the 717 deal was signed, the AA-US slot divestiture came out which is providing even more opportunities for WN. WN has int'l growth prospects on the horizon they have to be able to jump on if for no other reason because other LCCS including B6 are aggressively growing in markets where WN needs to have a presence. Finally, WN has had to write at least a couple new generation aircraft over the past year that have been involved in single aircraft incidents, further compounding their aircraft shortage.

Look at WN's traffic report from here and you will see that in Jan, WN's trips flown were down by 7.4% while RPMs are slightly up. WN is significantly upgauging its network and with that is removing alot of flights and flying bigger aircraft which helps their CASM but reduces their competitive position; passengers don't care about the size of the aircraft as they do about whether a carrier has a flight leaving when they want at the price they are willing to pay. Customer choices on WN will diminish esp. on its traditional network which will provide opportunity for other carriers.

WN also has to fix its on-time which has sunk to one of the lowest positions among the network carriers. It used to be that the low fare carriers offered high quality service and reliability but it is now a couple of LCC/LFCs which are struggling mightily with their perception of being perceived as unreliable. One of the only solutions is for WN to have spare personnel and aircraft to get the schedule back on track when it needs to or to add in more block time and greater ground time, both of which increase the number of aircraft WN needs.

And WN still has to make all of these new market additions work in far more competitive markets than WN typically chooses when introducing new service.

WN has a history of executing its strategies well but they also are pushed to the limit this year and other carriers are going to take advantage of WN's limitations to make inroads in key WN markets.

http://finance.yahoo.com/news/southwest-airlines-reports-january-traffic-123000319.html

 

[swamt]

I suspect you're underestimating their bandwidth.

DL's not the only airline who picks up used aircraft. As of their current 10K filing, WN has added two -700s on leases, and is buying 15 -700's (mostly from Westjet if I recall).

WN's public statements and filings already express an interest in continuing to pick up -700's to accelerate the planned retirements of the -300 and -500 fleet.

If necessary, they can just as easily defer those retirements as they did when the decision to sell the 717's came about. Certainly, the additional slots at DCA and LGA would drive a requirement for more block hours, as will the October DAL schedule.

Hey eolesen. You are correct. SW has picked up 10 used A/C from WJ, 5 from others. SW is looking at a grand total of 150 used aircraft. Also, a lot if not all -3 and -5's retirements will be slowed to utilize such aircraft until they are replaced by new aircraft, but, Boeing cannot keep up with the demand required by SW's growth coming, therefore the used aircraft. SW has plenty of routes to place all aircraft, very profitable, but I see problems getting enough aircraft for the up coming growth for 2014-2016.

 

[WorldTraveler]

swamt,

precisely and I don't disagree in the least with what you have posted.

But being short of aircraft for up to 3 years is a very long time in an industry where other carriers do have capacity and can significantly affect the competitive landscape.

A big change can take place even this year as WN pulls far more 717s than it receives in replacement aircraft - used or not.

The 7.5% reduction in the number of flights flown in Jan speaks volumes about the strategic challenges that WN is facing in this same year that it has a number of major strategic opportunities becoming available. WN's traditional domestic network is vulnerable to competitive incursions over the next several years.

 

[swamt]

swamt,

precisely and I don't disagree in the least with what you have posted.

But being short of aircraft for up to 3 years is a very long time in an industry where other carriers do have capacity and can significantly affect the competitive landscape.

A big change can take place even this year as WN pulls far more 717s than it receives in replacement aircraft - used or not.

The 7.5% reduction in the number of flights flown in Jan speaks volumes about the strategic challenges that WN is facing in this same year that it has a number of major strategic opportunities becoming available. WN's traditional domestic network is vulnerable to competitive incursions over the next several years.

WT, Pls stop with the 717's. They are being replaced almost one-4-one. Glad to see that someone can see the A/C ratio to planned flights as I. If you have been following me (as I think you have) I still see another purchase, acquisition, or merger by SW in the near future. My original guess was by 2015, then I extended to 2016, but who knows, yes it is a guess by me, but rumors were running wild about Alaska and JB, with Alegiant thrown it as well. Not sure if SW will be willing to go thru another merger operation so quickly after the AT one, but, I still see this as a very strong option to gain "aircraft". Although JB would not be the correct aircraft, so focus very well could be on Alaska. But then again I could be completely wrong, who knows...

 

[WorldTraveler]

I'm not looking at aircraft ratio. I am looking at WN's traffic stats. I will be watching that number all year long and I can absolutely assure you that WN does not have the aircraft to maintain its current schedule and grow where it needs to over the next couple years, esp. in 2014.

Go for a merger. If the motivation is to gain aircraft, all WN do is exactly what happened in ATL which is to reduce their core network. Given that DL seems to have made the decision to grow SEA on its own, any pullback by AS in SEA only opens doors for DL. Same thing for B6 where DL has already surpassed B6 as NYC's largest domestic airline and marginalized B6 by flying more and more capacity from LGA, the preferred shorthaul airport from NYC, in markets that can be served from there.

How about instead you just admit that WN pushed its fleet plan to the limits with the decision to remove the 717s from DL's fleet and it will cost WN in its ability to defend its core network while also pursuing all of the opportunities in the near future.

As much as you don't want to admit it, DL's decision to pick up the 717s and WN's desire to get them accomplished far more than just removing an undesirable fleet type for WN.

 

[eolesen]

WN has its challenges, but you seem to really be stretching the whole 717 argument for your own edification... Nobody really cares if aircraft formerly used by one airline are now being scheduled into that same airline's hubs by the new owners. It certainly wasn't a compelling argument when Valujet did it to DL...

If the 717 deal really is stretching or limiting WN, then why aren't any of the equity analysts saying so?

 

[swamt]

The shortage of a/c is not due to the 717's being SOLD to Delta. Even if SW kept the 717's we would still be shorted seats flying. Repeal of W/A, added slots at LGA and DCA, poss. of more slots coming, international flights starting, international flights growing and expanding, and of course the AT 100% synergies being obtained; All these reasons, as well as more, all coming to realization all in the same year (2014) and continuing thru 15 and 16 and beyond is why SW is experiencing an a/c shortage. Like I have said before, by the time the 717's are gone, there will be aircraft already in place that replaced them AND there will more seats than if we kept the 717's. When you look at it by seats, it will be an improvement when the transactions are completed. So your long winded theories about the 717's is not correct. SW is not stupid, if they thought the 717's would have been beneficial they would have kept them, don't you think? Come on man...

 

[WorldTraveler]

I'm not doubting that WHEN IT IS ALL DONE WN will have the fleet it wants but it doesn't change that in the short term they will be in a very tight position with fleet esp. this year. All of the opportunities you listed are precisely why I have said WN has more strategic opportunities on its plate at the same time that is fleet is being restructured with fewer aircraft in the short term.

I'm sure you know that the 717s aren't being SOLD to DL but DL is assuming the leases.

The 717s are not the single factor and I never said it was - but pulling 70 aircraft out of the fleet just this year is a major challenge to overcome. WN simply did not realize all of the opporutnities that would come its way at the time it did the 717 deal with DL.

It also doesn't change that WN's gauge is increasing which means frequencies will decrease based on the same number of seats. Being in that position for a carrier like WN that has used its frequent schedule as a marketing advantage does leave it vulnerable to incursion from other carriers who do have smaller aircraft including large RJs, other small mainline aircraft and, yes, the 717. Increased gauge is necessary to keep CASM down but frequency has to be maintained in order to maintain a marketplace advantage. Carriers that can do both will win over those that cannot do either to the same degree as competitors.