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WN May Slow Down Its Growth  
User currently offlinePNQIAD From India, joined May 2006, 587 posts, RR: 0
Posted (7 years 5 months 4 weeks ago) and read 3884 times:

Southwest Airlines mulls slowing expansion

Quote:
Southwest Airlines Co. may slow expansion if profits continue to lag its growth targets, the discount carrier's chief executive said.

"If slower growth is what we need to get back on our profitability target, then we'll certainly do that," said Gary Kelly in an interview with UBS analyst Kevin Crissey.

Looks like pressure is building up on WN to do something quickly about slowing growth.....

33 replies: All unread, showing first 25:
 
User currently offlineN471WN From United States of America, joined Dec 2003, 1584 posts, RR: 2
Reply 1, posted (7 years 5 months 4 weeks ago) and read 3850 times:
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WN is smart and they are looking at the legacy carriers cutting domestic capacity and thus making it less likely that they will have to cut growth very much. It is perfect timing in a way and a look at the WN May numbers (just released) show that while not great are an improvement over the first quarter. SWA just needs to be patient and watch the legacy carriers continue to drive business their way through capacity cuts and unhappy employees such as the Flight Attendants at NWA and the pilots at United. The "certain to be" labor unrest will benefit SWA.

User currently offlinePanAm747 From United States of America, joined Feb 2004, 4242 posts, RR: 8
Reply 2, posted (7 years 5 months 4 weeks ago) and read 3765 times:

Southwest will ALWAYS take a long-term approach to its finances.

One of the saddest things I have seen happen to businesses of all types in the recent past has been the lack of any long-term planning or strategy. The focus has seemed to become "immediate short-term profit", "make the stockholders happy at ANY cost" and "isolate upper level management from any culpability in the event of a downturn". Enron, for example, saw its growth skyrocket - yet anyone with a basic business background could see that the speculation its growth was based on was temporary (at best). Unfortunately, questions from the investors about "long term" planning or the viability of continued unrestrained growth was deemed "none of your business". Sadly, we know the results.

Why am I on this rant? Because Southwest is different. No "All 50 States!!". No "prestige routes". No "expanding for the sake of expanding". No "let's branch out into other business ventures because it's trendy right now". There is almost a classic Confucian or Lao Tze level of patience and planning that goes into WN's business model, something most other airlines can't conceive of.

Fuel hedging is a prime example. When fuel prices were low, some critics blasted Southwest for hedging. Then, surprise, surprise!! Fuel prices skyrocketed. And Southwest was almost alone in remaining profitable - because it had thought long term!!

And now Southwest has to "slow its expansion". No big deal. Undoubtedly, there's a contingency plan in place to allow the company to adjust to the new circumstances. No massive lay-offs. No abandoning routes. No creative financing. Just strategic thinking in the company's (and not any one person's) best interest.

Southwest knows they're not immune to problems - they just plan for them ahead of time.



Pan Am:The World's Most Experienced Airline - P(oor) S(ailor's) A(irline): San Diego's Hometown Airline-Catch Our Smile!
User currently offlineN471WN From United States of America, joined Dec 2003, 1584 posts, RR: 2
Reply 3, posted (7 years 5 months 3 weeks 6 days 23 hours ago) and read 3729 times:
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Posts like that from PanAm747 are so refreshing and not all that common....how refreshing it is to read a well written and thought out note like the one PanAm747 just wrote.....measured and intelligent thought on aviation is what this forum is all about!!

User currently offlinePanAm747 From United States of America, joined Feb 2004, 4242 posts, RR: 8
Reply 4, posted (7 years 5 months 3 weeks 6 days 23 hours ago) and read 3678 times:

N471WN, I'm flattered!! Thank you so much - and welcome to my Respected Users list!!

I gained so much from my college classes on China - until then, I never really grasped the concept of "long term" and how it applies to some businesses while not to others. Indeed, it taught me a lot about my finances - and how we hear "Americans are saving less and planning for the future less" as background noise anymore, sad to say.

On the other hand, it is the highest compliment to have someone say "well written and thought out" as well as "measured and intelligent". Thank you again!!



Pan Am:The World's Most Experienced Airline - P(oor) S(ailor's) A(irline): San Diego's Hometown Airline-Catch Our Smile!
User currently offlineSLCUT2777 From United States of America, joined Dec 2005, 4126 posts, RR: 9
Reply 5, posted (7 years 5 months 3 weeks 6 days 23 hours ago) and read 3665 times:

I also second the posts just made by PanAM747 & N471WN. I think WN is working on a newer long term growth strategy that will take WN to 4-5 Canadian provinces from the states, as well as TZ codeshares to Alaska as well as Hawaii not to mention all the big U.S.-Mexico markets such as MEX, CUN, PVR, SJD, ACA etc... I also can't rule out WN growth to the Caribbean starting by 2009 and 2010. I think going to Canada, Mexico and the Caribbean are an integral part of the long-term business plan at WN. And to attract additional customers in the markets they are already in, they will allow people to pre-select a seat at the southwest.com site rather than just being reliant upon hitting the start of the 24 hour window to get a coveted "A-Pass" on line. This way they can pre-board before the infamous herd that gives many people "WN-phobia" and inhibits the growth of WN in established markets.

[Edited 2007-06-05 21:23:52]Fix airport code

[Edited 2007-06-05 21:24:52]HTML correction & spelling

[Edited 2007-06-05 21:26:03]


DELTA Air Lines; The Only Way To Fly from Salt Lake City; Let the Western Heritage always be with Delta!
User currently offlineDfwRevolution From United States of America, joined Jan 2010, 997 posts, RR: 51
Reply 6, posted (7 years 5 months 3 weeks 6 days 23 hours ago) and read 3642 times:

Quoting PanAm747 (Reply 2):
And now Southwest has to "slow its expansion". No big deal. Undoubtedly, there's a contingency plan in place to allow the company to adjust to the new circumstances.

There has been such a plan in place for sometime. It is titled: "Early retirement of the 737 classics." I'm afraid those are all the details I can share.  Wink


User currently offlineVega From , joined Dec 1969, posts, RR:
Reply 7, posted (7 years 5 months 3 weeks 6 days 21 hours ago) and read 3475 times:

Perhaps WN will postpone their intended/demanded physical expansion at PHL for this Fall and solve the overall gate dilemma at the airport. I'm not certain however, if in the long term, that would be a positive for either party.

User currently offlineFreequentFlier From United States of America, joined Feb 2007, 901 posts, RR: 12
Reply 8, posted (7 years 5 months 3 weeks 6 days 16 hours ago) and read 3220 times:

Quoting PanAm747 (Reply 2):
One of the saddest things I have seen happen to businesses of all types in the recent past has been the lack of any long-term planning or strategy. The focus has seemed to become "immediate short-term profit", "make the stockholders happy at ANY cost" and "isolate upper level management from any culpability in the event of a downturn". Enron, for example, saw its growth skyrocket - yet anyone with a basic business background could see that the speculation its growth was based on was temporary (at best). Unfortunately, questions from the investors about "long term" planning or the viability of continued unrestrained growth was deemed "none of your business". Sadly, we know the results.

Please explain, with ACTUAL EXAMPLES, and not mere rhetoric, how WN does anything different than other airlines when it comes to long term planning. If you're resigned to saying, "They hedged oil several years ago!", then 1) those hedges are expiring now and 2) that's all you've got because its the only actual example of it.

Quoting PanAm747 (Reply 2):
Why am I on this rant? Because Southwest is different. No "All 50 States!!". No "prestige routes". No "expanding for the sake of expanding". No "let's branch out into other business ventures because it's trendy right now". There is almost a classic Confucian or Lao Tze level of patience and planning that goes into WN's business model, something most other airlines can't conceive of.

Hmm, any actual examples of airlines flying prestige routes anytime recently? Any "expanding for the sake of expanding" going on lately? Did one of the other airline diversify into soft drinks, flowers or some "other business venture" that I'm seemingly not aware about?

And yes, WN's planning has been excellent lately. Woops!, it actually hasn't been, seeing as how as recently reported, 61 of the 73 markets they've most recently entered are consistent money losers, some of which they have been in for years. But hey, don't let the facts get you down. You were in the middle of a WN rhetorical love affair!

Quoting PanAm747 (Reply 2):
Fuel hedging is a prime example. When fuel prices were low, some critics blasted Southwest for hedging. Then, surprise, surprise!! Fuel prices skyrocketed. And Southwest was almost alone in remaining profitable - because it had thought long term!!

About the only thing I can agree with in this entire puff piece. Of course,its the ONLY thing they've done to show real long term thinking. But credit where its due.

Quoting PanAm747 (Reply 2):
And now Southwest has to "slow its expansion". No big deal. Undoubtedly, there's a contingency plan in place to allow the company to adjust to the new circumstances. No massive lay-offs. No abandoning routes. No creative financing. Just strategic thinking in the company's (and not any one person's) best interest.

Actually, no, there isn't a contingency plan. There's never been a contigency plan. WN seemingly believed it could continue outgrow its increasingly growing fuel bill now that its hedges are expiring. Recent history has shown it can't. Which is why its slowing its expansion now and not earlier (as a well planned company would have) - there's nothing really impressive about their recent market failure rate. And I might add again, several of these markets have existed for several years now. The opportunity to excuse these struggles in the new markets as growing pains has passed.

Quoting PanAm747 (Reply 2):

Southwest knows they're not immune to problems - they just plan for them ahead of time.

Actually they don't. Which is why this possible expansion slowdown is a wait and see, as Kelly basically admited.

This post isn't meant as some sort of gratuitous WN bashing. On net, WN has done wonders for the traveling public. But sorry, I'm not going to let the WN apologists get away with saying everything is hunky dorry there and how wonderful they were at planning when they made one fantastic decision (hedging all their fuel) which has allowed them to evade the real cost of doing business in the industry up until now. And now that the hedges are starting to expire, WN is struggling. I don't care how you spin it - 61 out of 73 market losses is not a sign of a successful company, current, future or otherwise.


User currently offlineWNCrew From United States of America, joined Jun 2006, 1483 posts, RR: 10
Reply 9, posted (7 years 5 months 3 weeks 6 days 16 hours ago) and read 3184 times:

Quoting FreequentFlier (Reply 8):
But sorry, I'm not going to let the WN apologists get away with saying everything is hunky dorry there ....

Name ONE US carrier where things ARE "Hunky Dorry"......

If all else fails I'm sure we can just file for bankruptcy, cut our wages, erase our benefits, get rid of the little we DO offer to our pax, BANISH all our debt, then pay our execs HUGE bonuses, repaint our fleet, farm out our flying, re-do our interiors, re-outfit our disgruntled employees, and try again!



ALL views, opinions expressed are mine ONLY and are NOT representative of those shared by Southwest Airlines Co.
User currently offlineTornado82 From , joined Dec 1969, posts, RR:
Reply 10, posted (7 years 5 months 3 weeks 6 days 15 hours ago) and read 3086 times:

Quoting WNCrew (Reply 9):
Name ONE US carrier where things ARE "Hunky Dorry"......

Right now Continental is probably in better shape looking ~ 5 years into the future than WN is.


User currently offlineAa757first From United States of America, joined Aug 2003, 3350 posts, RR: 8
Reply 11, posted (7 years 5 months 3 weeks 6 days 15 hours ago) and read 3086 times:

Quoting FreequentFlier (Reply 8):

Please explain, with ACTUAL EXAMPLES, and not mere rhetoric, how WN does anything different than other airlines when it comes to long term planning. If you're resigned to saying, "They hedged oil several years ago!", then 1) those hedges are expiring now and 2) that's all you've got because its the only actual example of it.

Keeping an all B737 fleet is long term planning. Their employment strategies (not cutting pay/benefits) also have long term planning involved.

I've never flown Southwest and don't particularly want to, either. But you can't deny that they aren't well managed. They've been a Fortune Top 10 Most Admired Company for ten years now. And they were ranked in 2006 edition as number one in the airline industry for long-term investment and use of corporate assets. And they've been profitable for most of their history. Its a well run company.


User currently offlineFreequentFlier From United States of America, joined Feb 2007, 901 posts, RR: 12
Reply 12, posted (7 years 5 months 3 weeks 6 days 15 hours ago) and read 3044 times:

Quoting Tornado82 (Reply 10):
Right now Continental is probably in better shape looking ~ 5 years into the future than WN is.

 checkmark 

Quoting Aa757first (Reply 11):
Keeping an all B737 fleet is long term planning. Their employment strategies (not cutting pay/benefits) also have long term planning involved.

I've never flown Southwest and don't particularly want to, either. But you can't deny that they aren't well managed. They've been a Fortune Top 10 Most Admired Company for ten years now. And they were ranked in 2006 edition as number one in the airline industry for long-term investment and use of corporate assets. And they've been profitable for most of their history. Its a well run company.

I don't believe I ever said WN was "poorly managed". I am simply referring to those who seem to have a lovefest with WN, and merely pointing out that its unsubstantiated. There's nothing particularly special with how WN is managed, that is the point i'm trying to get across. That is different than saying its poorly managed. And on that topic, I'm not necessarily sure the insistence on a single fleet type is a good idea as it limits expansion to smaller cities etc.


User currently offlineDfwRevolution From United States of America, joined Jan 2010, 997 posts, RR: 51
Reply 13, posted (7 years 5 months 3 weeks 6 days 15 hours ago) and read 3034 times:

Quoting FreequentFlier (Reply 8):
Hmm, any actual examples of airlines flying prestige routes anytime recently?

Airlines fighting hand over fist for China rights and/or making preparations to secure rights to LHR.

Quoting FreequentFlier (Reply 8):
Any "expanding for the sake of expanding" going on lately?

You could point to any number of LCC making highly speculative capacity growth. Say what you will about WN's backlog for 737-700, but at any point they have the option of remaining capacity neutral simply by retiring the eldest 737-300 that aren't far from max cycles anyhow.

Quoting FreequentFlier (Reply 8):
But sorry, I'm not going to let the WN apologists get away with saying everything is hunky dorry

And I don't think anyone is using such colorful (not to mention obnoxious  Yeah sure ) language to describe WN. But if there are any airline in the U.S. that has both the human and financial resources to tackle anything that comes their way: it is Southwest.

Quoting FreequentFlier (Reply 8):
they made one fantastic decision (hedging all their fuel) which has allowed them to evade the real cost of doing business in the industry up until now

And with that, you don't know what you are talking about.


User currently offlineJetJeanes From United States of America, joined Oct 2004, 1431 posts, RR: 1
Reply 14, posted (7 years 5 months 3 weeks 6 days 15 hours ago) and read 3028 times:

Well they certainly cant ask for concessions from its employees or they would be working for free. Its probably best to slow growth as oer the last few years they have really made a long jump,and with new aircraft it only makes sense to slow
down. Maybe pull out of a few cities.



i can see for 80 miles
User currently offlineBrazilExPat From Brazil, joined Jan 2006, 17 posts, RR: 0
Reply 15, posted (7 years 5 months 3 weeks 6 days 14 hours ago) and read 2952 times:

Quoting JetJeanes (Reply 14):

WN employees are some of the highest paid in the industry. There's a lot to be conceded if necessary.


User currently offlineFreequentFlier From United States of America, joined Feb 2007, 901 posts, RR: 12
Reply 16, posted (7 years 5 months 3 weeks 6 days 14 hours ago) and read 2935 times:

Quoting DfwRevolution (Reply 13):
You could point to any number of LCC making highly speculative capacity growth. Say what you will about WN's backlog for 737-700, but at any point they have the option of remaining capacity neutral simply by retiring the eldest 737-300 that aren't far from max cycles anyhow.

You mean what WN has been doing (again, 61 out of 73 most recent routes are unprofitable) HASN'T been "speculative capacity growth"?

Quoting DfwRevolution (Reply 13):

And with that, you don't know what you are talking about.

I really don't want to get into a bickering fight with you, but if you think China routes are done for prestige (as you have said in your previous response), you seriously have no idea what you're talking about.


User currently offlineTornado82 From , joined Dec 1969, posts, RR:
Reply 17, posted (7 years 5 months 3 weeks 6 days 14 hours ago) and read 2914 times:

Quoting DfwRevolution (Reply 13):

Airlines fighting hand over fist for China rights and/or making preparations to secure rights to LHR.

There's a loss of credibility. LHR is the high yielding option for London (think LGA on a much more grandiose scale) and China routes are cash cows. How are those examples of looking for prestige? It's looking for MONEY!


User currently offlineCslusarc From Canada, joined May 2005, 842 posts, RR: 0
Reply 18, posted (7 years 5 months 3 weeks 6 days 12 hours ago) and read 2812 times:

Quoting Tornado82 (Reply 17):
and China routes are cash cows

Well USA-China routes aren't cash cows for Chinese carriers, just look at how many frequencies remain unallocated amongst them.



--cslusarc from YWG
User currently offlineEA CO AS From United States of America, joined Nov 2001, 13704 posts, RR: 61
Reply 19, posted (7 years 5 months 3 weeks 6 days 11 hours ago) and read 2771 times:
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Quoting BrazilExPat (Reply 15):
WN employees are some of the highest paid in the industry. There's a lot to be conceded if necessary.

And - not to stir the pot further - they're also the most productive in the industry (based on the employees to passengers boarded ratio).

This is great, but ALSO has a downside. It means there's not much WN could gain in terms of productivity increases during future collective bargaining negotiations, which is where most airlines negotiate - they ask for 'cost-neutral' contracts that involve pay increases that only come with eliminating or modifying costly workrules that improve productivity per employee.

In other words, other airlines can fall back on paying more per employee while asking them to work harder. WN will have a hard time asking their people to work harder in exchange for the inevitable pay increases they'll ask for.



"In this present crisis, government is not the solution to our problem - government IS the problem." - Ronald Reagan
User currently offlineFlyPNS1 From United States of America, joined Nov 1999, 6694 posts, RR: 24
Reply 20, posted (7 years 5 months 3 weeks 6 days 5 hours ago) and read 2678 times:

Quoting FreequentFlier (Reply 12):
There's nothing particularly special with how WN is managed, that is the point i'm trying to get across.

You say there's nothing special, but the facts say otherwise.

In the past 20 years, how many major airlines have filed for bankruptcy (CH 11 or 7)?

Pan Am, Eastern, Continental, TWA, America West, USAirways, United, Delta, Northwest

In the past 20 years, how many major airlines have NOT filed for bankruptcy?

American and Southwest.

(Note: I left out a some of the smaller LCC's whose histories are really too short to evaluate).

In the past 20 years, how many major airlines have had labor turmoil with employees picketing and threatening a strike?

Basically all of them, except for Southwest.

In the past 20 years, how many major airlines have remained consistently profitable?

NONE....except for Southwest.

Clearly WN's management must be doing something different (or special) to avoid all of the problems that have befallen almost every other airline. That's not to say WN doesn't face challenges ahead. They absolutely do. The next few years may very well be some of the most challenging in WN's history. But to say WN's management hasn't done something special is foolish.


User currently offlineSLCUT2777 From United States of America, joined Dec 2005, 4126 posts, RR: 9
Reply 21, posted (7 years 5 months 3 weeks 6 days 3 hours ago) and read 2606 times:

Quoting Cslusarc (Reply 18):
Well USA-China routes aren't cash cows for Chinese carriers, just look at how many frequencies remain unallocated amongst them.

Since they've all focused on NYC-JFK and LAX as they're ports of destination in the U.S. rather than elsewhere, they've just kept the U.S. flag majors out.

Quoting FlyPNS1 (Reply 20):
Clearly WN's management must be doing something different (or special) to avoid all of the problems that have befallen almost every other airline. That's not to say WN doesn't face challenges ahead. They absolutely do. The next few years may very well be some of the most challenging in WN's history. But to say WN's management hasn't done something special is foolish.

 checkmark  WN is at a crossroads in their forward planning. They are looking outside the box, something many thought would never happen back in the 1990s. They've taken advantage of getting into airports everyone thought would never happen (PHL, SFO, DEN etc...). I think such change at WN is good. They can use their low-cost model and go virtually anywhere they shrewdly think will work in the long term. They may not be making much in some markets they are in, but I don't see them giving up on any of these any time soon.



DELTA Air Lines; The Only Way To Fly from Salt Lake City; Let the Western Heritage always be with Delta!
User currently offlineL410Turbolet From Czech Republic, joined May 2004, 5741 posts, RR: 19
Reply 22, posted (7 years 5 months 3 weeks 7 hours ago) and read 2362 times:

Southwest's website says:

"We are currently accepting reservations through November 02, 2007"

This message has been on their web for the past 2-3 months. Does anyone know when it will be possible to book a flight for a post-November 2nd date?


User currently offlineN801NW From United States of America, joined Jul 2004, 744 posts, RR: 1
Reply 23, posted (7 years 5 months 3 weeks 7 hours ago) and read 2330 times:

We are currently accepting air reservations through November 2, 2007. On June 28, we plan to open the schedule for purchase through January 16, 2008. This date is subject to change! Please check back frequently.

http://www.southwest.com/travel_cent.../travel_center.html?ref=trvltls_gn


User currently offlineLuvfa From United States of America, joined May 2005, 447 posts, RR: 4
Reply 24, posted (7 years 5 months 3 weeks 3 hours ago) and read 2245 times:

Quoting EA CO AS (Reply 19):
This is great, but ALSO has a downside. It means there's not much WN could gain in terms of productivity increases during future collective bargaining negotiations, which is where most airlines negotiate - they ask for 'cost-neutral' contracts that involve pay increases that only come with eliminating or modifying costly workrules that improve productivity per employee

I know that each station is going through an audit process for the next 2 years, starting witrh our busiest stations first and working its way down the line. This is all among the lines of increasing productivity. While our costs for employees may be highest in the industry, nobody is better than us in productivity!


25 Pellegrine : Well arguably most of the high-yielding traffic in the US-China market is of US origin. Americans prefer US carriers, especially since Chinese ones a
26 Flighty : This is off topic, but another reason in addition to what you wrote is that the US State Dept does not grant very many entry visas to China citizens.
27 AmtrakGuy : Where can I get to read the actual report on this? This has been reported last few weeks by several money mangers but how could they know? Has Southw
28 FreequentFlier : It can determined fairly accurately by going through WN's 10K report. Wall Street people are fairly good at determining profitability at each station
29 EA CO AS : Agreed - but again, this poses a problem from the standpoint that there's only so much productivity that you can squeeze out of your workers, and WN
30 Post contains links Mariner : In this article in The Street.com, the problems are laid out fairly simply, and some of the McAdoo analysis is presented - that many of the new marke
31 Surfdog75 : I agree that WN had an excellent business plan and has been the best managed of the domestic carriers. With that said, I also believe that WN was the
32 Post contains images Steeler83 : I also agree that I can see this happening as well, and sooner as opposed to later. That's where any real money-making will happen IMO. The US domest
33 RDUDDJI : IMO WN would be smart to slow growth a little. The problem that WN is facing IMO is lack of a way to increase their revenue without a significant chan
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