Jmc1975 From Israel, joined Sep 2000, 3159 posts, RR: 17 Posted (5 years 5 months 2 weeks 1 day 4 hours ago) and read 3051 times:
Southwest has made it public that they are seeking methods to increase revenue in an environment of shrinking domestic demand. It got me thinking about ExpressJet and how they can actually fill a niche that Southwest can't efficiently with their 737s. ExpressJet (XJet brand) is already servicing a number of Southwest markets without competing directly against them....a connecting of their dots so to speak.
If Southwest would operate ExpressJet as a wholly-owned subsidiary, not only could they connect the dots of their existing network, but they could enter new markets. By following their current business model of only adding markets if they can have 10 flights per day or more, they could essentially double the number of destinations served with their 244 (minus 30 ERJ-135s) ERJ-145s. There is the potential for significant ancillary cost synergies (i.e. airport facilities, provisioning, ground crews, fuel hedging etc.) and revenue synergies (connecting into eachother's network) all while slightly reducing competiton.
With a market value of approximately $160million, ExpressJet is well within the reach of Southwest if they would deem such a transaction would bring long-term profitablility. The overall network benefit would have to offset the CASM disadvantage that ExpressJet has to offer. Also, the phasing out of the ERJ-135s would be a logical step in minimizing CASM. Keep in mind, this could only happen if Continental and Delta terminate their existing agreements with ExpressJet for any reason. With Continental's Q400s coming online soon and American Eagle being divested of, the landscape of regional airlines is about to undergo a transformation.
PavlovsDog From Norway, joined Sep 2005, 655 posts, RR: 0 Reply 1, posted (5 years 5 months 2 weeks 1 day 4 hours ago) and read 3041 times:
ExpressJet, with their high CASM, is not a good fit for Southwest. RJ's have an inherently high cost structure so you'd have to run them un longish, thin, high-yielding routes to have a chance to make any money. There just aren't that many such routes out there. Personally, I think WN would be better served to get some larger turboprops to serve smaller markets. There are so many smallish (250,000-1,000,000) cities without direct service between them that I imagine there is a market. SK has a number of suitable aircraft for sale.
Jmc1975 From Israel, joined Sep 2000, 3159 posts, RR: 17 Reply 2, posted (5 years 5 months 2 weeks 1 day 3 hours ago) and read 2991 times:
Quoting PavlovsDog (Reply 1): ExpressJet, with their high CASM, is not a good fit for Southwest. RJ's have an inherently high cost structure so you'd have to run them un longish, thin, high-yielding routes to have a chance to make any money.
Southwest's average stage length is 630 miles. I wouldn't expect a Southwest-owned ExpressJet to be much shorter.
Sean-SAN- From United States of America, joined Aug 2002, 752 posts, RR: 1 Reply 3, posted (5 years 5 months 2 weeks 1 day 3 hours ago) and read 2940 times:
RJ's only make sense economically when they can feed high revenue traffic into hubs onto connecting flights. Doing point to point from one Podunk city to the next won't cut it.
PanAm747 From United States of America, joined Feb 2004, 4242 posts, RR: 10 Reply 4, posted (5 years 5 months 2 weeks 15 hours ago) and read 2591 times:
I doubt you will see Southwest buying ExpressJet - especially since ExpressJet is doing so much flying for other airlines right now!!
On the other hand, ExpressJet is functioning as a smaller version of Southwest here in California - connecting a lot of cities point-to-point that hub airlines cannot do. Using a modified version of the WN model - quick turn-arounds, simple rewards systems, and routes with little or no competition - XJet is filling a niche that others cannot do.
As far as any "cooperation" between the two airlines, I think you will first see a joint marketing combination, such as WN has with ATA - however, this first step is probably not likely, as XJet doesn't even connect flyers on its OWN flights, much less anyone else's. If you want to connect on an XJet plane, you will go through DL or CO - not through XJet directly.
Pan Am:The World's Most Experienced Airline - P(oor) S(ailor's) A(irline): San Diego's Hometown Airline-Catch Our Smile!
Srbmod From United States of America, joined Mar 2001, 16888 posts, RR: 51 Reply 5, posted (5 years 5 months 2 weeks 13 hours ago) and read 2429 times:
So XE is this week's airline de jour in the Southwest Buying (Insert Airline Here) rumor?
Southwest is not going to be buying any airline anytime in the near future. WN will grow using their own a/c, not with someone else's fleet. Besides, WN has already rejected the idea of regional jets in their fleet (Even the E-Jets).
AirframeAS From United States of America, joined Feb 2004, 14150 posts, RR: 26 Reply 6, posted (5 years 5 months 2 weeks 13 hours ago) and read 2395 times:
Quoting Srbmod (Reply 5): So XE is this week's airline de jour in the Southwest Buying (Insert Airline Here) rumor?
Or any (Insert Airline Here) Buying (Insert Airline Here) as well.
A Safe Flight Begins With Quality Maintenance On The Ground.
Futurecaptain From , joined Dec 1969, posts, RR: Reply 8, posted (5 years 5 months 2 weeks 12 hours ago) and read 2259 times:
Quoting AirframeAS (Reply 6): Or any (Insert Airline Here) Buying (Insert Airline Here) as well.
Well, pretty much all the little guys are potentials for hostile takeovers. Many majors have enough cash on hand to buy out other airlines today if they wanted. Nothing is impossible.
Market Caps:
Alaska: $1.07 billion
Air Tran: $749 million
Frontier: $213 million
Hawaiian: $239 million
Jet Blue: $1.2 million
Now, just look at how much cash the majors keep on hand right now. (as of last quarterly data on yahoo)
Southwest: $1 billion
American: $685 million
Continental: $2.7 billion
Delta: $2.1 billion
Northwest: $2.3 billion.
United: $1.6 billion
US Airways: $690 million
I'm just waiting for the industry to work itself out. There are too many players and the legacies could outright purchase the smaller airlines if they wanted. It's only a matter of time IMO.
Edit: I realize business is alot more than Market Caps and Cash flows, and takeovers involve alot more than writing a check. But as a basic example I think this works to show just how mergers could happen anywhere.
Alangirvan From New Zealand, joined Nov 2000, 2091 posts, RR: 1 Reply 9, posted (5 years 5 months 2 weeks 11 hours ago) and read 2216 times:
When Southwest looks at a new city, the city must be a minimum size to let Southwest operate its smallest planes there with the frequency Southwest wants to give the city. So Omaha gets the service, and Des Moines misses out, because not quite big enough. So Des Moines residents have to drive a few miles to their nearest Southwest Airport.
Doesn't McDonald's have some stores that are designed for smaller places that do not have the catchment area that McD's require?
If Southwest changed the habits of a lifetime, and worked with a partner airline that used planes that are smaller than Southwest's fleet, Southwest would be entitled to be a demanding partner. If a partner airline wants to try using Q400s or CRJs or E-Jets, the partner will have to show Southwest that the costs are better than Southwest could achieve with their own planes. If you are talking about smaller cities, that are perhaps 350 miles from a Southwest hub, maybe those costs are possible with a Q400. There may be some cities where the E-190 with 98 seats will give better frequencies than 737-500s. Would the partner be good enough for Southwest to call them Southwest Link or Southwest Link? If the partner wants to work with Southwest, they will have to be good enough.
MtnWest1979 From United States of America, joined Nov 2005, 2121 posts, RR: 1 Reply 10, posted (5 years 5 months 2 weeks 10 hours ago) and read 2099 times:
Gee , I heard that we were going to buy/cooperate with WestJet of Canada. That I'd like to see.
Avek00 From United States of America, joined Oct 2004, 4092 posts, RR: 18 Reply 11, posted (5 years 5 months 2 weeks 6 hours ago) and read 1918 times:
Quoting Futurecaptain (Reply 8): Now, just look at how much cash the majors keep on hand right now. (as of last quarterly data on yahoo)
Southwest: $1 billion
American: $685 million
Continental: $2.7 billion
Delta: $2.1 billion
Northwest: $2.3 billion.
United: $1.6 billion
US Airways: $690 million
AMR had $5.8 BILLION in cash at the end of Q3 2007.
SkyexRamper From , joined Dec 1969, posts, RR: Reply 13, posted (5 years 5 months 2 weeks 6 hours ago) and read 1840 times:
Why would SWA want to spend $160 Million on a company of ERJs when they could spend $160M at Boeing or possibly try getting their feet wet in Caribbean market.
Jmc1975 From Israel, joined Sep 2000, 3159 posts, RR: 17 Reply 14, posted (5 years 5 months 2 weeks 5 hours ago) and read 1802 times:
Quoting SkyexRamper (Reply 13): Why would SWA want to spend $160 Million on a company of ERJs when they could spend $160M at Boeing or possibly try getting their feet wet in Caribbean market.
And buy 3 new 737-700s? And getting their feet wet on a Caribbean beach wouldn't necessarily generate $2 billion of additional annual revenue would it?
MasseyBrown From United States of America, joined Dec 2002, 4725 posts, RR: 7 Reply 15, posted (5 years 5 months 2 weeks 4 hours ago) and read 1775 times:
CO holds the master lease on all of Expressjet's planes. Can't see how WN would be interested in that sort of deal.
N1120A From United States of America, joined Dec 2003, 25852 posts, RR: 79 Reply 16, posted (5 years 5 months 2 weeks 4 hours ago) and read 1765 times:
Quoting Sean-SAN- (Reply 3): RJ's only make sense economically when they can feed high revenue traffic into hubs onto connecting flights.
And considering that WN already enjoys among the highest yields in the domestic market, don't think RJs would help
Quoting Alangirvan (Reply 9): When Southwest looks at a new city, the city must be a minimum size to let Southwest operate its smallest planes there with the frequency Southwest wants to give the city. So Omaha gets the service, and Des Moines misses out, because not quite big enough. So Des Moines residents have to drive a few miles to their nearest Southwest Airpor
Des Moines is roughly the same size as Jackson and Spokane, which are Southwest cities.
Quoting Jmc1975 (Reply 14): And getting their feet wet on a Caribbean beach wouldn't necessarily generate $2 billion of additional annual revenue would it?
It wouldn't necessarily generate $2.2 billion in costs either
Mangeons les French fries, mais surtout pratiquons avec fierte le French kiss
XT6Wagon From United States of America, joined Feb 2007, 3130 posts, RR: 4 Reply 17, posted (5 years 5 months 2 weeks 4 hours ago) and read 1732 times:
I think its a safe bet that if WN wanted a "feeder" airline for the markets too small to serve with 737-700... It would be simple, they would order Q400, and simply make their own sub-company to handle it. Far easier than trying to force a square peg in a round hole as it were, with all the issues in trying to make buying a company work.
I'm somewhat surprised that WN hasn't been sniffing around some of the smaller airlines like Frontier. Possibly a stupid cheap way to get market share and less competition. Start out with it remaining separate, then as 737-700 arrive from Boeing, start moving routes to WN metal. Surplus Airbus's go on the market for companies overseas to pickup. WN thus gets gates, counter space, routes, etc and the time to convert them to WN operations. My guess is their current focus on evaluation and correction of the current company policies is keeping it out of their thoughts.
BooDog From United States of America, joined Nov 2007, 253 posts, RR: 0 Reply 19, posted (5 years 5 months 1 week 6 days 23 hours ago) and read 1650 times:
Quoting OPNLguy (Reply 18): I think that's a little low; Billions, perhaps?
I always wondered if WN could make a true regional airline work down in Texas. I'll use ABI for example. Take some Q200's and do 5xDAL, 3x HOU, 2xAUS, 1xELP. If they keep the regional within AR, LA, NM, OK and TX, I could see this working.
Lrdc9 From United States of America, joined Sep 2007, 609 posts, RR: 0 Reply 20, posted (5 years 5 months 1 week 6 days 14 hours ago) and read 1493 times:
Quoting Futurecaptain (Reply 8): Well, pretty much all the little guys are potentials for hostile takeovers. Many majors have enough cash on hand to buy out other airlines today if they wanted. Nothing is impossible.
Market Caps:
Alaska: $1.07 billion
Air Tran: $749 million
Frontier: $213 million
Hawaiian: $239 million
Jet Blue: $1.2 million
Now, just look at how much cash the majors keep on hand right now. (as of last quarterly data on yahoo)
Southwest: $1 billion
American: $685 million
Continental: $2.7 billion
Delta: $2.1 billion
Northwest: $2.3 billion.
United: $1.6 billion
US Airways: $690 million
Wait. Why is AA and US able to buy the so called small fries out with AS and AT and B9(1.2 b) with higher caps. I think you need to make a switch.
Lrdc9 From United States of America, joined Sep 2007, 609 posts, RR: 0 Reply 22, posted (5 years 5 months 1 week 6 days 13 hours ago) and read 1439 times:
RFields5421 From United States of America, joined Jul 2007, 6150 posts, RR: 25 Reply 23, posted (5 years 5 months 1 week 6 days 13 hours ago) and read 1384 times:
Quoting XT6Wagon (Reply 17): I'm somewhat surprised that WN hasn't been sniffing around some of the smaller airlines like Frontier. Possibly a stupid cheap way to get market share and less competition.
I'm sure they have looked at the possibilities.
But SW has the simplest, smartest operational plan in the airline business in the US today, and their track record proves they do their homework before expanding, or making other changes.
Since they've already announced they are slowing deliveries of new aircraft in 2008 because they don't the market is going to support that much growth / cost next year - I'd say they chances of buying anything a between Nil and Zero.
I may not like or a lot of things they do - but danged - you have to admit they are smart and do know the business.
Rikkus67 From Canada, joined Jun 2000, 1464 posts, RR: 2 Reply 24, posted (5 years 5 months 1 week 6 days 11 hours ago) and read 1306 times:
Quoting MtnWest1979 (Reply 10): Gee , I heard that we were going to buy/cooperate with WestJet of Canada. That I'd like to see.
Tim Hortons US owned - Wendy's - but not for long
Hudsons Bay Company (oldest continual company in the world, DBA the Bay, Zellers, Home Outfitters, Design Depot, and Fields) - owned by USA company
Woolco (Canada) - taken over by Wal-Mart
Canadi>n Airlines International (when it was still around) - was 25% owned by American Airlines
ANY major restaurant or retail chain from USA, yup, in Canada....
OK big brother, I would rather like to keep Westjet as the airline that carries the "Proudly Canadian" logo WHEREVER they fly....
...international codeshare though? well yah, that's cool...
Cessna 172; King Air 100; Twin Otter; SAAB 340; Dash 7; Dash 8-100,-200,-300,-400; CRJ-200,700,900; ERJ-170; F-28; DC 9-
25 N1120A: Actually, not exactly. First, Tim Hortons was already spun off, so it is no longer part of Wendy's International. Second, after the merger between TH
26 Eghansen: That's funny!!! Southwest started as a true regional airline in Texas before deregulation. Remember the go-go boots?
27 SkyexRamper: Read NUTS! It will make you understand just who Southwest is and will hopefully stay. It's a great book, however if you work for any other airline it
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