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WN Masterplan In The Works?  
User currently offlineSurfrider1978 From United States of America, joined Jan 2008, 292 posts, RR: 0
Posted (6 years 7 months 3 days 5 hours ago) and read 4682 times:

Found this quote from another thread. This is the first I have heard of this, can anyone shed light on this?

"The biggest mystery of all halting a $500 million stock buyback program at $54 million then borrowing $600 million makes one wonder if they are they preparing to fend off a buyout."

26 replies: All unread, showing first 25:
 
User currently offlineChrisNH From United States of America, joined Jun 1999, 4163 posts, RR: 2
Reply 1, posted (6 years 7 months 3 days 5 hours ago) and read 4653 times:

I think the chances of Southwest being bought out pale in comparison to the chances that Southwest buys someone out itself. I think it is almost a sure thing that Southwest is the acquiring party rather than the acquired one.

User currently offlineMariner From New Zealand, joined Nov 2001, 25687 posts, RR: 85
Reply 2, posted (6 years 7 months 3 days 5 hours ago) and read 4606 times:
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Quoting ChrisNH (Reply 1):
I think it is almost a sure thing that Southwest is the acquiring party rather than the acquired one.

Southwest CEO Kelly has said he has no interest in either, as he explained in the NY Times. It's subscription, but here's the relevant stuff:

NYT/Kelly: "Mr. Kelly said his interest in an acquisition, tepid to begin with, had all but vanished because of rising fuel prices. Southwest does not have enough fuel hedges to protect a merger partner, so it would inevitably be buying a money-losing operation.

“My enthusiasm for that is just not there,” he said. “The thought of simply acquiring outright another airline that is destined to lose money this year just doesn’t seem like a good opportunity.”


But it may be interesting that although he doesn't want to acquire "outright" - I guess he could mean he might have some interest in a partial deal, as they did with ATA?

mariner



aeternum nauta
User currently offlineSPREE34 From United States of America, joined Jun 2004, 2264 posts, RR: 9
Reply 3, posted (6 years 7 months 3 days 4 hours ago) and read 4524 times:

Money to buy parts of another carrier that, 1. goes bankrupt, 2. sells off assets to avoid bankruptcy, or 3. parts being divested by other carriers in a merger.

Could also be for a stock buy in Wild Turkey.



I don't understand everything I don't know about this.
User currently offlineAeroman62 From United States of America, joined Jan 2004, 158 posts, RR: 0
Reply 4, posted (6 years 7 months 3 days 2 hours ago) and read 4285 times:

If F9 shuts down/chapter 7 liquidation, WN could buy lots of ground assets at DEN with this money, as well as the slots to operate DEN/LGA and DEN/DCA - not usually WN's model, but times are changing, and WN is going to need to evolve as well. Another target might be Air Tran assets or the carrier outright, however to the points above, fuel is the big trump card in all of this.

User currently offlineTylerDurden From United States of America, joined May 2008, 852 posts, RR: 0
Reply 5, posted (6 years 7 months 3 days 2 hours ago) and read 4241 times:



Quoting Aeroman62 (Reply 4):
If F9 shuts down/chapter 7 liquidation,

Pretty much a question of when, not if. And yes, I imagine that WN will move and expand quite rapidly at DEN. Will be great market for them.


User currently offlineTxAgKuwait From United States of America, joined Aug 1999, 1803 posts, RR: 42
Reply 6, posted (6 years 7 months 3 days 2 hours ago) and read 4217 times:



Quote:
as well as the slots to operate DEN/LGA and DEN/DCA - not usually WN's model

If you went back a ways...to 1971, to be exact...you might be surprised that Southwest's model is not what you think.

A lot of people on a.net as well as other chat/message boards seem to think that Southwest is the airline of the dispossessed...that it is only interested in serving out of the way airports at low discount prices.

Southwest was founded primarily as an airline for business people. The Dallas - Houston - San Antonio markets consisted almost exclusively of people who would fly down for a meeting (or series of meetings) and fly right back, often the same day.

Southwest elected to serve Hobby in Houston (and later Love Field in Dallas when DFW opened) not because they were cheaper, or because they were out of the way. Quite the contrary. They wanted to be in those airports because they were the airports CLOSEST TO DOWNTOWN. You know, like Petula Clark sang about. Downtown is where all the action is, it was where the business traveler wanted to end up.....and they wanted to be able to go from Dallas to Houston not from Grapevine to Conroe.

Unfortunately, the new Denver airport (or "Western Kansas International, as I occasionally call it) is the only game in town since folks in the greater Denver area would rather sell the front range to Texans rather than allow commercial service in/out of Centennial.....but at the other end LaGuardia and Washington National are two markets that Southwest would dearly love to participate in.

Despite their predilection for building new markets....shocking them awake with lower fares and higher frequency....Southwest has never been about giving away seats a la Ryan Air. Instead, their fare system has always been about value. They charge not what the market will bear, but what makes sense based upon their costs and the availability/desirability of competing modes of travel. Under good conditions Houston to Dallas is 4 hrs or so on Interstate 45.....Between 12 and 15 gallons of gas (let's call it $50 worth). Southwest gets about $109 or so for the flight.....not a bargain, but it's cheap enough that it generates close to 4000 O&D passengers per day.

At first I thought that WN was getting the money to buy some hedges. Then it occurred to me that they might be looking very seriously at trying to buy some assets spun off as a result of mergers OR buy some assets being liquidated as part of a chapter 7 in the bankruptcy courts.

The only other thing I can think of as a viable possibility is that Southwest is buying oil & gas production. Generally speaking, it is possible to buy oil and gas royalties, depending on the field and the expected longevity of the oil and/or gas one can expect to pay roughly 48 to 60 times the net revenue generated in a month.

Like I told OPNL_Guy....if they want to look at buying some production, they ought to holler at me. Since my retirement from the Army I am back to doing Geology/Petroleum Engineering type stuff and I am in the phone book. I'd be glad to give them some advice for a pass or two. I'd even settle for NRSA.


User currently offlineMMEPHX From , joined Dec 1969, posts, RR:
Reply 7, posted (6 years 7 months 3 days 1 hour ago) and read 4192 times:



Quoting Surfrider1978 (Thread starter):
"The biggest mystery of all halting a $500 million stock buyback program at $54 million then borrowing $600 million makes one wonder if they are they preparing to fend off a buyout."

...or just stock piling liquid assets to see them through the rough times ahead with oil at $120+ (OK, some hedges for WN)

Smart move WN, get debt cheap when you don't really need it for the day you do...there's some sharp cookies over at Southwest.


User currently offlineSurfrider1978 From United States of America, joined Jan 2008, 292 posts, RR: 0
Reply 8, posted (6 years 7 months 2 days 12 hours ago) and read 3888 times:

They definately have a card up their sleeve and im so curious as to when something will happen.

Quoting Surfrider1978 (Thread starter):
The only other thing I can think of as a viable possibility is that Southwest is buying oil & gas production. Generally speaking, it is possible to buy oil and gas royalties, depending on the field and the expected longevity of the oil and/or gas one can expect to pay roughly 48 to 60 times the net revenue generated in a month.

This would be the smartest damn move I can imagine.

Quoting Aeroman62 (Reply 4):
Another target might be Air Tran assets or the carrier outright, however to the points above, fuel is the big trump card in all of this.

If fuel were not such a killer, I think a buyout of AirTran would be a perfect fit for WN, and give them an in at ATL with a decent ammount of gates.


User currently offlineSeeTheWorld From United States of America, joined Dec 2005, 1325 posts, RR: 4
Reply 9, posted (6 years 7 months 2 days 12 hours ago) and read 3873 times:

Slots at DCA is United/US Airways merge.

User currently offlineFlyPNS1 From United States of America, joined Nov 1999, 6729 posts, RR: 24
Reply 10, posted (6 years 7 months 2 days 12 hours ago) and read 3806 times:



Quoting Aeroman62 (Reply 4):
WN could buy lots of ground assets at DEN with this money, as well as the slots to operate DEN/LGA and DEN/DCA - not usually WN's model,

Technically, I don't believe that the DCA-DEN slots can be bought. F9's DCA slots are special provision beyond perimeter slots that they had to apply for. If F9 went out of business, those slots would be returned to the pool and the DOT would hold a new competitve proceeding.

With that said, if US/UA merger and divest of DCA slots, I wouldn't be surprised to see WN go shopping.


User currently offlineAirbazar From United States of America, joined Sep 2003, 8645 posts, RR: 10
Reply 11, posted (6 years 7 months 2 days 12 hours ago) and read 3740 times:



Quoting Mariner (Reply 2):
I guess he could mean he might have some interest in a partial deal, as they did with ATA?

And how well did that work out for them? I don't think we'll WN in any aquisition/merger deal any time soon.

Quoting TxAgKuwait (Reply 6):
A lot of people on a.net as well as other chat/message boards seem to think that Southwest is the airline of the dispossessed...that it is only interested in serving out of the way airports at low discount prices.

That sounds more like Ryanair than Southwest. WN is rarely cheaper than the competition and they fly into some major urban areas.


User currently offlinePar13del From Bahamas, joined Dec 2005, 7625 posts, RR: 8
Reply 12, posted (6 years 7 months 2 days 11 hours ago) and read 3681 times:



Quoting Airbazar (Reply 11):
That sounds more like Ryanair than Southwest. WN is rarely cheaper than the competition and they fly into some major urban areas.

If you really want to see how low a fare WN has, try to walk up to the counter in any city served by them and multiple carriers and see what you get.

Historically, WN has had the lowest or in more accurate terms the best value for money, you are not likely to sit in a seat that you paid $500.00 for beside someone who pay $50.00 a month ago.

I hope they are using the raised capital to stablize and maintain the business model, their hedges have shown them to be the one carriers whose main interest is the business of flying pax from point A to B. They should have no reason to buy equipment/slots from failed or dying carriers, these can be obtained on the open market. If UA for example wants to buy up slots to prevent there further progress in the market, its their money to loose as they now have to service the route or loose them.


User currently offlineItalianFlyer From United States of America, joined Nov 2007, 1099 posts, RR: 2
Reply 13, posted (6 years 7 months 2 days 11 hours ago) and read 3610 times:

Seems that they are keeping their unrestricted cash balance high so the can hedge fuel at competitive rates out another 4 to 6 years. Kind of scary when they folks in the Crystal Palace are thinking $100 plus a barrel may be a "bargin" in a few years  Confused

User currently offlineSurfrider1978 From United States of America, joined Jan 2008, 292 posts, RR: 0
Reply 14, posted (6 years 7 months 2 days 11 hours ago) and read 3608 times:

what are the current daily flights now with the additional SFO and now the OMA flights from DEN?

User currently offlineAirbazar From United States of America, joined Sep 2003, 8645 posts, RR: 10
Reply 15, posted (6 years 7 months 2 days 10 hours ago) and read 3542 times:



Quoting Par13del (Reply 12):
If you really want to see how low a fare WN has, try to walk up to the counter in any city served by them and multiple carriers and see what you get.

True for walk-up fares but that is what the LCC is all about. Not true for advanced reservations. I just bought tickets to MCO, about 3 weeks in advance and US, DL and FL were all cheaper than WN. I have never flown with WN because I have never found a cheaper fare on WN. Say what you want but in my experience WN has never had the cheaper fare. That's not necessarily a bad thing. I'm just reporting what my experience has been.


User currently offlinePar13del From Bahamas, joined Dec 2005, 7625 posts, RR: 8
Reply 16, posted (6 years 7 months 2 days 9 hours ago) and read 3459 times:



Quoting Airbazar (Reply 15):
True for walk-up fares but that is what the LCC is all about. Not true for advanced reservations. I just bought tickets to MCO, about 3 weeks in advance and US, DL and FL were all cheaper than WN. I have never flown with WN because I have never found a cheaper fare on WN. Say what you want but in my experience WN has never had the cheaper fare. That's not necessarily a bad thing. I'm just reporting what my experience has been

Now you understand the fallacy of those who say WN does not cater to business traveller's, who's more likely to book weeks in advance and whose more likely to just show up at the airport or have to change their time and date of departure, WN has all those covered without exorbitant charges.

I agree that they are not always the cheapest, but you should also bear in mind that the legacy carriers who now offer competitive fares are doing so after Chpt.11 allowed them to "trim the fat", and presently, if they could raise fares back to their previous levels they would do so in a shot, the increase in fuel prices has created additional pressure.


User currently offlineCschleic From United States of America, joined Feb 2002, 1301 posts, RR: 0
Reply 17, posted (6 years 7 months 2 days 8 hours ago) and read 3158 times:

Wasn't borrowing the $600 million a drawdown of unused availability on an existing credit line? Could be building cash reserves while they can easily, to get them through the current economic environment.

Lots of public companies were buying back stock the last couple of years, some even borrowing to do it, if their overall debt levels and credit agreements allowed them to do it. But many have slowed those purchases or even stopped them altogether as either their stock prices have come back a bit, or they need to retain the cash for other purposes, including generally slowing business.


User currently offlineEXAAUADL From , joined Dec 1969, posts, RR:
Reply 18, posted (6 years 7 months 2 days 8 hours ago) and read 3105 times:



Quoting Aeroman62 (Reply 4):
If F9 shuts down/chapter 7 liquidation, WN could buy lots of ground assets at DEN with this money, as well as the slots to operate DEN/LGA and DEN/DCA - not usually WN's model, but times are changing, and WN is going to need to evolve as well. Another target might be Air Tran assets or the carrier outright, however to the points above, fuel is the big trump card in all of this.

Wow, this post like most of the others misses the point completely. WN can be bought out..not by an airline but by a group of investors, like what Donald Trump tried to do to AMR in 1989


User currently offlineBNAtraveler From United States of America, joined Dec 2003, 412 posts, RR: 2
Reply 19, posted (6 years 7 months 2 days 7 hours ago) and read 3040 times:
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Quoting Cschleic (Reply 17):
Wasn't borrowing the $600 million a drawdown of unused availability on an existing credit line? Could be building cash reserves while they can easily, to get them through the current economic environment.

No. Southwest took a loan for $600M on favorable terms IN ADDITION to their $600M line of credit (none of which is currently drawn).


User currently offlinePar13del From Bahamas, joined Dec 2005, 7625 posts, RR: 8
Reply 20, posted (6 years 7 months 2 days 7 hours ago) and read 2993 times:



Quoting EXAAUADL (Reply 18):
Wow, this post like most of the others misses the point completely. WN can be bought out..not by an airline but by a group of investors, like what Donald Trump tried to do to AMR in 1989

Correct, buying back some of your shares does improve your chances of fighting off a un-friendly take over. It can also be used to decrease the amount of pressure your own share holders can place on you, as in I want you to have assigned seating like the other carriers, when one considers the number of persons who post on various forums about the "cattle call" we can almost be certain some of then are shareholders.


User currently offlineSurfrider1978 From United States of America, joined Jan 2008, 292 posts, RR: 0
Reply 21, posted (6 years 7 months 2 days 7 hours ago) and read 2704 times:



Quoting Par13del (Reply 20):
It can also be used to decrease the amount of pressure your own share holders can place on you, as in I want you to have assigned seating like the other carriers, when one considers the number of persons who post on various forums about the "cattle call" we can almost be certain some of then are shareholders.

When fuel prices are more of a worry, why would they bother pulling such a large amount of cash to worry about this?


User currently offlineTVNWZ From United States of America, joined Feb 2006, 2408 posts, RR: 2
Reply 22, posted (6 years 7 months 2 days 6 hours ago) and read 2615 times:

I understand that WN is mortgaging 21 of its 737-700's to get the money. It appears they are just managing their money smartly since the banks that are making the loans are offering relatively favorabile terms. I think they are just getting a good rate--a rate management thinks would only go up, so they borrowed now. They still have plenty of planes left to do even more borrowing.

User currently offlineCubsrule From United States of America, joined May 2004, 23296 posts, RR: 20
Reply 23, posted (6 years 7 months 2 days 4 hours ago) and read 2035 times:



Quoting Surfrider1978 (Reply 14):
what are the current daily flights now with the additional SFO and now the OMA flights from DEN?

86, IIRC

Quoting FlyPNS1 (Reply 10):
With that said, if US/UA merger and divest of DCA slots, I wouldn't be surprised to see WN go shopping.

I don't know. There's no question that DCA is a better market for catching local traffic than is IAD, but WN seems hesitant to expand at IAD, presumably because they are afraid of cannibalizing BWI. Wouldn't DCA have the same problem?

That said, there's not really a similar issue at LGA, though LGA is significantly more delay-prone than DCA.



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlineFlyPNS1 From United States of America, joined Nov 1999, 6729 posts, RR: 24
Reply 24, posted (6 years 7 months 1 day 17 hours ago) and read 1866 times:



Quoting Cubsrule (Reply 23):
There's no question that DCA is a better market for catching local traffic than is IAD, but WN seems hesitant to expand at IAD, presumably because they are afraid of cannibalizing BWI. Wouldn't DCA have the same problem?

That's true, but I think WN would be careful in what they offered at DCA. They probably aren't going to get more than 40 flights a day at DCA with little chance to really grow big. So, I think WN would offer a schedule tailored to certain major business routes and key WN markets. It might hurt BWI a little, but in the long-term would give WN the exposure to Northern Virginia they want. If WN can pull off having substantial service at LAX, ONT, BUR and SNA, I think they can also pull off BWI/DCA/IAD.

In terms of IAD, I agree that they are hesitant to cannibalize BWI, but I think there's more than just that. I don't think WN launched IAD because it was a market they wanted to grow. Instead, it was launched as a warning shot to any LCC that might be thinking of expanding at IAD (post Independence). WN took a hit at BWI during the Independence days and didn't want that repeated. WN figured they could establish a small operation at IAD and help scare off any big LCC growth. So far, it's generally worked (only a few long-hauls added by B6/VX which WN isn't interested in) .


25 Post contains links SWABrian : Actually, this is a bit inaccurate, although the thought is correct about the focus being business travelers. We have always been at Love Field from
26 EMB170 : Much of WN's expansion in the Mid-Atlantic region, I think, is likely due to the volatility of the market here and the fact that they've been in reac
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