deltaffindfw
Posts: 1382
Joined: Tue Sep 02, 2003 7:42 am

WN Starting To Look Like CO?

Wed Aug 18, 2004 1:18 pm


Take this article with a grain of salt - excerpts below:

http://www.dallasnews.com/sharedcontent/dws/bus/stories/081804dnbusswa.9bbb3.html

Southwest Airlines Co.'s soaring labor costs may hobble its growth, according to two research reports released Tuesday.

Rising employee costs – combined with stiffer competition and the threat of sustained high oil prices – could make Southwest look more like a traditional carrier than the low-cost leader, the reports said.

The trend could keep the Dallas-based carrier's stock price grounded, Jamie Baker of J.P. Morgan Chase said in his report.

Its labor costs per seat mile flown are now about equal to those of Continental Airlines Inc.

"Our thesis is that Southwest is entering a period of gradually declining forward valuation," he said.

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Southwest continues to maintain a cost advantage over traditional carriers such as Fort Worth-based American Airlines Inc., the firm said, but mostly because of very low non-employee costs.
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Labor costs are about to exceed non-employee costs – a situation that only struggling Delta Air Lines Inc. now faces.

Mr. Baker said Southwest's aggressive fuel hedge positions start to expire next year, exposing the carrier to the high cost of jet fuel that's crushing competitors.
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The report said that "it is much too early to conclude that Southwest has lost its competitive edge vis-à-vis the legacy carriers" but that "Southwest holds no dispensation from the laws of economics."
 
DfwRevolution
Posts: 8572
Joined: Sat Jan 09, 2010 7:31 pm

RE: WN Starting To Look Like CO?

Wed Aug 18, 2004 1:22 pm

Its labor costs per seat mile flown are now about equal to those of Continental Airlines Inc.

This is exactly why WN offered early retirement benefits to many of its workers this summer.

Rising employee costs – combined with stiffer competition and the threat of sustained high oil prices – could make Southwest look more like a traditional carrier than the low-cost leader, the reports said.

Well everyone is in the same boat regarding fuel prices, half the LCCs are adding additional fleet types which still remains a dubious action in many people's opinion, and with WNs quality manegment, I'd say they are in good shape.

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