FlyPNS1 wrote:I agree that WN's growth rate will be much slower in the future, however I don't see that as a problem except for maybe the folks on Wall Street. Heck, I think even Wall Street might be happy if they keep growth slower in order to push up RASM. WN is a publicly traded company, but they've rarely been engaged in short-term gimmicks to make Wall Street happy.
To be clear, I think the challenge posed by slower growth has absolutely nothing to do with the expectations of Wall St which, I agree, can indeed often be short-sighted. Rather, I think the challenge Southwest faces from lower growth is that while lower growth will likely strengthen unit revenues, it will undermine unit costs which - at Southwest - have been predicated for decades, to one extent or another, on continual growth.
The other issue Southwest now faces is that, unlike twenty years ago, it's no longer the lowest-cost, 'swing' producer. As such, other, lower-cost operators can actually now come in and profitably stimulate traffic at price points below what Southwest can sustain. In effect, the tables have been turned a bit on Southwest such that Southwest now faces the challenge from Allegiant, Spirit, etc. that Southwest posed to AA, Delta, United, etc. 10-15 years ago. So that will somewhat erode the unit revenue benefit that Southwest derives from slower capacity growth - when Southwest slows growth, ULCCs will come in and backfill it, just like what Southwest did the legacies in the 2000s.
FlyPNS1 wrote:And if WN's growth is a problem then you must believe the legacy carriers will face similar growth challenges, but on a global scale. The regionals as feeders are falling apart (50 seaters are dead, 70 seaters are dying and even the 76 seater economics are starting to fade). On the mainline side, 100-110 seaters still have questionable mainline economics. Many of the legacy carriers will be forced to shrink domestically from many of the feeder markets as they've already been doing. Even internationally, the long-term prospects (beyond just some economic growth) are far more limited. The Middle East/Indian Sub-Continent is a lost cause. Europe is going to be a nightmare as ULCC's attack and the ME3 push for 5th freedom. Asia has more growth, but the Chinese carriers are going to rise up and flood the market.
I strongly disagree. The network carriers - for all their own faults, challenges and struggles, of which there are plenty - have business models and networks capable of handling massive volumes of highly diversified traffic and revenue from markets big and small, near and far. On the global stage, the U.S. network carriers may face new and emerging threats and competitive pressures that they'll have to contend with - but at least they're capable of even playing. But for all of its strength and brilliance, Southwest does not have that - it can't even play in the game. If a market is too small or too large/far for a 737, Southwest cannot access that traffic. That's a growth problem that I do believe Southwest will have to address at some point because - as said - Southwest is, in my view, starting to push the limits of where it can profitably go with 737s at its (rising) cost levels.
