Aceskywalker
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WN Practices Sustainable?

Sun Jul 28, 2019 3:30 pm

Southwest has developed a loyal customer base by having open seating, 2 free bags, and a no penalty cancel fee (albeit money spent converts to credit with a 12 month expiration date).

But I've always wondered if that will be sustainable going forwards.
WN is opening up more expensive routes (Hawaii, potentially EU if rumors are to be taken seriously).
Prices of fuel are almost guaranteed to go up with geopolitical tensions.
The cost of potentially having grounded MAXs well into 2020 if not longer, compounded with pressure to introduce a new fleet type.

Disregarding that I've always wondered how WN hasn't buckled under the pressure of investors and shareholders to adopt fees common to other LCCs and are found in almost all legacy carriers. It is quite a load of money they're leaving on the table by being generous.
 
CobaltScar
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 3:38 pm

Their pay and benefits are also very superior and they don't do red eye flying. I scratch my head and wonder a lot how they continue to make so much money and compete so well despite all that.
 
FLLflyboy
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 3:46 pm

WN has some smart and bright people working for them. I wouldn't worry too much as to how they conduct business. They have proven they can weather just about anything and I think their long-term future looks promising.
 
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adamblang
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 3:52 pm

Aceskywalker wrote:
having open seating, 2 free bags, and a no penalty cancel fee

When all the airlines had free bags and no cancellation fees, maybe ~20% of each airline's customers were willing to pay a fare premium for those benefits. The people for whom free bags is important isn't a large enough customer base for the entire industry to chase. When doing revenue projections, the folks weighing fees versus not decided it's worth chasing the ~80% of the customers who'll pay the fee at the expense of the ~20% that won't. ~20% of your customers might be something an individual airline is willing to risk but ~20% of the market is a huge opportunity for one carrier to stick their neck out for. You constantly hear airline executives talking about differentiating themselves in a commodity market. Southwest has that included bags / no change fees segment cornered. There's not enough of this market segment for every airline to chase but there is enough for one airline to chase it and those customers pay Southwest a premium for it.

Aceskywalker wrote:
WN is opening up more expensive routes (Hawaii, potentially EU if rumors are to be taken seriously).

Their revenue managers are no dummies. If their fares don't cover their costs, I'm sure they'll cut the routes. We've seen Southwest trim lagging routes – they're not asleep at the helm.

Aceskywalker wrote:
Prices of fuel are almost guaranteed to go up with geopolitical tensions.

Southwest is probably the least susceptible to this in the U.S. They have no MD-80s guzzling gas. No inefficient RJs. No long-haul routes that require huge amounts of fuel to operate. Their entire operation is one low gallon per available seat mile aircraft.

Aceskywalker wrote:
The cost of potentially having grounded MAXs well into 2020 if not longer, compounded with pressure to introduce a new fleet type.

Are MAX groundings hurting Southwest? Sure. Will it break the company? No. Boeing will pay out compensation. The planes will eventually come back online. 5% of a fleet grounded is a lot but also not catastrophic. We're heading into the low season when 5% of planes would've been out of service anyway. Adding a new fleet type would be a long term solution to a sort term problem. Hell, by the time Southwest started taking delivery of a new fleet type, the MAX will probably be flying again. It's not like getting new planes, in particular adding a new fleet type, is a quick and easy thing.
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kiowa
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 3:54 pm

Although their product is marginal, their marketing and advertising is unsurpassed in the industry. I own a lot of their stock for that reason. They will be fine.
 
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DL717
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 3:56 pm

CobaltScar wrote:
they don't do red eye flying.


Not for long....
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Cubsrule
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 4:01 pm

Am I missing a reason their decades of consistent profits do not speak for themselves?
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PatrickZ80
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 4:05 pm

FLLflyboy wrote:
WN has some smart and bright people working for them. I wouldn't worry too much as to how they conduct business. They have proven they can weather just about anything and I think their long-term future looks promising.


I tend to disagree. In my opinion those "smart and bright people working for them" have a tunnel vision of how an airline should be run and everything that doesn't match their vision, they don't want to hear of. So far it has worked, but it has resulted in the products of Southwest and the rest of airlines drifting further and further apart. This total incompatibility with everyone else might eventually cause trouble for them.

Another airline with tunnel vision is Norwegian. Of course the product Norwegian has in mind is different from what Southwest has in mind, but just like Southwest Norwegian also doesn't want to adapt their product. They just set it up the way they see it and then wait for it to work. Even if it's obvious it's not going to work, they don't want to hear that and continue waiting for it to work. We know what that did to the financial situation of Norwegian. The same might happen to Southwest.
 
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PatrickZ80
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 4:08 pm

Cubsrule wrote:
Am I missing a reason their decades of consistent profits do not speak for themselves?


Indeed they're profitable, however they're failing to see the difference between profit and more profit. Southwest chases profit, but they don't chase more profit. There are so many things they can make extra money on which they don't. That's their weak point.
 
Jshank83
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 4:19 pm

PatrickZ80 wrote:
FLLflyboy wrote:
WN has some smart and bright people working for them. I wouldn't worry too much as to how they conduct business. They have proven they can weather just about anything and I think their long-term future looks promising.


So far it has worked, but it has resulted in the products of Southwest and the rest of airlines drifting further and further apart. This total incompatibility with everyone else might eventually cause trouble for them.


Isn't that what Southwest is going for, with having less add on fees?
 
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hOMSaR
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 4:33 pm

Seems like this topic comes up every quarter or so. Some folks seem insistent on trying to fix what isn’t broken.
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Cubsrule
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 4:34 pm

PatrickZ80 wrote:
Cubsrule wrote:
Am I missing a reason their decades of consistent profits do not speak for themselves?


Indeed they're profitable, however they're failing to see the difference between profit and more profit. Southwest chases profit, but they don't chase more profit. There are so many things they can make extra money on which they don't. That's their weak point.


Chasing more profit has led lots of carriers to bankruptcy and failure, no? Is it worth it?
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stlgph
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 4:46 pm

PatrickZ80 wrote:
Cubsrule wrote:
Am I missing a reason their decades of consistent profits do not speak for themselves?


Indeed they're profitable, however they're failing to see the difference between profit and more profit. Southwest chases profit, but they don't chase more profit. There are so many things they can make extra money on which they don't. That's their weak point.


No, Southwest chases consistency, which brings them far more victories than trying to chase a profit number.
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TheOldDude
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 4:46 pm

adamblang wrote:
Aceskywalker wrote:
having open seating, 2 free bags, and a no penalty cancel fee

When all the airlines had free bags and no cancellation fees, maybe ~20% of each airline's customers were willing to pay a fare premium for those benefits. The people for whom free bags is important isn't a large enough customer base for the entire industry to chase. When doing revenue projections, the folks weighing fees versus not decided it's worth chasing the ~80% of the customers who'll pay the fee at the expense of the ~20% that won't. ~20% of your customers might be something an individual airline is willing to risk but ~20% of the market is a huge opportunity for one carrier to stick their neck out for. You constantly hear airline executives talking about differentiating themselves in a commodity market. Southwest has that included bags / no change fees segment cornered. There's not enough of this market segment for every airline to chase but there is enough for one airline to chase it and those customers pay Southwest a premium for it.

Aceskywalker wrote:
WN is opening up more expensive routes (Hawaii, potentially EU if rumors are to be taken seriously).

Their revenue managers are no dummies. If their fares don't cover their costs, I'm sure they'll cut the routes. We've seen Southwest trim lagging routes – they're not asleep at the helm.

Aceskywalker wrote:
Prices of fuel are almost guaranteed to go up with geopolitical tensions.

Southwest is probably the least susceptible to this in the U.S. They have no MD-80s guzzling gas. No inefficient RJs. No long-haul routes that require huge amounts of fuel to operate. Their entire operation is one low gallon per available seat mile aircraft.

Aceskywalker wrote:
The cost of potentially having grounded MAXs well into 2020 if not longer, compounded with pressure to introduce a new fleet type.

Are MAX groundings hurting Southwest? Sure. Will it break the company? No. Boeing will pay out compensation. The planes will eventually come back online. 5% of a fleet grounded is a lot but also not catastrophic. We're heading into the low season when 5% of planes would've been out of service anyway. Adding a new fleet type would be a long term solution to a sort term problem. Hell, by the time Southwest started taking delivery of a new fleet type, the MAX will probably be flying again. It's not like getting new planes, in particular adding a new fleet type, is a quick and easy thing.



I agree that market differentiation is important. Doing what everyone else does limits competitive advantage to price and scope and scale of operation. Differentiation based on other attributes holds the promise of allowing an airline to compete more effectively and better protect their markets.
 
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PatrickZ80
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 4:50 pm

Jshank83 wrote:
Isn't that what Southwest is going for, with having less add on fees?


It is, but I'm not sure if that's a good thing. After all, they're missing the income that the other airlines have out of ancillary revenue and have to compensate for that with higher base fares. Those higher base fares might scare people off, specially people who aren't familiar with Southwest or who don't need everything that Southwest is offering.

There is a certain expectation that people have when flying and nowadays that expectation is that you have to pay extra for everything. Southwest doesn't meet that expectation, but if people don't know that they expect the same on Southwest. And then if they see another airline being cheaper than Southwest, they book that other airline. That other airline, just like every airline nowadays, offers a low service level and charges for extras. That's fine because people expect that and assume it'll be the same on Southwest. It isn't? No, that can't be.
 
jplatts
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 5:06 pm

Aceskywalker wrote:
Southwest has developed a loyal customer base by having open seating, 2 free bags, and a no penalty cancel fee (albeit money spent converts to credit with a 12 month expiration date).

But I've always wondered if that will be sustainable going forwards.
WN is opening up more expensive routes (Hawaii, potentially EU if rumors are to be taken seriously).

Disregarding that I've always wondered how WN hasn't buckled under the pressure of investors and shareholders to adopt fees common to other LCCs and are found in almost all legacy carriers. It is quite a load of money they're leaving on the table by being generous.


WN will likely lose some market share to US3 carriers and ULCC's in markets such as Atlanta, Chicago, Denver, Dallas/Fort Worth, Los Angeles, Miami/Fort Lauderdale, Phoenix, and San Francisco if WN starts charging for checked bags and itinerary changes.

If WN does start charging fees for the 1st and 2nd checked bags, WN would likely exempt travelers with A-list status and those traveling on Business Select tickets from the checked bag fees for the 1st and 2nd checked bags.

WN's policy of not charging fees for 1st checked bag, 2nd checked bag, or itinerary changes has allowed it to differentiate itself from US3 carriers or ULCC's, and this policy has also stimulated additional ticket sales on WN.
 
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hOMSaR
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 5:10 pm

PatrickZ80 wrote:
Jshank83 wrote:
Isn't that what Southwest is going for, with having less add on fees?


It is, but I'm not sure if that's a good thing. After all, they're missing the income that the other airlines have out of ancillary revenue and have to compensate for that with higher base fares. Those higher base fares might scare people off, specially people who aren't familiar with Southwest or who don't need everything that Southwest is offering.

There is a certain expectation that people have when flying and nowadays that expectation is that you have to pay extra for everything. Southwest doesn't meet that expectation, but if people don't know that they expect the same on Southwest. And then if they see another airline being cheaper than Southwest, they book that other airline. That other airline, just like every airline nowadays, offers a low service level and charges for extras. That's fine because people expect that and assume it'll be the same on Southwest. It isn't? No, that can't be.


You’re just making suppositions and guesses without any evidence or fact. Could some people think there are extra fees on Southwest? Perhaps. But plenty of people know that Southwest doesn’t slap them with lots of extra fees. That’s been the basis of their marketing for years.

There are many people who fly Southwest specifically for this reason. I have a colleague who lives in another city, and is in the office approximately every other week. He books Southwest specifically because he knows he’s not out $200 if his plans change and he needs to be in the office on dates other than originally planned. He’s able to book decent fares for the weeks he thinks he’ll need to be in the office, and if one of those weeks changes, he changes the ticket without a change fee. Add the fee, and suddenly there is zero reason for him to book Southwest (especially considering that the office is more convenient to O’Hare than Midway anyway). So, then they wouldn’t be getting the airfare plus the change fee, they’d be getting nothing.

Multiply that by the many business travelers who book Southwest specifically for this flexibility, and you likely have more than enough revenue benefit to offset the lack of $200 change fee.

Allowing free checked bags helps to speed up the boarding/alighting process, which aids in having quicker turns. Quicker turns means better plane utilization. Start charging bag fees and a lot more people will start carrying on stuff that they should check. That slows down boarding, causing delays and lower utilization. How many bag fees do you have to charge to make up for the need to buy an extra $50 million plane just to maintain schedule?

Plus, as you note, WN often has higher fares than the competition. So, add in these fees, and those fares have to come down. Now you’ve offset your fee revenue with lower fare revenue. And while you say “higher base fares might scare people off,” the evidence is that it doesn’t. The thread on Q2 financial performance ( viewtopic.php?p=21539725 ) indicates that WN’s load factor is comparable to other carriers. So you’re supposing another problem where the evidence indicates none actually exists. Overall, depending on which ratio you use, they have either the highest or second-highest operating margin of any airline in the country.

I go back to my previous statement a couple posts back: Southwest’s business model isn’t broken, and there’s no real point in trying to fix it. There are just as many (if not more) potential downsides to them adopting the fee model as there are potential benefits.
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Polot
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 5:13 pm

PatrickZ80 wrote:
Jshank83 wrote:
Isn't that what Southwest is going for, with having less add on fees?


It is, but I'm not sure if that's a good thing. After all, they're missing the income that the other airlines have out of ancillary revenue and have to compensate for that with higher base fares. Those higher base fares might scare people off, specially people who aren't familiar with Southwest or who don't need everything that Southwest is offering.

There is a certain expectation that people have when flying and nowadays that expectation is that you have to pay extra for everything. Southwest doesn't meet that expectation, but if people don't know that they expect the same on Southwest. And then if they see another airline being cheaper than Southwest, they book that other airline. That other airline, just like every airline nowadays, offers a low service level and charges for extras. That's fine because people expect that and assume it'll be the same on Southwest. It isn't? No, that can't be.

At this point WN’s service offering is very well known in the US, they are after all one of the largest domestic airlines in the country. They made a huge marketing push around things like bags fly free.

WN’s consistency is its biggest strength, and why people like my parents love them. No matter where you are going the WN experience, love it or hate it, is the same. You don’t have to worry about varying aircraft types sometimes requiring gate checking luggage versus not, the boarding process is extremely straightforward and easy to understand (after the first time) without various amount of zones with unclear rules on how you end up in what zone, you don’t have to worry about inconsistently applied policy because someone who works for a subcontracting airline said one thing and another person from mainline says something else etc.
 
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Veigar
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 5:16 pm

Are people still questioning WN?

Why fix what isn't broken, as hOMSaR pointed out?
 
planecane
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 5:20 pm

PatrickZ80 wrote:
Cubsrule wrote:
Am I missing a reason their decades of consistent profits do not speak for themselves?


Indeed they're profitable, however they're failing to see the difference between profit and more profit. Southwest chases profit, but they don't chase more profit. There are so many things they can make extra money on which they don't. That's their weak point.

If it wasn't for the free bags I'd almost never fly WN. I'd rather have an assigned seat if it's going to cost me a similar amount. This "more profit" doesn't exist if they lose 20% of their customers to competitors. Jokes during the safety demonstration is not enough.

Even now I calculate the WN fare vs. the competition based on how many bags I need to check.
 
BNAMealer
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 5:21 pm

Why does this continue to come up? They are, for the most part, fine. If they started charging for the extras and collecting a bunch of ancillary revenue, they’d lose their customer base pretty fast.

There are only two things WN ought to consider going forward (as soon as the MAX fiasco is over and things get back to normal). These two things could increase revenue/profit for them without compromising their core values.

1. Adding a smaller/different fleet type to replace the 73G’s. The MAX 7 isn’t going to cut it, they ought to convert the order into more MAX 8’s and then order the A223 or the E2. Depending on how it is configured, this could allow them to open up smaller markets that wouldn’t be feasible with a large 737.

2. Codeshare/interline with foreign carriers to allow customers to use WN to connect onto international itineraries. There are a lot of intriguing possibilities here if they chose to do this, and it would make them even more competitive with the US3.
 
Super88
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 5:23 pm

the only thing Southwest has going for it is the free baggage check.....Southwest has gotten to big to be the airline it use to be, happy, fun people and fun flying. a lot of point to point flights have been dropped and force people through DAL, HOU etc....the fare's are usually higher to places I travel. delays are common especially in bad weather, when 1 flight gets delayed its a domino effect for downline flights, the planes are pushed to the max with no time to make up the delay.
 
Brickell305
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 5:37 pm

PatrickZ80 wrote:
Cubsrule wrote:
Am I missing a reason their decades of consistent profits do not speak for themselves?


Indeed they're profitable, however they're failing to see the difference between profit and more profit. Southwest chases profit, but they don't chase more profit. There are so many things they can make extra money on which they don't. That's their weak point.

Yet somehow WN has the best profit margins of the US majors. Why should they conform to become more like their less profitable competition?
 
A320NK
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 5:39 pm

Cubsrule wrote:
Am I missing a reason their decades of consistent profits do not speak for themselves?



I totally agree. If it ain’t broken, don’t fix it!
 
MikeMidd2001
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 5:46 pm

Consistency, simplicity, service. That's a big part of the Southwest business model that enables a different financial structure from many competitors.

Two checked bags may seem like lost revenue, but presumably enables a simpler system for baggage check-in and management.

Good pay and benefits may seem like wasted money, but presumably result in lower employee turnover, which reduces costs, and higher job satisfaction, which leads to better customer service.

Fuel costs may go up, but presumably given they are still less than half that of six years ago, Southwest is managing.

There are different ways to run a business. I'm in a services business that right now is entirely driven by month-to-month performance, cutting costs and extracting every bit of work from employees and revenue from customers. Guess what - the short-term mentality is costing us people, client satisfaction appears to be down and it's not generating more revenue in the grand scheme of things. Sound like the approach that American, United and Delta have all taken at various points?
 
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ElroyJetson
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 5:57 pm

WN is obviously profitable and I understand the "if it isn't broken don't fix it" mantra. However, they leave many profitable opportunities on the table. So far it has not appeared to hurt them.

However, airlines like DL and UA have continued to grow and seek out new opportunities for growth and profit that seem to be expanding market share and revenue. To me sensible growth is the correct way forward. WN is certainly consistent and conservative. Time will tell if their strategy is correct or a more aggressive stance is better.
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Chemist
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 6:02 pm

PatrickZ80 wrote:
Jshank83 wrote:
Isn't that what Southwest is going for, with having less add on fees?


It is, but I'm not sure if that's a good thing. After all, they're missing the income that the other airlines have out of ancillary revenue and have to compensate for that with higher base fares. Those higher base fares might scare people off, specially people who aren't familiar with Southwest or who don't need everything that Southwest is offering.

There is a certain expectation that people have when flying and nowadays that expectation is that you have to pay extra for everything. Southwest doesn't meet that expectation, but if people don't know that they expect the same on Southwest. And then if they see another airline being cheaper than Southwest, they book that other airline. That other airline, just like every airline nowadays, offers a low service level and charges for extras. That's fine because people expect that and assume it'll be the same on Southwest. It isn't? No, that can't be.


You are thinking way too simplistically.
How do you know that if WN switched to more fees they would be more profitable?
I fly WN precisely because of their differentiation. They'd lose my business (and I'm sure a lot of other business) if I had to pay for bags, and change fees - if WN was just like AA or UA. You are thinking like a typical MBA assuming fees increase overall profit, without regard to the broader picture. Behaviours of customers would change. WN has been profitable for decades, unlike the airlines who charge those fees.
 
tphuang
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 6:06 pm

WN consistently top the country in pre-tax margin (including Q2), so there is no problem. I think there is some value in the being the only airline that offers this stuff. If they were a new airline, I'd agree this would not work. But they have a hard built reputation that would be damaged if they break from it.
 
freakyrat
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 6:11 pm

PatrickZ80 wrote:
Cubsrule wrote:
Am I missing a reason their decades of consistent profits do not speak for themselves?


Indeed they're profitable, however they're failing to see the difference between profit and more profit. Southwest chases profit, but they don't chase more profit. There are so many things they can make extra money on which they don't. That's their weak point.


Southwest doesn't fee people to death and they never will. They base their product on one-way fares which allows open-jaw itineraries etc. I did one a couple of years ago. I had a last minute change of plans on a roundtrip flight from MDW-LAS. I needed to take in a concert in LA and flew my return flight out of LAX instead of LAS. They charged no change fee and got me rebooked. I had already booked the one-way fare from LAS-LAX for two of us. As they were having a fare sale at the time they refunded part of my previous ticket as the fare out of LAX-MDW was cheaper than what I had paid to fly out of LAS.

No other airline would even allow such an arrangement. That is what is nice about Southwest and they tout this on their billboards here around Dallas Love Field. They even invented a word for it "Transfarency".
 
rbavfan
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 6:13 pm

CobaltScar wrote:
Their pay and benefits are also very superior and they don't do red eye flying. I scratch my head and wonder a lot how they continue to make so much money and compete so well despite all that.


Red eyes were meant to re-position planes. Southwest schedules planes point to point. So there is always a morning flight to continue onward. Better to fly back in the AM with more passengers than middle night with 4 or 5.
 
9Patch
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 6:15 pm

Aceskywalker wrote:
Southwest has developed a loyal customer base by having open seating, 2 free bags, and a no penalty cancel fee (albeit money spent converts to credit with a 12 month expiration date).


The open seating is one feature of Southwest I don't like!
 
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flyingclrs727
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Re: WN Practices Sustainable?

Sun Jul 28, 2019 6:21 pm

PatrickZ80 wrote:
Jshank83 wrote:
Isn't that what Southwest is going for, with having less add on fees?


It is, but I'm not sure if that's a good thing. After all, they're missing the income that the other airlines have out of ancillary revenue and have to compensate for that with higher base fares. Those higher base fares might scare people off, specially people who aren't familiar with Southwest or who don't need everything that Southwest is offering.

There is a certain expectation that people have when flying and nowadays that expectation is that you have to pay extra for everything. Southwest doesn't meet that expectation, but if people don't know that they expect the same on Southwest. And then if they see another airline being cheaper than Southwest, they book that other airline. That other airline, just like every airline nowadays, offers a low service level and charges for extras. That's fine because people expect that and assume it'll be the same on Southwest. It isn't? No, that can't be.


I don't just book tickets on any airline. I compare bookings on different airlines from several airports and take into consideration the fees. WN usually wins on the routes they serve. If I check in online 24 hours in advance, I don't have problems getting contiguous seats for my wife and me or whoever I am traveling with. Compare that to other airlines where families, even with young children booked together on one ticket, get split up. Some airlines have even overbooked and deboarded minors flying with family. I've never heard that about WN. The two free bags are quite useful for flying family from overseas around the US. They can book open jaw iteneraries from and to Europe, and I can get them tickets on WN to get them around the US with all their gear. All the baggage fees on other airlines add up when taking into consideration multiple travel days to various points of interest in the US.
 
User avatar
TWA772LR
Posts: 6801
Joined: Thu Nov 17, 2011 6:12 am

Re: WN Practices Sustainable?

Sun Jul 28, 2019 6:29 pm

SWA had the luxury of timing to help them grow. Deregulation forced airlines to change their strategies overnight while SWA was able to go in to it with a fresh mind. Slow, but steady growth helped them through the 90s with the discipline to focus on strengths while a growing brand awareness to make expansion more stomachable thanks to notoriety. Post 9/11, fortune proved to favor the bold when SWA fuel hedged like crazy and finally grew like wildfire.

Another big topic is while airlines changed product offerings, SWA stayed truly consistent with very little change to the product (good airport experience, and great onboard experience) while still finding ways to make money at minimal cost (Business Select, the upgrade scheme, early bird, etc...).

Perhaps the MAX grounding will make them slow down their growth strategy, I don't mean in the short term, but more the medium term as more of a wake up call to make them reevaluate where/how to grow.

Now as a former SWA employee, the true way they keep costs low is to drown people in Kool Aid in the hopes to make the operation more efficient. I did love being a CSA and helping fix peoples problems that ranged from being self-inflicted, to caused by weather, or just plain bad luck; but when I tried to drink the Kool Aid, it didn't sit well and the only thing that kept me going were my amazing coworkers, and I had more self-respect than to kiss ass. Also, with our union having it be allowed in our contract that we could be called to work on our day off, that didn't sit well with me at all. Then my station management, when they noticed I worked incredibly hard and spoke my mind and I had tremendous amounts of dirt on them when I wasn't even looking for it, they severely hampered my professional growth and I actually wept when I turned in my resignation letter because I knew it meant I wouldn't work with my amazing team ever again.

But now I work at another US airline earning a liveable wage with a new great team, more professional growth opportunities, and (by what will be by the grace of God) the ability to be a pilot on my dream aircraft at my dream airline.
When wasn't America great?


The thoughts and opinions shared under this username are mine and are not influenced by my employer.
 
BNAMealer
Posts: 150
Joined: Sat Jul 27, 2019 8:03 pm

Re: WN Practices Sustainable?

Sun Jul 28, 2019 6:44 pm

ElroyJetson wrote:
WN is obviously profitable and I understand the "if it isn't broken don't fix it" mantra. However, they leave many profitable opportunities on the table. So far it has not appeared to hurt them.

However, airlines like DL and UA have continued to grow and seek out new opportunities for growth and profit that seem to be expanding market share and revenue. To me sensible growth is the correct way forward. WN is certainly consistent and conservative. Time will tell if their strategy is correct or a more aggressive stance is better.


Like I said above, the two opportunities WN could do to grow without compromising their core values is to introduce a smaller plane and codeshare.
 
User avatar
OA940
Posts: 1882
Joined: Fri May 20, 2016 6:18 am

Re: WN Practices Sustainable?

Sun Jul 28, 2019 6:44 pm

I mean they barely ever posted a loss so I guess they must be doing something right. Also they're not an LCC. They're hybrid, just like AS and B6. They themselves said like 5 years ago their model no longer fits the definition of a modern LCC
A350/CSeries = bae
 
Louis2
Posts: 4
Joined: Sun Jul 28, 2019 4:55 pm

Re: WN Practices Sustainable?

Sun Jul 28, 2019 6:54 pm

I think keeping it simple keeps SWA profitable. Here in Europe is has all become so difficult. SWA is consistent, simple and easy. They kept flying to smaller airports, they operate just the boeing 737 and just a ticket with a lugage included.
Keep even in mind that for most airlines the lugage seldom fits in de cabin. SWA avoids this problem by letting people check-in lugage without a fee.
 
alasizon
Posts: 1885
Joined: Sat Apr 28, 2007 8:57 pm

Re: WN Practices Sustainable?

Sun Jul 28, 2019 7:01 pm

The thing with WN is that their OTP is starting to become sub-par (and not improving with the MAXes out of service) and if people start to realize that they can get to where they want on-time more often with other carriers that could start to bite them but its not entirely out of control. YTD from BTS (Jan-May), WN has a 78.09% A14 while AS was 79.05%, DL 86.03%, NK 80.68%. UA had a 77.96% A14 despite all the issues they incur with EWR & IAD which WN hardly has to contend with. WN only has a 75.13% D14 over the same time period and was the only one of the airlines that actually had a higher A14 than D14 (which to me is telling of how much they are padding their schedule).

CobaltScar wrote:
Their pay and benefits are also very superior and they don't do red eye flying. I scratch my head and wonder a lot how they continue to make so much money and compete so well despite all that.

Although their pay and benefits are better than most, they have a very lean corporate overhead so despite having very high staff costs, each one of those people are expected to put 110% in every day.

rbavfan wrote:
Red eyes were meant to re-position planes. Southwest schedules planes point to point. So there is always a morning flight to continue onward. Better to fly back in the AM with more passengers than middle night with 4 or 5.


There are plenty of red-eyes now that are completely full (and even some that command a premium over mid-day transcons where the whole day is lost). With red-eyes there is always also a morning flight to continue onward, its not like a plane just flies the red-eye and then doesn't have something else to pick back up.
Manager on Duty & Tower Planner
 
sphealey
Posts: 307
Joined: Tue May 31, 2005 12:39 am

Re: WN Practices Sustainable?

Sun Jul 28, 2019 7:07 pm

PatrickZ80 wrote:
Cubsrule wrote:
Am I missing a reason their decades of consistent profits do not speak for themselves?


Indeed they're profitable, however they're failing to see the difference between profit and more profit. Southwest chases profit, but they don't chase more profit. There are so many things they can make extra money on which they don't. That's their weak point.
Driving one's customer's insane with ticky-tack "fees" for services that have been considered part of the basic product being sold since the day of the stagecoach has not shown itself to be a sustainable route to more profit either. It seems great to armchair tacticians who love to talk about "not leaving money on the table", forgetting that when a service provider moves to capture any surplus under the revenue curve the customer sees that as ripping them off.
 
User avatar
flyingclrs727
Posts: 2398
Joined: Thu Apr 19, 2007 7:44 am

Re: WN Practices Sustainable?

Sun Jul 28, 2019 7:14 pm

TWA772LR wrote:
SWA had the luxury of timing to help them grow. Deregulation forced airlines to change their strategies overnight while SWA was able to go in to it with a fresh mind. Slow, but steady growth helped them through the 90s with the discipline to focus on strengths while a growing brand awareness to make expansion more stomachable thanks to notoriety. Post 9/11, fortune proved to favor the bold when SWA fuel hedged like crazy and finally grew like wildfire.

Another big topic is while airlines changed product offerings, SWA stayed truly consistent with very little change to the product (good airport experience, and great onboard experience) while still finding ways to make money at minimal cost (Business Select, the upgrade scheme, early bird, etc...).

Perhaps the MAX grounding will make them slow down their growth strategy, I don't mean in the short term, but more the medium term as more of a wake up call to make them reevaluate where/how to grow.

Now as a former SWA employee, the true way they keep costs low is to drown people in Kool Aid in the hopes to make the operation more efficient. I did love being a CSA and helping fix peoples problems that ranged from being self-inflicted, to caused by weather, or just plain bad luck; but when I tried to drink the Kool Aid, it didn't sit well and the only thing that kept me going were my amazing coworkers, and I had more self-respect than to kiss ass. Also, with our union having it be allowed in our contract that we could be called to work on our day off, that didn't sit well with me at all. Then my station management, when they noticed I worked incredibly hard and spoke my mind and I had tremendous amounts of dirt on them when I wasn't even looking for it, they severely hampered my professional growth and I actually wept when I turned in my resignation letter because I knew it meant I wouldn't work with my amazing team ever again.

But now I work at another US airline earning a liveable wage with a new great team, more professional growth opportunities, and (by what will be by the grace of God) the ability to be a pilot on my dream aircraft at my dream airline.



Deregulation didn't just happen. WN created a much of the political support for it. By showing that an airline could operate profitably in intrastate markets where the CAB had no authority to regulate, the idea of deregulating airlines throughout the US became tenable. Other airlines had other ideas about how to react to deregulation. Some like Braniff made bad decisions about it when it was allowed and went out of business as a result.
 
sphealey
Posts: 307
Joined: Tue May 31, 2005 12:39 am

Re: WN Practices Sustainable?

Sun Jul 28, 2019 7:14 pm

There is a certain expectation that people have when flying and nowadays that expectation is that you have to pay extra for everything.

For their own sake I truly hope the people running the legacy carriers don't believe that, because it means they are colossally out of touch with their customers. From out here in the land of SLF (think for a minute about what the use of that term within the industry implies how they see the customers who are paying their salaries) the ticky-tack fees, and the web sites set up to hide those fees in as many ways as possible, and infuriating and lead the customers to hate the service providers with a vengeance. It also leads them to abandon any sense of brand loyalty regardless of any rewards program and shop as hard as they can on the discount web sites.
 
User avatar
AirKevin
Posts: 499
Joined: Wed Apr 26, 2017 2:18 am

Re: WN Practices Sustainable?

Sun Jul 28, 2019 7:27 pm

Super88 wrote:
delays are common especially in bad weather, when 1 flight gets delayed its a domino effect for downline flights

To be fair, delays in bad weather would affect every airline, not just Southwest, as would the domino effect.
Captain Kevin
 
TUSDawg23
Posts: 264
Joined: Sun May 30, 2010 2:43 am

Re: WN Practices Sustainable?

Sun Jul 28, 2019 7:27 pm

WN is a very conservative airline that doesn't make dramatic changes in a hurry. Wall street doesn't like the fact they don't charge bag fees, but it's a small way to differentiate themselves and build brand loyalty in a very competitive market. They do have ways they generate ancillary revenue like early bird check in that can be a life saver when you find yourself about to be stuck in a c boarding group middle seat on a 3 hour flight. The big bet they've put on the MAX has obviously stung them pretty good to start, their labor costs continue to rise, and it's hard to predict how many more markets they can grow into flying only in North America. That said, they are still in a very strong position financially, they offer a very robust network, and they offer a very consistent product which attracts the business pax who will continue to come back again and again and keep WN in business for many years to come.
 
airzona11
Posts: 1517
Joined: Wed Dec 17, 2014 5:44 am

Re: WN Practices Sustainable?

Sun Jul 28, 2019 7:35 pm

Cubsrule wrote:
Am I missing a reason their decades of consistent profits do not speak for themselves?


On Anet since they don’t have 321s and lie flats, WN is doomed, they aren’t a real seasoned airline.

Flipping it around, around the legacy and other US airlines sustainable? Those airlines have had some cases of drastic evolution, both financial and product.
 
Austin787
Posts: 380
Joined: Fri Jun 17, 2016 11:39 pm

Re: WN Practices Sustainable?

Sun Jul 28, 2019 7:43 pm

Southwest's model uses the steps:
1) Take care of their employees. Create a culture they love to work in.
2) Empower their employees to take care of customers. Make sure employees have resources they need to help customers.
3) Customers become loyal to Southwest, and recommends Southwest to others. That takes care of Southwest's profits and keeps their investors and shareholders happy.

Brickell305 wrote:
PatrickZ80 wrote:
Cubsrule wrote:
Am I missing a reason their decades of consistent profits do not speak for themselves?


Indeed they're profitable, however they're failing to see the difference between profit and more profit. Southwest chases profit, but they don't chase more profit. There are so many things they can make extra money on which they don't. That's their weak point.

Yet somehow WN has the best profit margins of the US majors. Why should they conform to become more like their less profitable competition?

Southwest has the best profits of the US airlines the past 40+ years. And the difference is even more noticeable during hard economic times - Southwest continues posting profits while most of their fee loving competitors post big losses and file bankruptcy.
 
User avatar
flyingclrs727
Posts: 2398
Joined: Thu Apr 19, 2007 7:44 am

Re: WN Practices Sustainable?

Sun Jul 28, 2019 7:57 pm

sphealey wrote:
PatrickZ80 wrote:
Cubsrule wrote:
Am I missing a reason their decades of consistent profits do not speak for themselves?


Indeed they're profitable, however they're failing to see the difference between profit and more profit. Southwest chases profit, but they don't chase more profit. There are so many things they can make extra money on which they don't. That's their weak point.
Driving one's customer's insane with ticky-tack "fees" for services that have been considered part of the basic product being sold since the day of the stagecoach has not shown itself to be a sustainable route to more profit either. It seems great to armchair tacticians who love to talk about "not leaving money on the table", forgetting that when a service provider moves to capture any surplus under the revenue curve the customer sees that as ripping them off.


I agree. As an experiment, I booked my wife on NK to get her from Texas to Ft. Lauderdale. I was curious, because Spirit Airlines came up on some round the world iteneraries I queried on KAYAK. I wanted to see it it would be an airline to use or avoid. I did notice the KAYAK iteneraries had very long even overnight layovers between Spirit flights and and any other airline.

I found that Spirit uses it's own weight standards for bags. Their standard bags are only 40 pounds rather than 50. Then they charge serious per pound penalties above 40 pounds. The 40 pound limit to FLL wasn't much of a problem on my wife's stand alone trips considering even in winter she would be wearing lots of beach clothes and bathing suits. As part of a long international itenerary, it is untennable. Furthermore, I read the other fine print and found out that they won't guarantee that a second bag can be checked on any of their flights. There is absolutely no way I would ever consider booking NK on any part of an international itenerary.

WN is really great for using on open jaw iteneraries. All pricing is one way. There is no need to backtrack using a round trip ticket to get a good price. There are two free 50 pound bags, and a third bag can be added for $75 if needed. My only self imposed restriction is to not schedule travel on Southwest on the same day as other flight legs.
 
Jshank83
Posts: 2835
Joined: Tue Nov 01, 2016 2:23 pm

Re: WN Practices Sustainable?

Sun Jul 28, 2019 8:42 pm

Chemist wrote:
PatrickZ80 wrote:
Jshank83 wrote:
Isn't that what Southwest is going for, with having less add on fees?


It is, but I'm not sure if that's a good thing. After all, they're missing the income that the other airlines have out of ancillary revenue and have to compensate for that with higher base fares. Those higher base fares might scare people off, specially people who aren't familiar with Southwest or who don't need everything that Southwest is offering.

There is a certain expectation that people have when flying and nowadays that expectation is that you have to pay extra for everything. Southwest doesn't meet that expectation, but if people don't know that they expect the same on Southwest. And then if they see another airline being cheaper than Southwest, they book that other airline. That other airline, just like every airline nowadays, offers a low service level and charges for extras. That's fine because people expect that and assume it'll be the same on Southwest. It isn't? No, that can't be.


You are thinking way too simplistically.
How do you know that if WN switched to more fees they would be more profitable?
I fly WN precisely because of their differentiation. They'd lose my business (and I'm sure a lot of other business) if I had to pay for bags, and change fees - if WN was just like AA or UA. You are thinking like a typical MBA assuming fees increase overall profit, without regard to the broader picture. Behaviours of customers would change. WN has been profitable for decades, unlike the airlines who charge those fees.



Agree with this. The no fees is one of the reasons that keeps me flying them over others. For me it is the the no change fees as to why I fly them. I can book a trip early and not have to play the is it the right time to book game or am I sure my plans are set in stone. Bags fly free also is helpful when I am taking golf clubs.
 
ltbewr
Posts: 14237
Joined: Thu Jan 29, 2004 1:24 pm

Re: WN Practices Sustainable?

Sun Jul 28, 2019 8:54 pm

I have never flown on WN and unlikely to do so especially with their planned withdrawal from EWR (I live in NJ and I certainly won't fly out of LGA).

There is no doubt WN is highly successful with their business plan. They never had to declare bankruptcy, they have a nearly uninterrupted record of paying shareholders dividends, and provide a quality of service the works great on short to medium length flights (>4 hours) without making transfers.

That they don't charge for up to 2 checked bags is great, the ability to choose your own seat, short flights that mean fewer complaints about being in middle seats, less hassles when families want to fly together, much better upfront pricing. Many will choose them even if the total fare is even a bit higher than a legacy's with fees as less hassle, and a better overall quality of service.
 
freakyrat
Posts: 1711
Joined: Fri Aug 22, 2008 1:04 pm

Re: WN Practices Sustainable?

Sun Jul 28, 2019 9:09 pm

Louis2 wrote:
I think keeping it simple keeps SWA profitable. Here in Europe is has all become so difficult. SWA is consistent, simple and easy. They kept flying to smaller airports, they operate just the boeing 737 and just a ticket with a lugage included.
Keep even in mind that for most airlines the lugage seldom fits in de cabin. SWA avoids this problem by letting people check-in lugage without a fee.


The free bag check is what I liked flying to Europe on Lufthansa. They were able to board an Airbus A330 quickly and I had space for my feet.
 
freakyrat
Posts: 1711
Joined: Fri Aug 22, 2008 1:04 pm

Re: WN Practices Sustainable?

Sun Jul 28, 2019 9:10 pm

The 2 free checked bags works out well on them for ski trips.
 
MIflyer12
Posts: 5603
Joined: Mon Feb 18, 2013 11:58 pm

Re: WN Practices Sustainable?

Sun Jul 28, 2019 9:57 pm

ElroyJetson wrote:
WN is obviously profitable and I understand the "if it isn't broken don't fix it" mantra. However, they leave many profitable opportunities on the table. So far it has not appeared to hurt them.

However, airlines like DL and UA have continued to grow and seek out new opportunities for growth and profit that seem to be expanding market share and revenue. To me sensible growth is the correct way forward.


WN has been growing ASMs and RPMs faster than DL and UA (or AA) for a long, long time.

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