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SWADawg
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Southwest misses on Q4 Earnings

Thu Jan 23, 2020 1:35 pm

Not going to sugarcoat these earnings. The longer the MAX remains grounded, the worse it’s going to be going forward for WN.

https://www.marketwatch.com/story/south ... iteid=nbsh
My posts are my opinion only and do not reflect the views of Southwest Airlines
 
tphuang
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 1:47 pm

Seems like max grounding has hurt wn far more than anyone else. The cost performance is really not good.
 
morrisond
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 2:03 pm

SWADawg wrote:
Not going to sugarcoat these earnings. The longer the MAX remains grounded, the worse it’s going to be going forward for WN.

https://www.marketwatch.com/story/south ... iteid=nbsh


Sorry but having more aircraft in the fleet would not be helping the Load Factor.

That is the big reason for the earnings miss.

They are saying the MAX grounding impacted Operating Earnings by $828 Million. On average they should have had about 50 MAX's flying for 9 months. There extra efficiency would not have generated an extra $1.4 Million of Operating income per month (about 4-5X the lease rate of a MAX) per frame.

If they have extra frames it arguably would just have added more capacity into the system and lowered yields further.

They are using some very creative accounting to get to that $828Million.

The most interesting quote from the press release is this:

"During fourth quarter, reached confidential agreement with The Boeing Company (Boeing) on compensation related to estimated 2019 financial damages due to the March 13, 2019, Federal Aviation Administration (FAA) order to ground the Boeing 737 MAX aircraft (MAX); substantially all of the compensation will be accounted for as a reduction in the cost basis of both owned MAX aircraft and future purchased MAX aircraft, which is expected to reduce depreciation expense in future years"

Which sounds like to me they just gave them a partial refund on the 34 already delivered and SW will just pay less for each frame going forward. That is a very small current cash cost for Boeing and what many of us on here were guessing would happen.
 
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scbriml
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 2:06 pm

Gloom and doom overload.

They still made $517million profit in three months and $2.4billion for the year. The contribution to employee profit sharing as a result of the compensation agreement with Boeing actually cost Southwest $97million because they're not receiving the compensation as cash.

"During fourth quarter, reached confidential agreement with The Boeing Company (Boeing) on compensation related to estimated 2019 financial damages due to the March 13, 2019, Federal Aviation Administration (FAA) order to ground the Boeing 737 MAX aircraft (MAX); substantially all of the compensation will be accounted for as a reduction in the cost basis of both owned MAX aircraft and future purchased MAX aircraft, which is expected to reduce depreciation expense in future years"

Interesting to note that the agreed compensation only covers 2019.
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DakotaFlyer
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 2:07 pm

I mean they still made $500 million
 
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scbriml
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 2:12 pm

morrisond wrote:
That is a very small current cash cost for Boeing and what many of us on here were guessing would happen.


Given the agreed compensation only covers 2019 and there will certainly be further compensation for 2020, while the short-term hit to Boeing is not great, the hit will affect future revenue presumably to the tune of hundreds of millions of $$$. And that's just for Southwest.

But, since this thread is about Southwest, good for them getting their MAXes at even lower prices.
Time flies like an arrow. Fruit flies like a banana!
There are 10 types of people in the World - those that understand binary and those that don't.
 
MIflyer12
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 2:22 pm

DakotaFlyer wrote:
I mean they still made $500 million


To add some context, WN made more (net income) than AA did ($514 mil vs. $414 mil) on just 56% of the RPMs.
 
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par13del
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 2:35 pm

scbriml wrote:
morrisond wrote:
That is a very small current cash cost for Boeing and what many of us on here were guessing would happen.


Given the agreed compensation only covers 2019 and there will certainly be further compensation for 2020, while the short-term hit to Boeing is not great, the hit will affect future revenue presumably to the tune of hundreds of millions of $$$. And that's just for Southwest.

But, since this thread is about Southwest, good for them getting their MAXes at even lower prices.

As most speculated, this will quite likely be the norm for all clients whose deliveries were during 2019 and possibly 2020. Boeing has a number of MAX a/c parked on their premises in WN colours, I am thinking that all those already in client liveries are up for discounts on delivery payments.
 
ethernal
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 2:42 pm

The MAX situation of course didn't help but Southwest's current business model is under pressure. They have limited ability to grow using their current airframes and cost/fare structure. Being eaten from the top by the resurgent US3 and being eaten from the bottom by ULCC. They've had top line challenges for the past five years, and now it is starting to impact their bottom line.
 
morrisond
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 2:50 pm

scbriml wrote:
morrisond wrote:
That is a very small current cash cost for Boeing and what many of us on here were guessing would happen.


Given the agreed compensation only covers 2019 and there will certainly be further compensation for 2020, while the short-term hit to Boeing is not great, the hit will affect future revenue presumably to the tune of hundreds of millions of $$$. And that's just for Southwest.

But, since this thread is about Southwest, good for them getting their MAXes at even lower prices.


Yes agreed - but that will be over many years - Boeing should make money on future MAX deliveries just less than they expected.
 
BNAMealer
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 2:51 pm

ethernal wrote:
The MAX situation of course didn't help but Southwest's current business model is under pressure. They have limited ability to grow using their current airframes and cost/fare structure. Being eaten from the top by the resurgent US3 and being eaten from the bottom by ULCC. They've had top line challenges for the past five years, and now it is starting to impact their bottom line.


Is it the business model or their unwillingness to deviate from the all 737 fleet? Getting a smaller plane like the A223 would open up a fair amount of expansion opportunities into smaller markets
 
musman9853
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 2:59 pm

BNAMealer wrote:
ethernal wrote:
The MAX situation of course didn't help but Southwest's current business model is under pressure. They have limited ability to grow using their current airframes and cost/fare structure. Being eaten from the top by the resurgent US3 and being eaten from the bottom by ULCC. They've had top line challenges for the past five years, and now it is starting to impact their bottom line.


Is it the business model or their unwillingness to deviate from the all 737 fleet? Getting a smaller plane like the A223 would open up a fair amount of expansion opportunities into smaller markets


they had smaller planes they got from airtran and they couldnt wait to get rid of them.
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BNAMealer
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 3:03 pm

musman9853 wrote:
BNAMealer wrote:
ethernal wrote:
The MAX situation of course didn't help but Southwest's current business model is under pressure. They have limited ability to grow using their current airframes and cost/fare structure. Being eaten from the top by the resurgent US3 and being eaten from the bottom by ULCC. They've had top line challenges for the past five years, and now it is starting to impact their bottom line.


Is it the business model or their unwillingness to deviate from the all 737 fleet? Getting a smaller plane like the A223 would open up a fair amount of expansion opportunities into smaller markets


they had smaller planes they got from airtran and they couldnt wait to get rid of them.


That was a different time. Plus, those plans IIRC were configured smaller than what a A223 would be.
 
jplatts
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 3:06 pm

I had previously mentioned that the lack of RIC-MDW nonstop service is one of the biggest holes in the WN network, and the plane shortage that WN is currently facing as a result of the 737 MAX grounding is preventing WN from addressing this hole in WN's network. WN has also even had to reduce frequencies on other nonstop routes out of MDW such as MDW-AUS/BWI/BOS/CVG/CMH/MSP/OAK/OMA due to the 737 MAX grounding.
 
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Polot
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 3:08 pm

BNAMealer wrote:
musman9853 wrote:
BNAMealer wrote:

Is it the business model or their unwillingness to deviate from the all 737 fleet? Getting a smaller plane like the A223 would open up a fair amount of expansion opportunities into smaller markets


they had smaller planes they got from airtran and they couldnt wait to get rid of them.


That was a different time. Plus, those plans IIRC were configured smaller than what a A223 would be.

A A223 wouldn’t be much smaller than the 73Gs WN currently operate. Better operating economics though.
 
BNAMealer
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 3:12 pm

Polot wrote:
BNAMealer wrote:
musman9853 wrote:

they had smaller planes they got from airtran and they couldnt wait to get rid of them.


That was a different time. Plus, those plans IIRC were configured smaller than what a A223 would be.

A A223 wouldn’t be much smaller than the 73Gs WN currently operate. Better operating economics though.


Which might make some smaller markets more feasible. Plus, not only would they have better operating economics, but it could be a bulwark against a future MAX-style fiasco.
 
WaywardMemphian
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 3:32 pm

ethernal wrote:
The MAX situation of course didn't help but Southwest's current business model is under pressure. They have limited ability to grow using their current airframes and cost/fare structure. Being eaten from the top by the resurgent US3 and being eaten from the bottom by ULCC. They've had top line challenges for the past five years, and now it is starting to impact their bottom line.


This is so true. 10 years ago, I thought nothing of driving over to Tulsa and flying to Orlando on WN even though I live minutes from XNA. The cost played a a huge factor, 800 bucks for a family of 4 plus the carry ons and the usual big checking that accompanied the kids always. For this thread I looked to see what it would be to fly my 4 today to MCO from TUL, the last Sat in May to the first Sat in June, 7 day trip right after school is out. Cheapest one stop from TUL to MCO and back from TUL, 420 bucks. I can fly AA, DL, and UA from XNA for 350 to 375 and then there's Allegiant to Sanford. I could fly the following Tues( the cheapest day to fly) and the price comes down to 230 from TUL, but guess what, The big Three at XNA are all 235 across the board and then there's Allegiant.

I remember that MDW to DAL flight that stopped halfway at BKG, the one that once landed at the wrong airport and nearly ended up in the middle of US 67. They could not wait to cut that especially with the end of the WA in sight, instead they could have shifted it to either XNA or SGF or even both and added a DEN to ATL with that stop in the middle. And kept the Sat only MCO flights .They would have had a near decade building a following at either or both flying popular destinations from growing markets. Since then their prices, especially on connecting flights aren't anywhere near as attractive as they once were, they have a newer pilot contract that is much more expensive, larger planes and a one type fleet that is has made it impossible to expand all the while Allegiant, Frontier, and Spirit eat at them from the big markets and the small. They need a smaller plane with great economics for the healthy airports in that 1 million enplanement rangem oH, like XNA, JAC, TYS, SGF range and they really need to look making them the midway points to the bug destinations again. From my world routes like DEN-XNA-BNA/ATL, LAS-XNA-BWI and MDW-XNA-DAL with Tue and Sat to and from MCO on a 140 seater like an A223 makes just too much sense and hits back at the Frontiers and Allegiants of the world.
 
WaywardMemphian
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 3:38 pm

Polot wrote:
BNAMealer wrote:
musman9853 wrote:

they had smaller planes they got from airtran and they couldnt wait to get rid of them.


That was a different time. Plus, those plans IIRC were configured smaller than what a A223 would be.

A A223 wouldn’t be much smaller than the 73Gs WN currently operate. Better operating economics though.


Jet Blues A223s are to be 240 seaters, 6 less than the 146 seat 737-700s. Is there good enough info on the performance of other brands' 223s to compare to WN's 700s?
 
NASBWI
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 3:47 pm

WaywardMemphian wrote:
Polot wrote:
BNAMealer wrote:

That was a different time. Plus, those plans IIRC were configured smaller than what a A223 would be.

A A223 wouldn’t be much smaller than the 73Gs WN currently operate. Better operating economics though.


Jet Blues A223s are to be 240 seaters, 6 less than the 146 seat 737-700s. Is there good enough info on the performance of other brands' 223s to compare to WN's 700s?


At 140 seats, the A223 will only seat 3 less than WN’s 73Gs as they seat 143.
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cledaybuck
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 3:47 pm

tphuang wrote:
Seems like max grounding has hurt wn far more than anyone else. The cost performance is really not good.

WN has more MAX's and fewer ways to cover for the lost capacity than AA or UA. ASM's had to be lower than originally planned.
As we celebrate mediocrity, all the boys upstairs want to see, how much you'll pay for what you used to get for free.
 
drdisque
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 4:04 pm

I think revenue management is definitely part of the problem.

RM is running tight to try to keep yields decent, especially considering they consider themselves capacity constrained during the MAX grounding.

However, the MAX grounding has also caused a lot of rescheduling which has resulted in a lot of poorly timed flights that are unattractive (ie 10:30 PM departures with 1 AM arrivals).

These poorly timed flights are going out with lousy LF's because RM isn't being loose enough on those flights.

It's possible management knows those flights will lose money but are still flying them because they have to hit their crew minimums and want to keep reported ASM's up for Wall Street.
 
kabq737
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 4:05 pm

I’m not actually all that concerned about their numbers. They could be better but I don’t consider them worrisome for the airline.

The only thing that really raised my eyebrows was the LF. Having an 83.1% LF when you have 50 airplanes missing seems sort of low. Just my thinking but I’m happy to be corrected.
Been on: 320, 321, 333, 733, 73G, 738, 739, 744, 752, 763, 764, 772, 789, C208, CR7, CR9, BE20, MD83, MD88, MD90, E70, E75, E90, TRIM
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AWACSooner
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 4:30 pm

[sarcasm]
Only $500M? Jeez, imagine how much $$ they would've made had they nickeled and dimed the pax like everyone else. You're leaving money on the table, WN!
[/sarcasm]
 
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ElroyJetson
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 4:30 pm

I am not surprised and have been anticipating this for several years. The MAX issue is only a small.part of the story.

Load factors are down due to competition from ULCC's at the bottom and more aggressive completion from the big three at the top. WN botched the Air Tran merger and wasted opportunities for growth. Instead of focusing on mid level cities that are growing rapidly like RIC, AUS, RDU they focused only connecting large city pairs with heavy competition and low growth due to being such mature markets.

Meanwhile, DL has been aggressively expanding in those mid level markets, and UA has done an outstanding job of building out DEN and increasing market share.

WN's corporate culture used to be risk taking and aggressive. Now it is stodgy and ultra conservative imho.

I wish them no ill will but I have to say for WN the chickens are coming home to roost.
Last edited by ElroyJetson on Thu Jan 23, 2020 4:34 pm, edited 2 times in total.
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Scarebus34
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 4:31 pm

BNAMealer wrote:
ethernal wrote:
The MAX situation of course didn't help but Southwest's current business model is under pressure. They have limited ability to grow using their current airframes and cost/fare structure. Being eaten from the top by the resurgent US3 and being eaten from the bottom by ULCC. They've had top line challenges for the past five years, and now it is starting to impact their bottom line.


Is it the business model or their unwillingness to deviate from the all 737 fleet? Getting a smaller plane like the A223 would open up a fair amount of expansion opportunities into smaller markets

A new fleet type would do more harm than good. Their entire business model is based around a single fleet type and the synergies/efficiency that creates with training, parts, network planning, etc. If they started to introduce complexity their costs would go up and I’m not so sure flying to smaller markets with said plane would offset those headwinds.
 
durangomac
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 4:35 pm

kabq737 wrote:
I’m not actually all that concerned about their numbers. They could be better but I don’t consider them worrisome for the airline.

The only thing that really raised my eyebrows was the LF. Having an 83.1% LF when you have 50 airplanes missing seems sort of low. Just my thinking but I’m happy to be corrected.


My understanding that most of the westbound Hawaii flights are having to be weight restricted, not surprised the load factor has taken a hit.
 
kabq737
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 4:38 pm

durangomac wrote:
kabq737 wrote:
I’m not actually all that concerned about their numbers. They could be better but I don’t consider them worrisome for the airline.

The only thing that really raised my eyebrows was the LF. Having an 83.1% LF when you have 50 airplanes missing seems sort of low. Just my thinking but I’m happy to be corrected.


My understanding that most of the westbound Hawaii flights are having to be weight restricted, not surprised the load factor has taken a hit.


That definitely makes some sense I just don’t know if they run enough flights to Hawaii for that to have a huge effect on the numbers for the whole system.
Been on: 320, 321, 333, 733, 73G, 738, 739, 744, 752, 763, 764, 772, 789, C208, CR7, CR9, BE20, MD83, MD88, MD90, E70, E75, E90, TRIM
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cledaybuck
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 4:47 pm

It's weird to read this thread and the AA and UA threads. Expectations.
As we celebrate mediocrity, all the boys upstairs want to see, how much you'll pay for what you used to get for free.
 
ScottB
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 4:53 pm

scbriml wrote:
Gloom and doom overload.


Serious doom & gloom overload here. While they did miss on earnings, they also posted an operating margin of 11.6% for the quarter. By comparison, United's "strong" Q4 numbers featured an operating margin of 7.9%. LUV management also chose to pay out the employees' share of MAX-related compensation in Q4, and that reduced operating income by $124 million.

tphuang wrote:
Seems like max grounding has hurt wn far more than anyone else. The cost performance is really not good.


It's not just about costs; the MAX probably has less of a cost advantage in the short-haul markets which are WN's specialty. Rather, WN has ~75 fewer operational aircraft in the fleet today than they expected to 10 months ago and that has an enormous impact on the business! They're running with an operational structure and route network which anticipated a 10% larger fleet right now.

BNAMealer wrote:
Getting a smaller plane like the A223 would open up a fair amount of expansion opportunities into smaller markets


Unless the A223's trip costs are substantially lower than the 737MAX-7, it really wouldn't make a meaningful difference. A delta of 5-10 seats between the A223 and 737-7 does not create expansion opportunities. Now, an A220-100 or E190-E2 might have a more viable niche for small markets, but getting acceptable labor costs might be problematic. I may sound like a broken record, but the problem with the 717 wasn't that it was a different fleet type. The 717 wasn't going to work for WN because the trip cost differential vs. the 73G was only a few percent -- it was generally worth eating a few percent extra in cost to get 20 or so extra seats.

WaywardMemphian wrote:
This is so true. 10 years ago, I thought nothing of driving over to Tulsa and flying to Orlando on WN even though I live minutes from XNA. The cost played a a huge factor, 800 bucks for a family of 4 plus the carry ons and the usual big checking that accompanied the kids always. For this thread I looked to see what it would be to fly my 4 today to MCO from TUL, the last Sat in May to the first Sat in June, 7 day trip right after school is out. Cheapest one stop from TUL to MCO and back from TUL, 420 bucks. I can fly AA, DL, and UA from XNA for 350 to 375 and then there's Allegiant to Sanford. I could fly the following Tues( the cheapest day to fly) and the price comes down to 230 from TUL, but guess what, The big Three at XNA are all 235 across the board and then there's Allegiant.


The reason for all those lower fares out of XNA to MCO/SFB is Allegiant. With G4, you'll get their ULCC product with a bunch of extra fees larded on -- $20 for each carry-on and $30 for each checked bag if you pay at booking. The prices go up from there. DL/AA/UA from XNA are going to be in Basic Economy -- so understand what you don't get with that fare before you book.
 
N212R
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 4:57 pm

DakotaFlyer wrote:
I mean they still made $500 million


The glass is ever half empty for the Money Men. Avarice should be the name of their after shave.
 
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par13del
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 5:06 pm

kabq737 wrote:
I’m not actually all that concerned about their numbers. They could be better but I don’t consider them worrisome for the airline.

The only thing that really raised my eyebrows was the LF. Having an 83.1% LF when you have 50 airplanes missing seems sort of low. Just my thinking but I’m happy to be corrected.

It may be related to routes that were cut versus just reducing frequencies on more routes.
 
kabq737
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 5:13 pm

par13del wrote:
kabq737 wrote:
I’m not actually all that concerned about their numbers. They could be better but I don’t consider them worrisome for the airline.

The only thing that really raised my eyebrows was the LF. Having an 83.1% LF when you have 50 airplanes missing seems sort of low. Just my thinking but I’m happy to be corrected.

It may be related to routes that were cut versus just reducing frequencies on more routes.

But wouldn’t they choose to cut the worst performing routes first therefore actually raising system wide performance?

Sorry if I’m incorrect just trying to wrap my head around this.
Been on: 320, 321, 333, 733, 73G, 738, 739, 744, 752, 763, 764, 772, 789, C208, CR7, CR9, BE20, MD83, MD88, MD90, E70, E75, E90, TRIM
Flown: SEEKER, C150M C172N, C172R, C172S, C182RG, DA40, PA-46
 
Cubsrule
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 5:19 pm

kabq737 wrote:
par13del wrote:
kabq737 wrote:
I’m not actually all that concerned about their numbers. They could be better but I don’t consider them worrisome for the airline.

The only thing that really raised my eyebrows was the LF. Having an 83.1% LF when you have 50 airplanes missing seems sort of low. Just my thinking but I’m happy to be corrected.

It may be related to routes that were cut versus just reducing frequencies on more routes.

But wouldn’t they choose to cut the worst performing routes first therefore actually raising system wide performance?

Sorry if I’m incorrect just trying to wrap my head around this.


A lot of the cutting has been on longer, low-frequency routes, primarily so they have to cut fewer flights/routes and can reaccomodate passengers over other hubs. It's been stuff like BNA-BUR or IND-OAK.
I can't decide whether I miss the tulip or the bowling shoe more
 
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PacoMartin
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 5:23 pm

kabq737 wrote:
I’m not actually all that concerned about their numbers. They could be better but I don’t consider them worrisome for the airline.


If you look at the full year it is a long way from a disaster
Southwest airlines managed to earn higher fares by $3.34 per average passenger which mitigated MAX problems.

Their net income is still considerably higher than AA on less than half the revenue.

Total Revenue $22,428 million for 2019; up $263 million from 2018 - Southwest
Total Revenue $45,768 million for 2019; up $1227 million from 2018 - American

Net Income $2,300 million for 2019; down $165 million from 2018 - Southwest
Net Income $1,686 million for 2019; up $274 million from 2018 - American
 
jplatts
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Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 5:26 pm

WN CONUS/PR nonstop routes in the 4/2018 - 10/2018 time period
====================================================
98133874 passengers
119755818 seats
81.95% load factor

WN CONUS/PR nonstop routes in the 4/2019 - 10/2019 time period
====================================================
96932875 passengers
118573245 seats
81.75% load factor

WN stations that carried more domestic passengers in 4/2019 - 10/2019 time period than in the 4/2018 - 10/2018 time period:
AUS, BNA, BOI, BUR, CHS, CLT, CVG, DAL, DCA, DEN, DSM, ECP, ELP, GEG, HOU, ICT, JAX, LBB, LGA, LGB, MEM, MSY, OAK, OKC, ONT, PHX, PNS, PWM, RDU, RIC, RSW, SAN, SAT, SDF, SJC, SLC, SMF, STL, TUS

WN stations that carried fewer domestic passengers in 4/2019 - 10/2019 time period than in the 4/2018 - 10/2018 time period:
ABQ, ALB, AMA, ATL, BDL, BHM, BOS, BUF, BWI, CLE, CMH, CRP, DTW, EWR, FLL, GRR, GSP, HRL, IAD, IND, ISP, LAS, LAX, LIT, MAF, MCI, MCO, MDW, MHT, MKE, MSP, OMA, ORF, PBI, PDX, PHL, PIT, PVD, RNO, ROC, SEA, SFO, SJU, SNA, TPA, TUL
 
737max8
Posts: 598
Joined: Thu Dec 10, 2015 4:13 am

Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 5:39 pm

kabq737 wrote:
durangomac wrote:
kabq737 wrote:
I’m not actually all that concerned about their numbers. They could be better but I don’t consider them worrisome for the airline.

The only thing that really raised my eyebrows was the LF. Having an 83.1% LF when you have 50 airplanes missing seems sort of low. Just my thinking but I’m happy to be corrected.


My understanding that most of the westbound Hawaii flights are having to be weight restricted, not surprised the load factor has taken a hit.


That definitely makes some sense I just don’t know if they run enough flights to Hawaii for that to have a huge effect on the numbers for the whole system.


I don't think weight has often been a problem westbound to Hawaii. And I thought WN just shared 90%+ load factors on west coast to Hawaii in 2019?
The thoughts and opinions expressed in my comments do not represent that of any airline or affiliate.
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alasizon
Posts: 2579
Joined: Sat Apr 28, 2007 8:57 pm

Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 6:19 pm

kabq737 wrote:
par13del wrote:
kabq737 wrote:
I’m not actually all that concerned about their numbers. They could be better but I don’t consider them worrisome for the airline.

The only thing that really raised my eyebrows was the LF. Having an 83.1% LF when you have 50 airplanes missing seems sort of low. Just my thinking but I’m happy to be corrected.

It may be related to routes that were cut versus just reducing frequencies on more routes.

But wouldn’t they choose to cut the worst performing routes first therefore actually raising system wide performance?

Sorry if I’m incorrect just trying to wrap my head around this.


They cut the weakest routes with the most aircraft time, that doesn't necessarily mean that they were actually the weakest overall. For instance, BUR-BNA wasn't a bad performer but because it chewed up so much aircraft time during a prime time of day, it was easier to cut that to fund some of the regular shorter flying that normally would have been on the MAX.

The 83% LF is particularly concerning to me as it should have been much higher given it was Q4 and the forced capacity discipline should have made it around 86-87% in my opinion.
Airport (noun) - A construction site which airplanes tend to frequent
 
durangomac
Posts: 442
Joined: Fri Dec 08, 2006 5:18 am

Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 7:19 pm

737max8 wrote:
kabq737 wrote:
durangomac wrote:

My understanding that most of the westbound Hawaii flights are having to be weight restricted, not surprised the load factor has taken a hit.


That definitely makes some sense I just don’t know if they run enough flights to Hawaii for that to have a huge effect on the numbers for the whole system.


I don't think weight has often been a problem westbound to Hawaii. And I thought WN just shared 90%+ load factors on west coast to Hawaii in 2019?



During the summer months that is true, headwinds during the summer aren't that big of an issue. My info comes from an FA that fly Hawaii flights often and she says most of her flights westbound have had weight restrictions. Apparently WN revenue management is having to hold back 30-40 seats on every westbound flight during the winter until they get closer in when more accurate wind prediction is available a few days out from the flight, at that point they can release seats for sales. She says that some of her flights have had upwards of 30 seats empty because of weight restrictions. Yes I know, I'm listening to an FA but they are usually aware of weight restrictions day of the flight.
 
AirnerdTX
Posts: 10
Joined: Wed Mar 13, 2019 12:27 pm

Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 8:12 pm

ElroyJetson wrote:
I am not surprised and have been anticipating this for several years. The MAX issue is only a small.part of the story.

Load factors are down due to competition from ULCC's at the bottom and more aggressive completion from the big three at the top. WN botched the Air Tran merger and wasted opportunities for growth. Instead of focusing on mid level cities that are growing rapidly like RIC, AUS, RDU they focused only connecting large city pairs with heavy competition and low growth due to being such mature markets.

Meanwhile, DL has been aggressively expanding in those mid level markets, and UA has done an outstanding job of building out DEN and increasing market share.

WN's corporate culture used to be risk taking and aggressive. Now it is stodgy and ultra conservative imho.

I wish them no ill will but I have to say for WN the chickens are coming home to roost.



Coming home to roost indeed. if only WN management would mess things up so bad that they are forced into Ch11 then WN too could screw their employees like the "big three at the top", and then WN wouldn't be in this situation!
 
AirnerdTX
Posts: 10
Joined: Wed Mar 13, 2019 12:27 pm

Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 8:16 pm

kabq737 wrote:
par13del wrote:
kabq737 wrote:
I’m not actually all that concerned about their numbers. They could be better but I don’t consider them worrisome for the airline.

The only thing that really raised my eyebrows was the LF. Having an 83.1% LF when you have 50 airplanes missing seems sort of low. Just my thinking but I’m happy to be corrected.

It may be related to routes that were cut versus just reducing frequencies on more routes.

But wouldn’t they choose to cut the worst performing routes first therefore actually raising system wide performance?

Sorry if I’m incorrect just trying to wrap my head around this.


Seems easier to just cut a route from a hub and spoke network, less so for a point to point. Cutting a feeder flight MAF-DFW doesn't have much impact. But when you still have to get that plane to MAF so you can continue to LAS and then out to LAX, gonna have low LF's potentially on MAF-LAS in order to position the flight for LAS-LAX.

Could be wrong, but makes sense in my brain.
 
WPvsMW
Posts: 2252
Joined: Thu Mar 23, 2017 7:30 pm

Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 8:49 pm

Cubsrule wrote:
A lot of the cutting has been on longer, low-frequency routes, primarily so they have to cut fewer flights/routes and can reaccomodate passengers over other hubs. It's been stuff like BNA-BUR or IND-OAK.


Correct. The cuts are driven by fleet utilization. Cutting longer, low-frequency routes allowed WN to preserve frequency on its high margin short routes while concurrently adding Hawaii service (by definition, low frequency), with the implication that the overall effect was to preserve margins on a network level. Looks like that strategy worked.
 
Cubsrule
Posts: 14426
Joined: Sat May 15, 2004 12:13 pm

Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 9:01 pm

WPvsMW wrote:
Cubsrule wrote:
A lot of the cutting has been on longer, low-frequency routes, primarily so they have to cut fewer flights/routes and can reaccomodate passengers over other hubs. It's been stuff like BNA-BUR or IND-OAK.


Correct. The cuts are driven by fleet utilization. Cutting longer, low-frequency routes allowed WN to preserve frequency on its high margin short routes while concurrently adding Hawaii service (by definition, low frequency), with the implication that the overall effect was to preserve margins on a network level. Looks like that strategy worked.


Another thing worth keeping in mind is that, largely by virtue of not having BWI service, EWR had a longer average stage length than most non-Florida east coast stations. So it was a similar theory there.
I can't decide whether I miss the tulip or the bowling shoe more
 
jplatts
Posts: 3531
Joined: Sat Mar 18, 2017 6:42 pm

Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 9:06 pm

AirnerdTX wrote:
kabq737 wrote:
par13del wrote:
It may be related to routes that were cut versus just reducing frequencies on more routes.

But wouldn’t they choose to cut the worst performing routes first therefore actually raising system wide performance?

Sorry if I’m incorrect just trying to wrap my head around this.


Seems easier to just cut a route from a hub and spoke network, less so for a point to point. Cutting a feeder flight MAF-DFW doesn't have much impact. But when you still have to get that plane to MAF so you can continue to LAS and then out to LAX, gonna have low LF's potentially on MAF-LAS in order to position the flight for LAS-LAX.

Could be wrong, but makes sense in my brain.


Here were the load factors for WN MAF-LAS nonstop service in the first 10 months of 2019:
January 2019 - 64.27%
February 2019 - 72.62%
March 2019 - 77.56%
April 2019 - 77.50%
May 2019 - 79.48%
June 2019 - 85.38%
July 2019 - 80.57%
August 2019 - 74.92%
September 2019 - 67.87%
October 2019 - 74.62%

Average load factors for MAF-LAS in the 1/2019 - 10/2019 time period - 75.47%

There are over 100 WN domestic nonstop routes within the contiguous U.S. that had lower load factors than MAF-LAS did in the 1/2019 - 10/2019 time period.
 
airzona11
Posts: 1746
Joined: Wed Dec 17, 2014 5:44 am

Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 9:21 pm

SWADawg wrote:
Not going to sugarcoat these earnings. The longer the MAX remains grounded, the worse it’s going to be going forward for WN.

https://www.marketwatch.com/story/south ... iteid=nbsh


While they might have missed, based on passengers/miles and the like they aren't much different than the US3 and looks like made more than AA. It is all relative, they run an amazing cash machine.
 
jplatts
Posts: 3531
Joined: Sat Mar 18, 2017 6:42 pm

Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 9:25 pm

Cubsrule wrote:
Another thing worth keeping in mind is that, largely by virtue of not having BWI service, EWR had a longer average stage length than most non-Florida east coast stations. So it was a similar theory there.


WN resumed BWI-EWR nonstop service on October 2, 2019, but ended BWI-EWR nonstop service when it pulled out of EWR on November 2, 2019. WN also had an average load factor of 62.15% on BWI-EWR nonstop service in October 2019.
 
bob75013
Posts: 954
Joined: Tue Jun 23, 2015 5:05 pm

Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 9:36 pm

PacoMartin wrote:
kabq737 wrote:
I’m not actually all that concerned about their numbers. They could be better but I don’t consider them worrisome for the airline.


If you look at the full year it is a long way from a disaster
Southwest airlines managed to earn higher fares by $3.34 per average passenger which mitigated MAX problems.

Their net income is still considerably higher than AA on less than half the revenue.

Total Revenue $22,428 million for 2019; up $263 million from 2018 - Southwest
Total Revenue $45,768 million for 2019; up $1227 million from 2018 - American
Total Revenue $47,007 million for 2019 - $1568 million more than 2018Delta

Net Income $2,300 million for 2019; down $165 million from 2018 - Southwest
Net Income $1,686 million for 2019; up $274 million from 2018 - American
Net Income $4,767 million for 2019 - $832 million more than 2018 - Delta
\

adding Delta to what Paco said in bold

So despite being severely hampered by the MAX situation, WN performed about as well as Delta did.
 
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knope2001
Posts: 3021
Joined: Wed Jun 01, 2005 5:54 am

Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 9:54 pm

Cubsrule wrote:
kabq737 wrote:
par13del wrote:
It may be related to routes that were cut versus just reducing frequencies on more routes.

But wouldn’t they choose to cut the worst performing routes first therefore actually raising system wide performance?

Sorry if I’m incorrect just trying to wrap my head around this.


A lot of the cutting has been on longer, low-frequency routes, primarily so they have to cut fewer flights/routes and can reaccomodate passengers over other hubs. It's been stuff like BNA-BUR or IND-OAK.


Yup...two additional related notes on why MAX reductions could counter-intuitively lead to lower load factors:

--Long hauls in the US (Southwest and other carriers) often run rather high load factors. Those were a lot of Southwest's cuts. Short-haul point-to-point flying often runs much lighter load factors, and Southwest did not cut nearly as much there. The long-haul cuts impacted system load factor by their very nature, but it's important to remember that (except for extremely low loads) load factor is a decidedly crappy indicator of profitability.

--Many of Southwest's cuts are lopsided. In a particular schedule period MCI-MSP may drop to 1x but MSP-MCI stay at 2x. They probably can't avoid lopsided cuts too easily because of the linear nature of their system. But I would guess they can really wreck demand. With only 1x/day northbound they might lose well more than 25% of their traffic in spite of only cutting 25% of their seats. Same with long hauls. Having two trips to Phoenix might be very appropriate for the size of the market, but if returning there's only 1 flight and it's expensive due to demand some people won't fly at all, other people will go to a competitor.

If Southwest had no competitors and demand was fixed having fewer seats would mean higher load factors. But they do have competitors (including the highway) and demand is greatly shaped by fares and flight/capacity availability. That, and the tendency to have cut long, high-load-factor flights, make it not so surprising that load factor wouldn't be booming.
 
airplaneboy
Posts: 705
Joined: Sat May 15, 2004 11:59 am

Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 11:15 pm

knope2001 wrote:
Cubsrule wrote:
kabq737 wrote:
But wouldn’t they choose to cut the worst performing routes first therefore actually raising system wide performance?

Sorry if I’m incorrect just trying to wrap my head around this.


A lot of the cutting has been on longer, low-frequency routes, primarily so they have to cut fewer flights/routes and can reaccomodate passengers over other hubs. It's been stuff like BNA-BUR or IND-OAK.


Yup...two additional related notes on why MAX reductions could counter-intuitively lead to lower load factors:

--Long hauls in the US (Southwest and other carriers) often run rather high load factors. Those were a lot of Southwest's cuts. Short-haul point-to-point flying often runs much lighter load factors, and Southwest did not cut nearly as much there. The long-haul cuts impacted system load factor by their very nature, but it's important to remember that (except for extremely low loads) load factor is a decidedly crappy indicator of profitability.

--Many of Southwest's cuts are lopsided. In a particular schedule period MCI-MSP may drop to 1x but MSP-MCI stay at 2x. They probably can't avoid lopsided cuts too easily because of the linear nature of their system. But I would guess they can really wreck demand. With only 1x/day northbound they might lose well more than 25% of their traffic in spite of only cutting 25% of their seats. Same with long hauls. Having two trips to Phoenix might be very appropriate for the size of the market, but if returning there's only 1 flight and it's expensive due to demand some people won't fly at all, other people will go to a competitor.

If Southwest had no competitors and demand was fixed having fewer seats would mean higher load factors. But they do have competitors (including the highway) and demand is greatly shaped by fares and flight/capacity availability. That, and the tendency to have cut long, high-load-factor flights, make it not so surprising that load factor wouldn't be booming.


I think your assessment is spot on. I’d also like to add that loads might be down in some markets due to the fact that the fleet deficit is causing WN to operate some flights at times that aren’t desirable. The fleet is definitely flying longer days as evidenced by early morning flights departing earlier and late evening arrivals arriving later than WN used to traditionally schedule.
 
SanDiegoLover
Posts: 431
Joined: Sat Dec 10, 2016 12:24 am

Re: Southwest misses on Q4 Earnings

Thu Jan 23, 2020 11:43 pm

My guess is that SWA was operating under the assumption that the MAX grounding was going to be short-lived, and had they known up front the MAX would be grounded and delayed by over 1 year, they would have made different decisions. Instead of maximizing load factors, SWA likely cut easy to restore flights. SWA didn’t want to make any rash decisions on closing any outstations or large changes to their schedule. After all, if the planes are only going to be grounded for 60 days, it’d be foolish to do anything more than “tweak” around the edges.
 
WPvsMW
Posts: 2252
Joined: Thu Mar 23, 2017 7:30 pm

Re: Southwest misses on Q4 Earnings

Fri Jan 24, 2020 2:27 am

SanDiegoLover wrote:
SWA didn’t want to make any rash decisions on closing any outstations or large changes to their schedule.


Does EWR count as an outstation?

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