WN Makes 1q Profit

Atlwest1 · Thu Apr 19, 2012 12:12 pm

Looks as though WN made a 1st quarter profit due to "a one time fuel hedge". With out the hedge the loss was less then expected. Full article below.

Southwest 1q profit AJC

stlgph · Thu Apr 19, 2012 12:23 pm

Except adjusting a first-quarter loss of $18 million and losing 2 cents a share is more of a loss.

redrooster3 · Thu Apr 19, 2012 1:52 pm

Wow, this is awesome news! I totally was expecting a 1st quarter loss. I'm very happy. Even they're revenue pax/year is down since last year too.

MountainFlyer · Thu Apr 19, 2012 2:15 pm

I am not surprised at all. When they announced a few weeks ago that they were expecting a loss, I fully expected them to post either a smaller loss than expected (according to the article, even without the hedges the loss was smaller than expected), or a net income.

By making that announcement earlier, if it turned out to be a big loss, then there would be no surprise and the stock price would be at least cushioned. If it was anything better than a big loss (which it was), the stock price gets a nice boost. It's up nearly 5% so far this morning.

delta2ual · Thu Apr 19, 2012 2:55 pm

Operating Revenues of $4.0 Billion and net income of $98 million. Fuel is really hurting the bottom line. The article said they spent $1.5 Billion on fuel. Is that correct? Was that just for the quarter-it didn't say.

stlgph · Thu Apr 19, 2012 3:17 pm

AirTran fees to remain for 3 years. SW is hurting for some extra revenue to come in.

$1.51 billion for fuel is correct.

BD338 · Thu Apr 19, 2012 3:44 pm

Quoting delta2ual (Reply 4):
The article said they spent $1.5 Billion on fuel. Is that correct?

yep. Though, and as the article notes, the cost of fuel has dropped slightly from the high point earlier in the year. No one is expecting fuel prices to drop dramatically but every little bit helps the industry. Fuel prices will remain historically high in comparison to earlier years, though the latest round of fare increases by AA and DL were not matched by WN so we may be seeing a peak, or at least a plateau for a while, in fare levels. (off topic a bit, I was stumbling around RITA transtats the other day and they had an interesting yearly trend of average US airfares from 1995 to 2011. In 2011 the average fare was 15% LESS than in 1995 (using 1995 dollars as a constant) ) So even with huge increases in fuel and labor since 1995 it is still cheaper to fly, in relative dollars, today than in 1995!

Good job WN in Q1 we await the other airline reports in this typically weak quarter to see if there is a trend.

phxa340 · Thu Apr 19, 2012 3:52 pm

Quoting stlgph (Reply 5):
AirTran fees to remain for 3 years. SW is hurting for some extra revenue to come in.

Arg ... this is so hypocritical. Just for fun they should put some 'Bags $25 here' on the Airtran cargo hold.

MountainFlyer · Thu Apr 19, 2012 4:05 pm

Quoting stlgph (Reply 5):
AirTran fees to remain for 3 years.

One has to wonder if they will ever go away. By that, I mean perhaps by then WN will have the bag fee themselves, but that's a topic for a different thread.

MSPNWA · Thu Apr 19, 2012 4:57 pm

Guess things aren't as bad in WN land as expected. Not a bad quarter. Since this is the first combined Q1 results, it's a pretty good sign for WN to have absorbed FL's financials and improved as a whole.

panamair · Thu Apr 19, 2012 5:02 pm

But most of the operating financials are simply not very good.

Operating profit down 81% to $22m (+0.6% margin), or if excluding the fuel hedge gains, only a $10m (+0.3% margin) operating profit.

RASM /PRASM increase of just 2 to 3% (AA reported a 10% jump, UA is expected at 4 to 5% increase, and DL is expecting about 12-13%).

lightsaber · Thu Apr 19, 2012 5:05 pm

Quoting delta2ual (Reply 4):
Operating Revenues of $4.0 Billion and net income of $98 million. Fuel is really hurting the bottom line. The article said they spent $1.5 Billion on fuel.

I never thought I'd see the day that a short haul airline broke 1/3rd of their CASM on fuel. That just amazes me.

In other words, the 737 MAX's 10% to 12% fuel burn reduction is a $150 million to $180 million per quarter cost savings.

The reason I type this is that I'm having to bang into my head how other costs have 'diminished in importance' for airlines due to the huge rise in fuel costs.

This will change the industry.

Lightsaber

chuchoteur · Thu Apr 19, 2012 5:17 pm

Quoting lightsaber (Reply 11):
In other words, the 737 MAX's 10% to 12% fuel burn reduction is a $150 million to $180 million per quarter cost savings.

...and now you know why everyone's running to buy NEOs and MAXs

stlgph · Thu Apr 19, 2012 6:24 pm

FROM THE CONFERENCE CALL TODAY -

AirTran leaving 15 cities this year
AirTran planes being deployed on other routes
AirTran code share not until 2013, no specific time given
AirTran planes going to Cabo San Lucas, Mexico City
Southwest sees "a dozen or two" international flights at Hobby
Southwest $400m synergy target not dependent on codes

toltommy · Thu Apr 19, 2012 6:44 pm

Quoting PHXA340 (Reply 7):
Just for fun they should put some 'Bags $25 here' on the Airtran cargo hold.

How about "Bags fly fee"????

Silver1SWA · Thu Apr 19, 2012 6:59 pm

I am surprised by the news and I must admit I stand corrected in the thread about the expected loss.

Quoting PHXA340 (Reply 7):
Arg ... this is so hypocritical.

I agree that it appears hypocritical. However, as long as the two carriers are running independently as two separate brands, I'm not sure how WN could just eliminate the bag fees and keep the AirTran side profitable. Bag fees were introduced to offset AirTran's costs. Those costs would need to be offset somehow and right now, the benefits of the "merger" are not being realized any time soon.

[Edited 2012-04-19 12:00:19]

WNCrew · Thu Apr 19, 2012 7:14 pm

Quoting Silver1SWA (Reply 15):
I agree that it appears hypocritical. However, as long as the two carriers are running independently as two separate brands, I'm not sure how WN could just eliminate the bag fees and keep the AirTran side profitable.

People just want something to pick at and criticize is all. While the members of A.net may "think" of WN and FL as one, the public does not. PERIOD. Again, Hilton owns Hilton and Doubletree, two SEPARATE brands, and I don't expect a cookie upon checkin at Hilton...because it's NOT part of the brand. The excuse that "Yes but they're not merging".... neither are WN and FL. They're not creating a new brand out of two, they're maintaining and shrinking the FL brand and converting it to WN. Therefore... FL is FL is FL and WN is WN is WN... they will remain so until things are fully CONVERTED.

Funny how in the same breathe people will criticize WN for NOT charging for bags... it's a losing situation when it comes to WN, always is. ... and this is coming from someone who is the FIRST to call it like I see it, even in terms of my own employer... but sheesh people.

phxa340 · Thu Apr 19, 2012 7:20 pm

Quoting WNCrew (Reply 16):
Hilton owns Hilton and Doubletree, two SEPARATE brands, and I don't expect a cookie upon checkin at Hilton...because it's NOT part of the brand.

This comparison doesn't apply here. Hilton created Doubletree to cater to travelers on a smaller budget with ZERO intent to roll this into the main Hilton brand. WN have said they WANT to roll FL into the WN brand - One paint job, seating layout, etc ... hence the hipocracy. WN doesn't want FL cornering any niche part of the market via a seperate brand like Hitlon is doing with Doubletree. I really like WN but this is a messy integration anyway you look at it ... I am customer of WN that flies frequenty and yes much the public does percieve FL and WN as one carrier now.

stlgph · Thu Apr 19, 2012 7:37 pm

Yes, except .... Hilton/Doubletree doesn't work as a comparison because Hilton bought Doubletree in 1999. The cookies came in the 1980's. If you wanted a comparison, it would be ... AirTran takes over Southwest and eliminates the checked bag fees.

Silver1SWA · Thu Apr 19, 2012 7:43 pm

Quoting PHXA340 (Reply 17):
WN have said they WANT to roll FL into the WN brand - One paint job, seating layout, etc ... hence the hipocracy.

Yes, they WANT to. But at this very moment in time, the two remain separate operations. Bag fees came with AirTran. So as long as AirTran operates as AirTran, they will remain because they are part of AirTran's equation. Something would have to offset the loss in revenue from those bag fees, no?

WNCrew · Thu Apr 19, 2012 7:45 pm

Quoting PHXA340 (Reply 17):
WN have said they WANT to roll FL into the WN brand

...but they haven't yet, so as long as an AirTran plane has an AirTran paint job, it's the AirTran BRAND...

Quoting PHXA340 (Reply 17):
hence the hipocracy.

Hypocrisy would be if all the FL planes were painted in WN colors etc but WN said, "Well since they were originally FL we're charging for bags on those flights." They're not...

Quoting PHXA340 (Reply 17):
WN doesn't want FL cornering any niche part of the market via a seperate brand like Hitlon is doing with Doubletree.

..maybe they don't want it but for now they're running it that way. WN doesn't offer Business Class, but if you think they're not going to continue marketing Business Class and offering upgrades you're wrong. Should they also rip out all the Business Class Seats so they're not offering a different product than WN... even though they're not WN...??

phxa340 · Thu Apr 19, 2012 8:09 pm

Quoting WNCrew (Reply 20):
Hypocrisy would be if all the FL planes were painted in WN colors etc but WN said, "Well since they were originally FL we're charging for bags on those flights."

Right but they are parking their planes right next to Airtran planes with the "Bags Fly Free" here slogan. So essentially, they are attacking their own wholly owned subsidary.

stlgph · Thu Apr 19, 2012 8:19 pm

With a number of station and service eliminations, and at-station consolidations, the "cost of AirTran doing business" isn't so much that high of a cost anymore that needs to be offset by bag fees.

The bag fees are clearly a bellwether and a revenue source.

ouboy79 · Thu Apr 19, 2012 8:37 pm

Quoting PHXA340 (Reply 21):
Right but they are parking their planes right next to Airtran planes with the "Bags Fly Free" here slogan. So essentially, they are attacking their own wholly owned subsidary.

Isn't every airline that is operating "first class" on regional aircraft doing the same thing? I mean the core of this argument/attack on the FL bag fee is that they are the same company (or owned by at least). However for example the United mainline int'l first class experience is different than the United Express first class experience...even though it is the same brand, right? Well no...because one is Express the other is mainline. Though I guess you could take it up a notch and compare United mainline domestic FC and int'l FC. Exact same brand but the customer experience is completely different.

That is what the whole basis here is for FL being operated differently than the WN brand. Two different, distinct brands. Customers have expectations with the WN brand. The experience on board FL aircraft is NOT the same as on a WN aircraft. The procedures and policies are also completely different. It would not be proper to just simply repaint the FL fleet without getting the equipment and crews in line with the WN brand offering.

phxa340 · Thu Apr 19, 2012 8:46 pm

Quoting ouboy79 (Reply 23):
Isn't every airline that is operating "first class" on regional aircraft doing the same thing?

Not really understanding your argument. WN has built their business model around the campaign of "Bags Fly Free". UA hasn't build their business completely around their F/C cabin. Its a small part of them while WN's main benefit statement to their customers is Bags fly free and no change fees.

I understand that they need to get integrated and right now the two are two seperate companies but WN made a choice to collect extra revenue via FL's baggage fees and I find it hypocritical. I get that a lot of you disagree which is why I love hearing both sides on A.net

gustywinds · Thu Apr 19, 2012 8:47 pm

Quoting ouboy79 (Reply 23):
Isn't every airline that is operating "first class" on regional aircraft doing the same thing? I mean the core of this argument/attack on the FL bag fee is that they are the same company (or owned by at least). However for example the United mainline int'l first class experience is different than the United Express first class experience...even though it is the same brand, right? Well no...because one is Express the other is mainline. Though I guess you could take it up a notch and compare United mainline domestic FC and int'l FC. Exact same brand but the customer experience is completely different.

No, it is not the same thing. It is nothing more than a different a/c type. The policies (frequent flyer points, bag fees) are all the same.

All I can do is recall those obnoxious WN commercials with WN ramp agents pointing at the other airlines with blurred out tails bragging about WN bags flying free. Those other airlines are themselves now with FL. Ridiculous

http://travel.usatoday.com/flights/p...-due-to-rising-fuel-costs/676371/1

Quote:
The company said it incurred $13 million in expenses, before taxes, associated with the acquisition and integration of AirTran. It expects the total cost of acquiring AirTran to reach about $500 million.

How much will FL end up costing WN?

MountainFlyer · Thu Apr 19, 2012 8:54 pm

Quoting gustywinds (Reply 25):

How much will FL end up costing WN?

I don't think anyone, not even WN, knows the full extent of what it is going to cost them yet. Clearly the buyout as a little more complex than they originally thought.

[Edited 2012-04-19 13:55:23]

phxa340 · Thu Apr 19, 2012 8:58 pm

Quoting gustywinds (Reply 25):
All I can do is recall those obnoxious WN commercials with WN ramp agents pointing at the other airlines with blurred out tails bragging about WN bags flying free. Those other airlines are themselves now with FL. Ridiculous

Thats what I am trying to say. WN is ripping on the competition for bag fees yet their subsidary does the same exact thing. Which leads me to this :

Quoting stlgph (Reply 22):
The bag fees are clearly a bellwether and a revenue source.

Yup. Great for WN , not so great for building brand unity and perception.

Silver1SWA · Thu Apr 19, 2012 9:36 pm

Quoting PHXA340 (Reply 24):
I understand that they need to get integrated and right now the two are two seperate companies but WN made a choice to collect extra revenue via FL's baggage fees and I find it hypocritical. I get that a lot of you disagree which is why I love hearing both sides on A.net

No, FL made the choice to collect the fees as a way to offset their costs. It was not WN's doing. WN feels the need to keep those fees in place until the integration really begins. There was a reason for the fees in the first place.

MSPNWA · Thu Apr 19, 2012 9:50 pm

I wager it would cost WN too much money to scrap FL's bag fees at this time. FL wasn't doing the greatest anyway, and losing that revenue stream with FL's business model still in place is asking for pain on the bottom line.

Silver1SWA · Thu Apr 19, 2012 9:55 pm

Quoting MSPNWA (Reply 29):
I wager it would cost WN too much money to scrap FL's bag fees at this time. FL wasn't doing the greatest anyway, and losing that revenue stream with FL's business model still in place is asking for pain on the bottom line.

This! That's what I've been trying to say.

phxa340 · Thu Apr 19, 2012 10:05 pm

Quoting MSPNWA (Reply 29):
I wager it would cost WN too much money to scrap FL's bag fees at this time. FL wasn't doing the greatest anyway, and losing that revenue stream with FL's business model still in place is asking for pain on the bottom line.

Then I will propose what a lot of other members have been asking ... why buy FL in the first place if they were losing money and the only way to keep the company from bleeding too much money is to charge a fee your company's marketing team rip on constantly. Was it for ATL ? Was it to reduce a competitor ?

Again I agree it is smart business on WN's part ... I just see some backlash.

MSPNWA · Thu Apr 19, 2012 10:28 pm

Quoting PHXA340 (Reply 31):
Then I will propose what a lot of other members have been asking ... why buy FL in the first place if they were losing money and the only way to keep the company from bleeding too much money is to charge a fee your company's marketing team rip on constantly. Was it for ATL ? Was it to reduce a competitor ?

Again I agree it is smart business on WN's part ... I just see some backlash.

I'm sure for WN it was the best way to expand the company and grow in areas of the market that WN is weak (SE states). Buying a competitor is better financially than forcing one out.

I don't see any major backlash as long as the two airlines' operations are separate like they are now.

lightsaber · Thu Apr 19, 2012 10:34 pm

I'm less concerned about WN and bag fees than having WN on all the search engines. I tried to book WN twice in 1Q2012 and I couldn't because their software is not compatible with whatever AMEX business travel services uses for their bookings (which I'm stuck with for corporate travel). IMHO, having such a good last minute business product is wasted if AMEX, Carlson Wagonlit, and other corporate travel services are excluded.

Heck, Travelocity has certainly made inroads into the Fortune 500 too... Once the corporate travel contract is signed, it is one step from a VP letter to be allowed to book outside the system. WN is past due for upgrading their IT.

I know I'm describing a scenario that will cost WN IT related funds. The revenue will more than compensate. Seriously, the days I was booking away from AA to Dallas, I was authorized $1000 r/t (non-refundable) fares LAX(or LGB)-DFW/DAL. Since the flights were full those days,

WN needs to get over their allergy to corporate travel agency.

Quoting chuchoteur (Reply 12):
...and now you know why everyone's running to buy NEOs and MAXs

Now I know? I think I was trying to make that point earlier.

But it emphasizes why the MD-80s are doomed. 25% more fuel per mission than the 738 with fewer passengers. WN would have paid ~$200 million more in fuel in 1Q2012 if they had an all MD-80 fleet (less than the full amount due to 733s).

The MAX/NEO actually provide less advantage than the 737NG/A320 did over the prior generation of narrowbodies. Since they are re-engines and not re-winged, that isn't too surprising.

Quoting toltommy (Reply 14):
How about "Bags fly fee"????

Quoting PHXA340 (Reply 31):
why buy FL in the first place

A combined code-sharing WN/FL has far more potential than what we see now.

Lightsaber

phxa340 · Thu Apr 19, 2012 10:34 pm

Quoting WNCrew (Reply 20):
Hypocrisy would be if all the FL planes were painted in WN colors

Which they are currently doing ...

Silver1SWA · Thu Apr 19, 2012 10:38 pm

Quoting PHXA340 (Reply 34):

Quoting WNCrew (Reply 20):
Hypocrisy would be if all the FL planes were painted in WN colors

Which they are currently doing ...

The converted aircraft become part of WN. They don't go back into service for FL.

atrude777 · Thu Apr 19, 2012 10:40 pm

Quoting PHXA340 (Reply 34):

Which they are currently doing ...

and when a passenger flies an FL Converted Plane into WN interior and Exterior, they are not paying for the bag fees or change fees.

Quoting PHXA340 (Reply 31):
Was it for ATL ?

Yep...

Quoting PHXA340 (Reply 31):
Was it to reduce a competitor ?

Bingo!

Quoting lightsaber (Reply 33):
I tried to book WN twice in 1Q2012

Then you weren't using www.swabiz.com

They do have Corporate Accounts, it's tied to www.swabiz.com the corporate Business Account version of Southwest.com

Quoting lightsaber (Reply 33):

WN needs to get over their allergy to corporate travel agency.

they did...they do...they have them.

Alex

ouboy79 · Thu Apr 19, 2012 10:44 pm

Quoting lightsaber (Reply 33):
IMHO, having such a good last minute business product is wasted if AMEX, Carlson Wagonlit, and other corporate travel services are excluded.

I've been with two major companies that do their corporate travel through AmEx. Both companies also used Southwest exclusively for travel. I had zero issue booking travel through AmEx on WN. Of course most of the time I just pick up the phone to speak to someone, which of course is taboo these days. Ewww talking to people. Nasty. LOL

Quoting PHXA340 (Reply 34):
Which they are currently doing ...

You won't see a WN painted former FL aircraft running FL branded flights/operations. After they are repainted and refitted they go onto WN branded flights. So no, that isn't what they are doing exactly. WN metal isn't operating on FL branded ops.

phxa340 · Thu Apr 19, 2012 10:59 pm

Quoting lightsaber (Reply 33):
Carlson Wagonlit,

They recently added WN. It was a godsend as SWABIZ doesn't let you edit your itinerary after you book it (At least in my experience)

Quoting ouboy79 (Reply 37):
You won't see a WN painted former FL aircraft running FL branded flights/operations. After they are repainted and refitted they go onto WN branded flights. So no, that isn't what they are doing exactly. WN metal isn't operating on FL branded ops.

Ah, good. I still hope that WN takes the best of FL and does it in a timely manner but also keeps that warm and fuzzy WN feeling that its customers love about them and their crew.

ouboy79 · Thu Apr 19, 2012 11:48 pm

Quoting PHXA340 (Reply 24):
Not really understanding your argument. WN has built their business model around the campaign of "Bags Fly Free". UA hasn't build their business completely around their F/C cabin. Its a small part of them while WN's main benefit statement to their customers is Bags fly free and no change fees.

Right... but what I'm trying to get you to see is that yes they have a subsidiary operating with bag fees, but it isn't the WN brand that is doing it. So to most customers their EXPERIENCE isn't changed. They know what the experience on WN is all about and they know what it is like on FL. What I'm getting from people is that they expect the customer experience to be the same on FL as it is on WN. When you can't compare a United Domestic product to a United international product. It is not the same customer experience, even though it is the same brand.

Quoting gustywinds (Reply 25):
No, it is not the same thing. It is nothing more than a different a/c type. The policies (frequent flyer points, bag fees) are all the same.

So you are saying you get the EXACT same customer experience in first class on a United Express aircraft that you do on a mainline first class flight internationally?

phxa340 · Thu Apr 19, 2012 11:53 pm

Quoting ouboy79 (Reply 39):
What I'm getting from people is that they expect the customer experience to be the same on FL as it is on WN.

Yes , because WN has announced the acquisition/merger whatever, a while ago and announces FL routes on their website. So if I am loyal WN customer and I know they fully own FL and WN tells me to fly MDW-CUN on FL I would be suprised to find the 25 dollar fee as I know FL is owned by WN. Customers are expecting one company which in reality is not a possibility to do in such a short time frame ... one easy they thing they could done to align the companies is waive the bag fee. However , ATRUDE777 just posted that FL/WN points can be traded now which is a huge step in the right direction.

ouboy79 · Fri Apr 20, 2012 12:05 am

Quoting PHXA340 (Reply 40):
Yes , because WN has announced the acquisition/merger whatever, a while ago and announces FL routes on their website. So if I am loyal WN customer and I know they fully own FL and WN tells me to fly MDW-CUN on FL I would be suprised to find the 25 dollar fee as I know FL is owned by WN. Customers are expecting one company which in reality is not a possibility to do in such a short time frame ... one easy they thing they could done to align the companies is waive the bag fee.

Eh, who knows what may happen down the road here.

Quoting PHXA340 (Reply 40):
However , ATRUDE777 just posted that FL/WN points can be traded now which is a huge step in the right direction.

lightsaber · Fri Apr 20, 2012 3:24 am

Quoting Atrude777 (Reply 36):
Then you weren't using www.swabiz.com

We're not allowed to. We must book flight, hotel, and rental car through a package supplied by AMEX that is integrated with our project billing data base.

Unfortunately, we have to go through multiple steps:
1. per-authorization for the trip
2. Book the trip, including an algorithm that verifies the fare versus route options.
3. Integration with the post-trip reimbursement

Individual web sites are not integrated. They bypass the 'fare rules' checking.

All of this is required to survive audits by the customers. It forces all the information to be on one database for account auditing purposes. Its absolute impossible to justify an audit without comparing multiple airline fares.

Quoting Atrude777 (Reply 36):
they have them

On the web page? I can call, but that is a hassle.

Quoting ouboy79 (Reply 37):
Of course most of the time I just pick up the phone to speak to someone, which of course is taboo these days.

Unfortunately, that then requires an employee to take extra steps to ensure reimbursement of trip costs. I would have to first book (but not confirm) with another airline and capture a screen shot to show the compatible minimum fare. I then have to go to swa and also capture the screen shot and then go to a director to receive a signature authorizing the phone booking of the fare. (Otherwise, I might be paying for my own business trip.)

Its full integration or why bother? In particular, if seats are sold out in Y, the web based system will allow front cabin.

Quoting PHXA340 (Reply 38):
Quoting lightsaber (Reply 33):
Carlson Wagonlit,

They recently added WN.

Really. Good move on WN's part. If its recent, that is a good thing. Now to get onto AMEX and Travelocity.
I haven't used Carlson Wagonlit for a decade, but they had a good system back then. I have yet to use Travelocity's corporate system, I just have a few friends who must use it.

Lightsaber

odafz · Fri Apr 20, 2012 6:46 am

Quoting MSPNWA (Reply 9):
RASM /PRASM increase of just 2 to 3% (AA reported a 10% jump, UA is expected at 4 to 5% increase, and DL is expecting about 12-13%).

Again the increase of 2-3% resulted in a small profit, the 10% jump in AA resulted in losses, you can argue that the increase in RASM could have lead increase/decrease profits/loss , but we must clearly examine the yield of both companies.

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