Originally Posted by
Ed Harley
You've got your facts wrong. Richard Anderson was CEO of NWA from 2001-2004. Northwest didn't file for bankruptcy until 2005. The "gutting" of contracts and the formation of "Newco" didn't occur until after he left.
Yes, Kelly and Southwest made a once-in-a-lifetime bet on fuel hedges after Sep 11. They used the government money (from the sep 11 airline bailout money) to buy numerous fuel contracts that would secure low fuel prices for years to come. Southwest then had unprecedented growth across the country as they undercut other airline's ticket prices. I'm not saying there's anything wrong with this but let's be honest, Kelly was very lucky. He placed a huge bet on fuel (with money that wasn't his) and it paid off big.
But now that the fuel contracts have expired and Southwest is on equal ground with it's rivals, Kelly and Southwest are realizing that they may have bit off more than they can chew. Southwest is no longer able to expand, their profits have been reduced, they're having problems with the Airtran merger, they're leaving money on the table by not collecting baggage fees, and they've consistently had the worst on-time performance of any airline this past year.
I'm not counting Southwest out because they always seem to succeed. But this next year will be interesting. Delta seems to love the chance to compete head-to-head with Southwest now and consistently beats them. Southwest's entry into Atlanta was a failure. And Spirit is a true "low-cost" airline that is growing and I don't see Southwest being able to compete with their prices.
We'll see....
You can call it luck, but I call it smart leadership that has been typical throughout Southwest's history.
I wouldn't say Southwest is on equal ground with the legacy carriers either. The only way the legacies have been able to make money the last 10 years is on the backs of cheap regional airlines. Can't squeeze too much more out of that turnip unless they get more relief on scope from the unions. The legacies need to change their business model to maintain their growth in the future.
To say Southwest has been unable to expand is a bit of a distortion. Southwest has chosen not to expand until it completes the Air Tran merger (agreed this has been difficult) and stabilizes its infrastructure. Again, just smart business.
As for who the true low cost carriers are? Who cares. Southwest has its own unique brand, low fares and great customer service. All without the nickel and dime gimmicks other carriers have to do to turn a profit.
I've heard similar comments 20 years ago about how Southwest was no match for legacy carriers. But, now we see how well people can tell the future in this industry.
I bet you will still see incredible profits out of Southwest this year and the years to come. It's not the same airline as it was 20 years ago, but that's a good thing.