True. Like I said, who knows what SWA will be like in 5-10 years. CAL's only real strength is that it seems to produce higher revenue than its peers.

I think the next few years will be tougher for SWA. First, they're shrinking their schedule somewhat (could mean career stagnation). They're used to growing 5-7% every year, which means that they start generating revenue prior to incurring substantial operating costs on those legs... result is increased revenue and ability to cut ticket prices. Combine that with fuel hedging and efficient crew scheduling and it's a no brainer that they've made tons of money.

However, their fuel hedging returns are extremely likely to at least diminish. And when they shrink capacity, that means that they're on the negative side of the revenue curve on that route - they're still paying for crews/gates/etc. and not getting any revenue. That's sure to take a chunk out of their profit. Their business model seems to depend on rock-bottom low ticket prices to encourage the family/spring break type of traveler (low revenue to begin with). A $20 fare increase to that demographic is a bit different than a $20 fare increase to CAL's bread-n-butter business traveler.

Don't get me wrong, I'm not predicting all doom and gloom. I'm just predicting that SWA will slowly start to feel the rest of the industry's pain.

Riddler