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How is SWA the low cost leader?


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How is SWA the low cost leader?

Old 11-14-2005, 11:00 AM
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Default How is SWA the low cost leader?

1. They operate only 1 type of A/C to minimize the size of spare parts inventory, simplify the training of maintenance and repair personnel, improve proficiency and speed with which maintenance routine can be completed.

2. SWA tries to steer clear of congested airports, stressing instead serving airport relatively close to major metropolitan areas and in medium-sized cities. This helps produce better than average on time performance and reduces the fuel costs associate with planes sitting in line on crowded taxiways or cirlcing airports waiting for a landing clearance.

3. SWA's point to point scheduling of flight has proven more cost efficient than the traditional hub and spoke design used by rivals.

4. To economize on the amount of timeit takes terminal personnel to check passengers in and to simplify the whole task of making reservations, SWA does not utilize the practice of assigning passenger seats. The print a big A, B, or C on the boarding pass and passengers board roughly 30 at a time.

5. SWA fllight attendants are responsible for cleaning up trash left by deplaning passengers and otherwise getting the A/C presentable for passengers.

6. SWA does not have a first-class section or lounge for frequent flyers, nor do they serve meals on any of their flights.

7. SWA's average turn time is only 2/3 of the industry average. SWA has an average of 2.2 station personnel per 1,000 passengers versus an industry average of 4.2.

8. And the list goes on...



SWA management quote (Kelleher):

"You have to treat employees like your customers. When you treat them right, then they will treat your outside customer right. That has been a very powerful competitive weapon for us. You've got to take the time to listen to people's ideas. If you just tell somebody no, that's an act of power, and in my opinion, an abuse of power. You don't have to constrain people in their thinking."
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Old 11-15-2005, 09:05 PM
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Fuel hedging.
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Old 11-16-2005, 12:26 PM
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All the other stuff is great, but Mike is right..... Fuel hedging
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Old 11-16-2005, 01:17 PM
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Oh ya, forgot about the obvious one. I wonder what type of strategy they are workin' on for when their discount fuel runs out.
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Old 11-16-2005, 02:46 PM
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Smile Fuel hedges.....

ZZZZZZZ.....fuel hedges. Yeah, I'm sure that's the only reason old SWA is making money. That argument is worn out guys. My friends at SWA say their CEO has it under control and that their fuel hedges don't run out until 2010. Besides, who really cares unless you work there? Will everyone be happy when SWA starts losing money? I guess everyone should just hold their breath and hope SWA starts losing money soon. Maybe they'll even go bankrupt and start furloughing. Until then let's give poor old SWA a break!

OK, let the bashing begin......

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Last edited by Brown Dog; 11-16-2005 at 02:48 PM.
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Old 11-16-2005, 04:56 PM
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Originally Posted by Brown Dog

OK, let the bashing begin......

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I don't think bringing up Fuel Hedging is bashing SWA, however, it does reduce the operating cost over brand X, no?

SWA made a bet, that fuel prices would go up, and they did. It was a smart/lucky move for them to pursue a hedging policy, and one that paid off big time.

Once the contracts run out, the operating costs at SWA could go up. Is it doom and gloom? I doubt it, but absent new hedges AND the price of fuel staying where it is, SWA will find the need to get creative once again.
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Old 11-16-2005, 08:04 PM
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The bashing I was referring to was me. I figured people would let me have it! You know, it's anonymous so that's what usually happens.

As far as I know fuel hedging is not new to SWA as they've been doing it for 2 decades. It just happens this time the price swing was HUGE so the profits were huge. Of course SWA would make a lot less money without the hedges. They would make a lot less money if they flew more than one type of aircraft, had a defined benefit plan, flew their pilots fewer block hours, had more than 70 employees per airplane etc.

It just seems to me that there's an undertone that everyone is waiting for SWA to trip, so to speak. Just my thoughts. C-ya!

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Last edited by Brown Dog; 11-16-2005 at 08:06 PM.
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Old 11-16-2005, 08:56 PM
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Originally Posted by Brown Dog
It just seems to me that there's an undertone that everyone is waiting for SWA to trip, so to speak.
Mark my words, Brown Dog. SWA will trip. It's inevitable that they'll catch a toe on the curb or a wrinkle in the carpet or something because it's awfully hard to see the ground when you're carrying that tall stash of cash to the bank!

SWA's proclaimed operational agenda is to manage in the good times to prepare for the bad times. Knowing that the industry is cyclical, it isn't rocket science to predict that a downturn isn't far away. SWA is successful today because they didn't squander all the money they made during the last airline boom. That cash has allowed them to take actions that insulate them from many of the harsh factors that are weighing on the industry.

It's amazing what a company (in any industry) can do when its recognized purpose is to make a profit for its shareholders and provide decent wages and benefits for its employees. Once the ego gets hold and the goal changes to being the biggest or flashiest or whatever all bets are off for both the shareholders and the employees.
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Old 11-17-2005, 05:58 AM
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Rather than hope that SWA stumbles, how about hoping that our airlines apply some of these lessons in their own companies? Since airline managements seem to have a herd mentality, I would be happy to see our CEO ape the leadership style of Herb Kelleher or Gordon Bethune.

Last edited by CVG767A; 11-17-2005 at 06:32 AM.
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Old 11-17-2005, 09:31 AM
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I have been with Southwest for 5+ years and we've been dogged out by other airilines the whole time. When I started we were made fun of because we were the lowest paid, had no pension etc. Now we're dogged out by a lot of people because the company's financial prudence has helped them weather a nasty storm, so far anyway. So no matter what Southwest does everyone lines up to get in their licks. Weird, huh?

Believe me, the pilots at Southwest are a very humble group. Everyone knows success today can turn into failure tomorrow. We're happy for our succeses but we know if sit on our a**es someone will eat our lunch.

S.B.
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