sgrd0q

The most amazing figures are these –

This is mind boggling. Forget the fuel cost and forget the pilot cost. The fuel will eventually cost the same after the futures at SWA run out, and the pilot cost is about the same anyway according to the numbers that were posted earlier. But how on earth is the Core Cost so different? We are not talking 10 or 20% - SWA core cost per seat/mile (excluding fuel and labor) is two times lower than the industry average, and 2.5 times lower than CAL's core cost.

I suspect there is an accounting trick here. It may be accountants spinning similar numbers in different ways for the two companies? Who knows.

The second most amazing numbers to me are these –

Very surprising. It seems like pilots on average fly less than the monthly guarantee, in CAL's case by a lot. If I read the numbers above correctly CAL's pilots fly 53.25 hours per month on average! That truly surprises me as I thought everybody worked a lot more. This may be the biggest reason why even though SWA's pay-scale is substantially higher the pilot expense per seat/mile is essentially the same as seen here –

That and the fact that the pension plan contributions at CAL account for part of the pilot cost that is not reflected on the pay-scale, as pointed out earlier. I don't know if there are other factors like higher cost of medical insurance, training, other benefits, etc. that are higher at CAL. Purely guessing here.

SWAcapt

There is so much that goes into these numbers...everthing except fuel and labor. Lets just look at a few.
(1) Hub & spoke vs Point-to-point. With H&S, there must be a huge labor force standing by for when the bank of planes arrive and then sit idle 'till the next bank several hours later. With PTP, there are just a fraction of those workers on hand but are kept busy all day as the planes trickle through. Also with PTP, we utilize each gate up to 10 times per day. You can't do that with H&S.
(2) Multiple aircraft type fleet vs single airframe. For each type aircraft, there must be different pilots for each plane. If there were four types, one pilot retirement could generate 8 seat movements (huge training costs) also you must store parts for all those different planes. The large panes must have containers and special loading equipment. We have one type of belt loader and no containers.
(3)Food cost. It's expensive to maintain kitchens or contract with LSG for meals. On our longest of fights, we hand out 'snack packs'. I've heard rumor that we only pay for the packaging and Nabisco pays for all the contents as a marketing arrangement.


Remember, these are averages (total hours flown / total pilots). Management pilots, union officers/reps on trip-pulls, pilots being dead-headed, pilots on reserve, and all those on vacation are being paid but produce no revenue for the company. We approached the company about increasing our ADG (average daily guarantee) to 6.5 trips for pay(5.7hours of pay). We convinced them that it would drive the schedule to be more efficient and the pilots to be more productive. At SWA it is rare to have 'airport time'. I want to spend the least amount of days at work but get the biggest paycheck I can and still have my company to be profitable (I'm also a shareholder). The only way to do this is to fly as close to 8 block hours per day while I'm at work. We don't make money sitting at an airport. Some say that SWA guys work too hard but I find it harder to sit an a airport and not get paid than to actually fly the plane and make sone serious coin. I just added up my block hours this year divided by days flown = 6.33 hous per day. Hope this info is helpful in answering your question.

C152driver

SWAcapt,

Is there any particular reason why Southwest cant open fuel hedges into the future beyond the current ones?

--Andy

SWAcapt

No, none what so ever. Who knows, maybe a hedge at $75.00/barrel will look good in 2013.

C152driver

Well, they wont be paying the current market price for a hedge. My point is that Southwest can continue to play the "hedge" card to its advantage well into the future.

Maybe Southwest sees United as a "soft" target right now. It certainly is an interesting argument, since United lost $182 per share last year.

--Andy

ryane946

Wow, you are way off! First off, you need to look at operating expenses, not gain/loss per share. United posted a quarterly loss of somewhere around 3 billion dollars once or twice in 2005, but those numbers have absolutely NOTHING to do with their operational performance. So many of those an estimated "charge on paper." But these numbers mean nothing because when United exited bankruptcy, they posted a several BILLION dollar gain. Again, charges on paper. It means nothing.
This is a very complicated issue with bankruptcy, and I really don't want to expalin it now. All I can say is look at the operating gains/losses.


With that said, United posted a $172 million dollar operating loss for Q4 2005. Southwest posted an $82 million dollar operating gain, but it noted that was because it saved $258 million from its fuel hedges. So without those fuel hedges, SW would have lost $176 million dollars in the 4th quarter. That is even more than United!!! United is a better airline right now if you take away SW's fuel hedges.

Southwest's fuel hedges WILL run out in the next three years. Southwest WILL NOT continue to be above the industry.

SWAcapt

You really don't get it do you? Just stick to flight instructing or perhaps stand-up comedy. I have no real response to such a naive, simplistic statement.

Geronimo4497

WN's fuel hedges may run out, but they are actually PLANING for that future inevitability. Unlike most airlines, they will actually adjust their revenue structure to accommodate those changes. I love folks that knock on Southwest in one sentence and then complain that their airline does not charge enough for tickets in the next.

SWAcapt

Well said Geronimo!

C152driver

OK, I am searching for a coherent argument here. You seem to be making a comparison between United's results and Southwest's results with and without the fuel hedges. I see that as a pretty weak argument, as the reality is Southwest has the hedge, will continue to have the hedge for a couple more years, and quite possibly longer.

Here's a quote from United's form 10k for 2005:
The Company's operating expenses have fluctuated as it sought to restructure its obligations in bankruptcy, adjust its mainline and regional carrier operating capacity to match marketplace demand, and cope with historically high jet fuel prices throughout recent years. CASM increased from 10.65 cents in 2000 to 12.03 cents in 2001, and then declined back to 10.59cents in 2005. In spite of significant accomplishments in restructuring our operating expenses, including significant contributions from employees and creditors through the bankruptcy process, high fuel costs have had a significant adverse affect on unit operating costs, particularly in 2005 and 2004. In 2005, CASM was 4% and 1% higher than it was in 2004 and 2003, respectively. The increase in mainline fuel price between periods added approximately nine tenths of a cent, and one point four cents, to CASM in 2005, as compared to 2004 and 2003, respectively. In 2005, mainline fuel expense was our largest category of operating expense, surpassing salary and related costs which have traditionally been our largest operating cost.

In addition, fuel price fluctuations can have a material impact on the Company's future financial performance. For example, a one cent change in fuel price can either increase or decrease the Company's annual operating expenses by approximately $20 million.
The 2005 results include $18 million in operating special items and $20.6 billion in reorganization expenses related to the Company's bankruptcy filing.

--Andy