ryane946

I owned Southwest's stock from March 03 until December 05, so I was constantly checking news regarding LUV, and I still occassionally do. And this was something I started seeing a lot of recently. Southwest raising fares (after keeping them so low for years after 9/11). Why? Because their fuel hedges are running out. Last year I think they were 90% hedged at $26 a barrel. This year, 70% at $36 a barrel. Most airlines are paying about $70 a barrel. By 2009, 0% hedged at the same price as the rest of the industry.

For the past several years, Southwest has been able to undercut the industry with their low fuel prices. It helped lead to rounds of bankruptcies at many carriers. With several carriers reorganized, and Southwest's #1 expense (fuel) trippeling in the next 3 years, Southwest is going to have to raise prices. And this is GREAT news for the rest of the industry.
Higher prices = higher revenue = profits. And with profits, legacy pilots can regain some of their lost pay. This can also help lead to growth later on down the line.

I want to reitterate that I am in no way wishing Southwest to go down the toilet. I just feel that their low prices have had a major affect in the rapidly decreasing pilot QOL. When their prices ascend to those of the rest of the industry, legacy airlines will be able to come out of the cellar.



DALLAS (AP) - Southwest Airlines is imposing one of its biggest fare increases ever.

The low cost carrier is raising fares for one-way trips by three dollars on flights of 751 miles to one-thousand miles, and by ten dollars on flights of more than a-thousand miles. A spokeswoman says shorter flights aren't affected.

The airline is blaming high fuel prices.

The increase is Southwest's fourth this year and ninth in the past two years.

%@AP Links

Tinpusher007

I don't think raising fares is going to lead to pilots getting a raise any time soon.

Daytripper

From OCT. 2005......Just like I said.

Daytripper

You sure are on top of things.

Sir James

don't SWA pilots get a raise in October, something like 3%?

ryane946

4% in September according to APC.

LuvJockey

Lower fares have nothing to do with decreasing pilot quality of life, but crappy business models, poor management, and high costs do. It wasn't that long ago that you were saying that SWA wouldn't be profitable without its fuel hedges. My guess is that with less fuel hedged this quarter, SWA will be much more profitable than it was last year. Furthermore, increased profitability at many of the reorganized carriers will only benefit their biggest stockholders, primarily the management types that now own large shares of the companies, Airbus, and conglomerates that financed the companies in bankruptcy. The management of those companies will figure out how to keep their wing-tips on the neck of their unions by threatening another round of bankruptcy, ensuring continuous low labor costs (yup, wages and QOL) and Wall Street will only applaud.

The reality is that SWA has little to do with their woes. SWA prices its seats at whatever it needs for revenue. When it charges low fares, it does so to put butts in seats. If SWA were undercutting the rest of the industry, it would have had much higher load factors than the rest while the rest went chapter 11. In reality, that didn't happen, and SWA actually had lower load factors than the legacies (look it up). Right now, SWA has high load factors with lower industry capacity, and it's raising fares. It's that simple. Nobody in the press has mentioned the fact that SWA dropped it's max fare from $399 to $299 post 9/11, they've only managed to mention that SWA has raised them to $319 now with (their ninth increase in the last two years).

As a final thought, I have to ask some questions. If SWA is so insignificant that it won't make a dent in the business of legacy carriers at their hubs, then how is it powerful enough to force these same carriers into bankruptcy? With a lessening fuel hedge, shouldn't SWA be bleeding cash? With higher wages, shouldn't SWA be bleeding cash? If profitability means that legacy carriers will be forced to pay their labor more, will they ever want to show a larger profit, or just potential for profit to Wall Street? Shouldn't legacy carriers with lowered costs through reorganization be forcing SWA to drop prices, not raise them? An finally, when in its history has SWA not charged lower prices than legacy carriers?

C175

With these rising fares, just how are the masses going to be able to afford to fly? For every action, there is a reaction. Be careful what you wish for.

RedeyeAV8r

They raised the fares a whopping $3.00 per flights between 500-1000 miles? and $10 for the Transcon flights...........I don't think that will shoo too many off.

Overnitefr8

I've never understood why raising airline fares a whole $3 to $10 would even make a newspaper. $3 on a $69 ticket is a grand total of 4%. Whooptee do. That's big news?