SWA Might Win
'Last Airline Standing'
With jet fuel prices off the charts, and disgruntled passengers now considering Greyhound buses as a viable alternative to commercial air travel, it's no secret that major U.S. carriers are on the mat, flat on their backs, fighting for their life.
Over the weekend in a Reuters story, Sir Richard Branson – owner of Britain's No. 2 long-haul airline Virgin Atlantic – openly predicted Armageddon coming soon to an airline near you:
"There will be "spectacular casualties" in the airline industry over the next 12 months. The financial state of the world is just about the worst I've ever known it. You have the perfect storm -- you've not only got the banking crisis and the housing crisis, you've got the soaring fuel prices as well. One of the big American carriers will almost definitely go."While Branson may be right that one of the "Bigs" may go the way of the dinosaur, a very good story from portfolio.com writer Joe Brancatelli that was published on wired.com seems to indicate that carrier will not be Southwest Airlines:
"By some estimates, the country's major carriers have consumed perhaps $100 billion in capital during the past decade, but Southwest Airlines continues to be profitable. It's been in the black for 33 consecutive years and, last week, for the 127th consecutive quarter, it paid a modest dividend. Its balance sheet, with about $3 billion in cash on hand and $600 million in available credit, is the envy of an otherwise fuel-price-ravaged industry."It has always been possibly the ninth or tenth Wonder of the World how SWA can stay profitable in this completely anemic economic downturn. In a story you simply MUST READ, Brancatelli lays it all out there for you and SWA's competitors to read. Here's a few tidbits...but you really need to read the entire article:
SWA flies only one airframe, Boeing's 737 series. This strategery saves them millions on maintenance and parts.But the big reason that SWA remains profitable while their competition flouders has to do with the way they buy their fuel. For the details of that, I urge you to go read Brancatelli's article, it will inform you and also raise this one glaring question:
SWA avoids the "hub and spoke" system, instead flying non-stop to minimize the time their jets spend being delayed at the larger hubs.
SWA's lean and mean cabin layout, no assigned seating and minimal beverage and snack service allows them to "turn a gate" quicker, meaning they can deplane and reload faster.
SWA's fare structure is more passenger friendly, and as competitors tack on fuel surcharges and extra baggage fees, SWA's predictable ticketing means pax can know what to expect when they reserve a seat.
If Southwest can buy the same Jet A as the next guy and stay in the black, why can't the others? You'd think all major carriers would have ripped that page out of SWA's playbook by now, but one look at their bottom lines indicates that maybe it's just too much of a punch in the ego for SWA's competition to admit they've bungled their fuel buying for years.