Tag Archive for 'Southwest'

Southwest’s Earnings and Partner Speculation Part Deux

Published
by
Dan Webb
on July 25, 2008
in Southwest and Uncategorized
. 0 Comments

A profit! Southwest made $278 million during the second quarter, and excluding special items made $112 million, or $0.16 a share, better than estimated!

Of course the hedging program really helped here. According the the media call, the airline would have lost about $134 million during the second quarter. Gary Kelly was on CNBC and Bloomberg Thursday morning, and I believe he said the hedging program saved $511 million during the second quarter, and the airline expects to see $2 billion in savings for the year.

Like the other airlines, revenue was up a good amount. Southwest set a record with $2.9 billion, 11% higher than last year. Southwest is different, though, because that extra revenue isn’t coming from extra fees. It was very refreshing to hear Gary Kelly say that Southwest would rather be transparent and raise fares rather than adding extra fees that the customer may not expect. He especially stressed the lack of a change fee during one of the television interviews. This feature is very popular with business travelers.

Anyways, I’d to like to go back quickly to some of the speculation I made a couple of days ago on codesharing. First Gary Kelly said this on the conference call, laying out the future codeshare plans:

We are working very hard on a Hawaiian solution as well as a Mexican and the Caribbean solution which with a little luck we’ll get all of those executed by the end of next year.

Then Dan McKenzie of Credit Suisse asked:

I wonder if you can talk about the pros and cons of say a code-share with another domestic low-cost carrier to gain access to markets that Southwest hasn’t yet cracked in particular maybe Atlanta or Reagan National or LaGuardia?

Which I saw as a question about a potential AirTran partnership, an idea I had not considered before. Kelly replied:

Well, we had a great amount of business to LaGuardia [with ATA] in particular, but also to Reagan so those are on our wish list…What we told you all is that we’ll be working on Mexico and the Caribbean but it could somehow it could emerge that we have somebody who could codeshare for us to New York or Washington. But right now, Dan, those are lower priorities for us.

That answer instantly made me think of AirTran as less likely, as they don’t have much to offer in terms of Mexico and the Caribbean. But it is still interesting to consider a codeshare with a carrier in the domestic market.

Anyways, based on what was said about future codeshares, we can all look forward to some exciting announcements from Southwest in the coming months.

Who Will Partner with Southwest Next?

Published
by
Dan Webb
on July 23, 2008
in Southwest
. 1 Comment

In my readings this weekend I came across this BusinessWeek article on Southwest’s new codeshare with WestJet, and it had this interesting tidbit:

[Gary] Kelly said Southwest is talking to “close to a dozen” other carriers about similar deals to connect its customers to Hawaii, Mexico and the Caribbean by late 2009, and Europe and beyond in later years.

Obviously it got me speculating as to who can be the next partners, and I found this to be very difficult. If the Southwest partnership with WestJet is any indication, Southwest is looking for a carrier that isn’t in one of the major three alliances (a move like this would probably anger the US airlines in these alliances) and follows a similar business model, which made my speculation even harder. Continue reading ‘Who Will Partner with Southwest Next?’

Southwest and Speculation

Published
by
Dan Webb
on July 21, 2008
in Industrywide and Southwest
. 1 Comment

I just found a slightly-old story from the Houston Chronicle about the ATA’s crusade against oil speculation and Southwest’s hedging:

Of all the airlines, though, Southwest could be affected the most if Congress changes the ATA’s cautious wording about related commodities.

…

Given his familiarity with commodity markets, I asked Topping [Scott Topping, Southwest's treasurer who is in charge of the hedging program] if he believes that speculators were inflating oil prices.

“That’s what I have a hard time getting my arms around,” he said. “Speculators bring information to the markets. Clearly, the supply of oil is struggling to grow, and demand is continuing. In that environment, higher prices are a result.”

That sounds like a “no” to me.

Very interesting to say the least. I always wondered why Southwest signed the letter to travelers. Industry unity (or something like that), I guess.