Is There A Hole In Southwest Airlines?
In the spirit of full disclosure, I will let you know that I own Southwest Airlines shares. Not a whole lot, but some. And I am not about to sell because of a bad story. In fact I can tell you that my son Jeffery is going to fly Southwest home this summer. Nobody in our family is scared. Here’s why: The Boeing 737 problem is not a problem with Southwest Airlines, it is a problem with the Boeing 737, that all airlines fly. So your choice is basically to fly the 737 or an Airbus model, or to just not fly. Some people probably won’t fly, but that’s a very small percentage. I personally would rather fly the 737 than any other airplane, especially after this incident. They are going to be the best checked airplanes around.
Southwest as a company
How is Southwest Airlines doing as a company? It is the best run domestic airline in the country. It is the largest budget fare carrier and has been profitable for most of its life. The company announced a 10% increase in traffic in January, which increased profit 13% versus the fourth quarter of 2010. (InvestorGuide.com)
How Southwest treats its customers
Southwest’s on time rating is very high. Its prices are low. Safety has been excellent. And it doesn’t charge for checked bags. Though Southwest is not my favorite airline to fly, it is always great for price and it doesn’t nickle and dime you for the important things – mainly luggage. Do other airlines believe you can fly without luggage?
How Southwest manages its costs
Southwest’s cost structure is excellent as it expedites its planes in an out of airport terminals, saving on gate space. The company also hedges fuel much better than any other airline, saving on fuel over its competitors. There was some concern that Southwest may have overestimated the price of jet fuel this year, but at this point it seems they may have underestimated it, and is in a much better position than its competitors.
Where Southwest is short
I had said that Southwest is not my favorite airline to fly. The main problem is that I was a frequent flyer at one time, and I was able to cheaply upgrade to first class seats. I also had certain other advantages over other flyers, that I felt that I deserved since I flew so often. With Southwest Airlines, everyone is basically the same. You get the same seats and amenities. You don’t get free flights faster because of status. There are very few benefits of being a great customer.
In addition, Southwest only flies the 737, and they only fly domestic. So if you like bigger airplanes or want to fly overseas, you’re out of luck. Southwest doesn’t partner with other airlines so you can’t stretch your Southwest flight to Paris or London on United or American. If I have a choice and I’m not paying for the trip, I would probably choose a different airline. But if I’m paying and I have no advantages, Southwest is the choice.
I think we are only seeing the beginning of Southwest’s rise. So I am keeping my shares, thank you very much. I just hope I can run my own business as well as Southwest has been able to.