Uhh, sure. Some people said that in 1980. They were wrong. Check oil prices from 1986 if you disagree. Some said it again in late 1990 when Hussein invaded Kuwait. Once again, they were incorrect. See oil prices from 1997-99.
You may be right. Oil prices might never again collapse. Just like California real estate, up might be the only direction they ever take.
And without WN's hedging in place, they, too, would be significantly in the red.
You do realize that if you ignore fuel costs, WN's costs are still cheaper than the legacies? WN's fuel hedging program has only magnified that cost difference, but the fuel hedging program certainly is not Southwest's only cost advantage.
Programs: ex-Eastern ex-lorenzo era CO ex-TWA ex-PanAM ex-NW-Plat now MMroach ex-UA1K AA EXP Hilton Diamond
Posts: 727
Quote:
Originally Posted by UnitedSkies
Sure, but will a $15 fare increase be any better? Either way, it's money out the door. I'm not quite sure why people are pissed about the small charges, while people are assuming they would just accept higher fares.
In reality, what will happen is BOTH.
I agree Both will happen. I also dont think this fee will cause as many problems as people think. People that check bags will check them and pay for it. People that think they are going to carry-on an oversized bag might be surprised to see a BIG sign that sez "oversized carryons,will not be gate checked, and you will be denied boarding" so they will check the bag and pay for it too. Most of these folks are a herd, if the TSA said "rub your head and hop on one foot" they would be doing it
If WN can hedge that fuel prices will go up why not everyone else? It does not take a genius to figure out that fuel prices are going to continue to increase.
You do realize that if you ignore fuel costs, WN's costs are still cheaper than the legacies? WN's fuel hedging program has only magnified that cost difference, but the fuel hedging program certainly is not Southwest's only cost advantage.
Sure, I agree that Southwest has additional cost advantages (shorter turn times, higher fleet utilization, simplified fleets, single cabin, no pre-assigned seating, less senior payroll, no international service).
But unless you're advocating that UA/AA/NW/DL/US/CO all go emulate Southwest by getting rid of aircraft type, international service, premium cabins, pre-assigned seat, etc., I'm not sure continuing to talk about how great Southwest's business model will be of any substance.
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The thing I miss about Air Force One is they don't lose my luggage. - President George Bush Sr.
Sure, but will a $15 fare increase be any better? Either way, it's money out the door. I'm not quite sure why people are pissed about the small charges, while people are assuming they would just accept higher fares.
I'm guessing that the $15 fee will do the following (and more) - none of which a $15 fare increase would do:
- cause more people to carry on a bag
- cause more gate checked bags
- cause longer lines at check-in
- cause delays boarding
- cause delays departing
- further congest the gate and boarding area
- surprise customers at the airport and cause frustration (that will be taken out on front line employees)
- stress and anger front line employees
- make labor contract negotiations worse
If WN can hedge that fuel prices will go up why not everyone else? It does not take a genius to figure out that fuel prices are going to continue to increase.
Poor management in the past has left the legacy carriers without the resources (i.e., cash) to implement a hedging program to the extent Southwest has (i.e., hedging approximately 100% of fuel purchases).
If WN can hedge that fuel prices will go up why not everyone else? It does not take a genius to figure out that fuel prices are going to continue to increase.
It's not that easy.
When the legacies were in trouble post-September 11, hedging was all but a pipedream because hedging requires money and credit, and all that good stuff. This was what WN was able to do while the legacies were not. It's not necessarily that the legacies did not WANT to hedge, they just needed to conserve cash during a very difficult period of time.
At the same time, there is a bit of not thinking that fuel prices would go as high as they have, in such a short time. Remember when oil was at $50 and everyone was up in arms because it had increased 100% within 1-2 years? If you are a betting person and don't think it would go much higher, hedging at $50 would have seemed like an incredibly stupid decision. Of course, as oil hit $80, it sure seemed like it couldn't go any higher (how could it?). The problem is, no one knows how high oil can go, so at $130, would you want to hedge in case it goes to $200? Or do you bet that it will go down to $100? Same situation, different year.
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The thing I miss about Air Force One is they don't lose my luggage. - President George Bush Sr.
I'm not sure continuing to talk about how great Southwest's business model will be of any substance.
WN's 30+ year streak of profitable operations should be worthy of discussion amongst the interested parties, given the current pitiful financial condition of the "full service" carriers.
While I think that the new fee will impact the cabin stowage (and I do care about that), I disagree with your approach. I'm all in favor of having people pay for what they use, rather than having to subsidize it. This is in principle, of course, as the $15 doesn't really matter than much to me in reality.
They reduced prices and stopped serving food in Y; those that want food can buy it. They eliminated drinks in Y on international flights; those that want a drink can buy one. They added a fee for the second bag; want to check two bags- pay for it. This is just the same philosophy. If I don't check a bag, why should I pay for yours (you, in the general sense ).
Let's not try to make this appear any different than what it is. The airline industry in the US has become a pay-for-service proposition. It's not going to change. We can either accept it with a sigh or b$%@& and moan about it.
Cheers.
Not so fast. Airlines have a choice to either raise prices or nickel and dime everyone for services that used to be covered by the price of a ticket. My last flight from JFK to SEA, they offered food for sale in the coach cabin but they ran out of several key choices. If airlines are going to replace free meals with food for sale, they should at least make sure they have enough loaded to cover the needs of a full trans con.
If you take the approach that everything should be ala carte--(so you will not be subsidizing someone else), why not take it to its full extreme and charge people by how much they weigh?
Do not be surprised to see the following in due time:
--No more free beverages in coach.
--Booking fee's when you use AA.com
--eliminating the free pass for luggage fee's for AA elites.
--A charge for carry on (why stop at checked luggage)
If airlines were smart, they would take the fuel surcharge they are charging and use it to buy fuel hedges for those travel dates.
This is more my concern rather than the "principle" of charging for a bag. I am not sure revenue benefits from the first bag fee are worth jeopardizing operational efficiency. There, how's that for a balanced viewpoint?
Now now, this is no problem at all, AA will be offering you for a small luxury fee of $50 one time RFID lugAAge tags that will automatically deduct $15 for your checked bags, in addition they will offer you a $5 inflight RFID AAdvantage card that will allow on board purchases and gate checked backs to automatically deduct from a chosen bank account or credit card backed by bank account.
That is my concern as well.
