This may be the single nastiest thing ever written about WN management. According to Chief Executive magazine, Gary Kelly is the 3rd worst CEO in the country for destroying his shareholder's wealth.
I don't think he deserves this, because his stewardship of the company has not been bad. That said, I can't say it's been exemplary, either. And his shareholders have truly suffered (although a lot of shareholders are suffering these days).
WN's problem now is its terrible fuel hedging postion for 2009 and 2010. Quite a turnaround from the past 2 years -- when all the other airlines had this enormous financial headwind, and WN had a great tailwind. I've always said WN's hedging was more luck than skill, and now it looks like the luck has run out. How Kelly manages this difficult time for the airline will perhaps determine whether he is ultimately viewed as a hero or a goat.
One thing to consider - I believe the report just analyzed CEOs of the S&P 500. If I recall, WN is the only airline in the S&P. I wonder what the numbers would be for the other airline CEOs.
Also, based on today's SEC Filing, Southwest seems to be making some progress in terms of hedging.
The rankings ignore CEO's whose tenure has ended during the evaluation period, in other words those who totally destroyed their companies or were just fired are excluded.
The rankings are only through August 2008, which makes them almost meaningless at this point of time considering what has occurred in the past 3 months. I can't believe the magazine even bothered publishing the piece quite frankly.
WN's new strategy is quite cryptic, and this looks like a typical Friday night dump of bad news (although in this case done right before x-mas). Did they sell their hedges at a huge loss? It would seem so, because (according to the Dallas story) their cash positon went down somethink like $4 billion in the past 6 months! Indeed, it's a good thing they brought in some new cash by the sale-leaseback of those aircraft. It is definitely possible to go broke trading commodities, and this seems to be exactly what WN feared.
On a positive note, at least the damage has been done and WN will currently "only" have to overpay on fuel by about 15% for next year.
I think they're actually in decent shape. Delta said its estimated fuel price for '09 was $2.19. Now, the WN number of $1.80 is without taxes, I don't know about Delta's. But, I haven't seen too many estimates from the airlines (I haven't really been looking, either), so we'll have to see how these numbers stack up.
But Southwest seems to be making some progress - the sale-leaseback and the issuing of those three-year notes adds some capital. I think WN has $200 million of credit left. Plus, this adjustment should help with the hedging (at least on how much cash needs to be sent over):
Quote:
if the Company becomes obligated to post collateral for obligations in amounts between $300 million and $700 million, the Company has agreed to pledge 20 of its Boeing 737-700 aircraft as collateral in lieu of cash.
Either way, very interesting stuff, and I'm looking forward to the WN analyst call in a couple weeks to hear more.
Amazing how you can simultaneously be the best AND the worst!
I honestly think the truth is somewhere in between. It's funny because absent their oil plays (which were WAY too aggressive), I think they manage the business too conservatively. WN has had several opportunities this decade to buy out their competitors -- which would have massively increased shareholder value. The best move would have been to buy out America West in 2002 or 2003, which they could have done for a few hundred million. If they had done that, America West would never have rescued US Airways, and WN would now control PHL and possibly CLT, and have much less competition in the southwest. It was a no-brainer, but they chose instead the failed strategy of trying to drive them out of business.
More recently, this summer, I think they should have bought AirTran when that airline was experiencing massive pain from the oil bubble. Again, it could have been bought for a couple hundred million. That opportunity has now also vanished.
None of this probably matters much to their customers, but the failure to act has cost shareholders billions.
Amazing how you can simultaneously be the best AND the worst!
I honestly think the truth is somewhere in between. It's funny because absent their oil plays (which were WAY too aggressive), I think they manage the business too conservatively. WN has had several opportunities this decade to buy out their competitors -- which would have massively increased shareholder value. The best move would have been to buy out America West in 2002 or 2003, which they could have done for a few hundred million. If they had done that, America West would never have rescued US Airways, and WN would now control PHL and possibly CLT, and have much less competition in the southwest. It was a no-brainer, but they chose instead the failed strategy of trying to drive them out of business.
More recently, this summer, I think they should have bought AirTran when that airline was experiencing massive pain from the oil bubble. Again, it could have been bought for a couple hundred million. That opportunity has now also vanished.
None of this probably matters much to their customers, but the failure to act has cost shareholders billions.
Southwest doesn't play the merge-and-destroy game that you're suggesting (that's AA's speciality). Even with ATA, they basically just bought the gates at MDW and their LGA slots; everything else is gone.
Southwest doesn't play the merge-and-destroy game that you're suggesting (that's AA's speciality). Even with ATA, they basically just bought the gates at MDW and their LGA slots; everything else is gone.
Well, if you want to argue that WN's "corporate ethics" are better than others, I wouldn't mention ATA. WN bought their Midway assets to prevent them from falling into another airlines hands (either AirTran or America West). What they left was a shell of a company that almost everyone believed would eventually go under (and everybody was right!).
America West intended to take the gates AND the employees. Had AW not been outbid, all of those employees would still have good major airline jobs today. And consumers would probably enjoy more choices in the Chicago market.
Which isn't to say that WN was wrong to do what they did -- from a business standpoint, I think it was one of their smarter moves in the past decade -- just that it was far from saintly.
Well, if you want to argue that WN's "corporate ethics" are better than others, I wouldn't mention ATA. WN bought their Midway assets to prevent them from falling into another airlines hands (either AirTran or America West). What they left was a shell of a company that almost everyone believed would eventually go under (and everybody was right!).
America West intended to take the gates AND the employees. Had AW not been outbid, all of those employees would still have good major airline jobs today. And consumers would probably enjoy more choices in the Chicago market.
Which isn't to say that WN was wrong to do what they did -- from a business standpoint, I think it was one of their smarter moves in the past decade -- just that it was far from saintly.
Am I reading this right? If America West had bought ATA, those employees would have "good major airline jobs"? Ha ha ha ha ha ha!!! This is the same crummy airline that merged with US because it was their and US' last gasp, and (miraculously) they manage to barely squeak by, despite industry-leading paycuts and labor discord and angry passengers.
The employees who were spared the sentence of working for HP and likely getting furloughed shortly thereafter instead have a better chance at being accepted for a position with WN due to their growth overall and in the Chicago market.
Had AW not been outbid, all of those employees would still have good major airline jobs today.
Well it would have been the FIRST good airline jobs they would have had, because it wasn't the case at ATA.
I also happen to know for a fact that many of the former ATA people were given hiring priority at Southwest, and if you'd ask any of them today they'd tell you that putting their company out of business was the biggest favor they could have received. Many of them got instant pay raises with their starting Southwest pay since ATA had frozen it's wages for about 7 years, and have a MUCH better work environment.
ATA was probably the perfect polar opposite of Southwest. Southwest is all about doing good by their employees, ATA was about the worst corperate culture imaginable. You knew when you were laid off when your airport badge didn't open the door anymore, and they were [...] right to the end with their surprise shut down that left hundreds of their people without jobs and no notice at all.
__________________
Views or opinions expressed above are not that of Southwest Airlines.
Last edited by curbcrusher; Dec 27, 08 at 8:35 am.
Reason: removed profanity
The employees who were spared the sentence of working for HP and likely getting furloughed shortly thereafter instead have a better chance at being accepted for a position with WN due to their growth overall and in the Chicago market.
These responses are laughable. The facts are what they are: WN buying ATA's assets -- and not hiring on ATA employees -- cost those employees their jobs. Why is it so hard to accept that WN is a business and not a charity?
Programs: Marriott Platinum, Starwood Platinum, NW Gold, SWA CP, also accumulating AA, Hilton, and PC
Posts: 397
Quote:
Originally Posted by num1bearsfan
Well it would have been the FIRST good airline jobs they would have had, because it wasn't the case at ATA.
I also happen to know for a fact that many of the former ATA people were given hiring priority at Southwest, and if you'd ask any of them today they'd tell you that putting their company out of business was the biggest favor they could have received. Many of them got instant pay raises with their starting Southwest pay since ATA had frozen it's wages for about 7 years, and have a MUCH better work environment.
ATA was probably the perfect polar opposite of Southwest. Southwest is all about doing good by their employees, ATA was about the worst corperate culture imaginable. You knew when you were laid off when your airport badge didn't open the door anymore, and they were pricks right to the end with their surprise shut down that left hundreds of their people without jobs and no notice at all.
I don't think all former ATA employees would agree with your sentiment:
*** Broken link removed, see post #18 for article excerpt ***
Last edited by indyscott; Dec 26, 08 at 8:54 pm.
Reason: Removed nonfunctional link
