The Daily Update: Tuesday, May 3

May 3, 2011 by · Comments Off 

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The Dallas Love Field airport is getting a face lift. Education budget cuts may cause more students to apply for student loans, and The Daily Campus and The Daily Mustang are merging. Find out all this and more on your Daily Update.

CEOs of Southwest Airlines and American Airlines “Take Off” at SABEW

April 8, 2011 by · 3 Comments 

By Maggie Ashworth
mashworth@smu.edu
 
Friday, April 8, 2011, business professionals and journalists gathered in Southern Methodist University’s Crum Auditorium for “Up in the Air: The Future of U.S. Airlines.”

The discussion featured the Chief Executive Officers for two of the country’s leading airlines, Southwest and American Airlines. The discussion was part of a series of lectures and workshops at the 48th Annual conference for the Society of American Business Editors and Writers (SABEW).

The session was lead by Terry Maxon, airline writer for Dallas Morning News, who introduced Southwest CEO Gary Kelly, and American Airlines CEO, Gerard Arpey. Maxon helped lead the conversation and prompted questions for both speakers to answer.

One would have expected some serious tension between these competitors, but the discussion could not have gone more smoothly. With a room full of business writers, there were plenty of questions to keep the speakers talking about a variety of subjects.

Kelly addressed the Southwest Airlines incident in Arizona last week, when the airline was forced to land a Boeing 737 in Yuma, Arizona, after discovering a hole in the roof of the aircraft.

“It was not expected, it is not what we want, certainly for our customers. It is a very, very rare occurrence. We have over a million takeoffs and landings a year, every single year, and the Boeing company has said that this was an unexpected event. The NTSB, of course, is leading the investigation into the incident and has already reported that Southwest Airlines was in full compliance with our maintenance program, that there were no missing maintenance steps,” Kelly said.

In response to the Boeing incident, Arpey still has faith in Boeing for American Airlines. Arpey stated that within the next year he thinks that American will actually host more Boeing 737 planes than MD-80s.

“The MD-80 has been a great airplane for American, but it does burn a lot more fuel than a 737, so it’s a good economic decision for us. And I think you can expect us to continue down that path,” Arpey said.

Other topics discussed during the lecture included the American Airlines decision to not file for bankruptcy, the problems faced in the transportation industry, as well as Southwest Airlines and American Airlines opposing views on charging customers for baggage, change in travel plans, and cocktails.

Today’s conversation leader, Terry Maxon, who regularly writes about the travel industry for The Dallas Morning News, felt that overall the discussion with Arpey and Kelly went very well. Maxon’s only complaint was that there was not enough time to have all the questions answered. Maxon feels that with so many issues in the airline industry, including pricing, customer service, fuel, and the impact of natural disasters, there could have never been enough time to discuss all aspects of the business. However, Maxon was pleased with the questions that were asked, and the topics that were discussed.

“There were a lot of questions asked, the audience got to ask a lot of insightful questions. You always worry that there’s going to be dumb questions asked, and there wasn’t a single question where you slapped yourself on the forehead and said that that shouldn’t even be brought up,” Maxon said.

The SABEW Conference will continue throughout tomorrow at Southern Methodist University, featuring speakers such as Container Store CEO Kip Tendell, Sean Carlson from Google, and James M. Monroney III, publisher and CEO of The Dallas Morning News.

The Daily Update: Wednesday, April 6

April 6, 2011 by · Comments Off 

Find out what Southwest is doing with their fleet. What are Dallas nonprofits doing in Japan? And find out how a man was saved from a gator attack in a very unusual matter. All this and more on your Daily Update!

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The Daily Update: Tuesday, April 5

April 5, 2011 by · Comments Off 

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Mustang Veteran football players show their stuff at Pro Day and the University of Connecticut Huskies took a showed the Butler Bulldogs whose top dog on the courts. All this and more on your Daily Update.

The Daily Update: Monday, April 4

April 4, 2011 by · Comments Off 

The Daily Update: Monday, April 4 from SMUDailyMustang.com on Vimeo.

A would be teenage suicide bomber was arrested in Pakistan and why Southwest airlines may have some holes in their business strategy. When was the last time you got involved in a pillow fight, if it has been a while you might have missed the time of your life this weekend, all this and more on your Daily Update. Anchored by SMU-TV’s Bridget Bennett.

Low Fares Even Lower? Southwest Airlines and AirTran Merge

November 2, 2010 by · Comments Off 

By Liz Collinsworth
lcollinswo@smu.edu

Southwest Airlines entered its biggest acquisition ever with the announcement of its merger with AirTran on September 27. Southwest has agreed to acquire its smaller low-fare rival for $1.4 billion in cash and stock. The merger will add 37 new destinations to Southwest’s network, for a total of 100 including a hub in Atlanta and the introduction of international flights.

According to the Spreading Low Fares Farther website, a site developed by Southwest to inform public about the merger, the deal will mean a first ever hub in Atlanta for Southwest, the addition of business markets such as New York La Guardia, Washington Reagan, and Boston Logan, the opportunity to serve smaller markets, and Southwest’s first time access to international destinations.

The merger is currently subject to approval of U.S. Department of Justice regulators and AirTran stockholders. Following approval, Southwest and AirTran plan to integrate within two years.

While Southwest says the deal will mean an expansion of its low-fare approach, critics say it may end up costing passengers—and employees.

According to “Southwest Airlines-AirTran Merger Details,” a blog on stockbloghub.com, “The merger may result in increase in fares, elimination of jobs and might pose major challenges to carriers, especially American Airlines.”

“Gary Kelly of Southwest Airlines is quite adamant that the merger won’t reduce jobs or, by itself, raise fares. He qualifies his statement by noting that cost pressures are forcing Southwest and other airlines to raise fares to cover their higher costs,” said Terry Maxon, airline writer for the The Dallas Morning News.

George Hobica of airfarewatchdog.com believes that the merger will eliminate jobs.

“Some employees will lose their jobs, mainly in functions such as PR, marketing, advertising, procurement, etc. But I doubt many pilots, flight attendants, baggage handlers and so forth will lose jobs, unless the economy takes a turn for the worse,” said Hobica.

Southwest estimates that this deal will provide flyers with the opportunity to save hundreds of millions of dollars annually on airfares. Hobica disagrees with Southwest’s claim, noting that AirTran was already a heavy discounter. Maxon, however, believes that this claim is dependent upon what terms it is based on.

“If the claims are based on what Southwest will charge compared to what AirTran charges, it is hard to make that case. If Southwest is basing the claim on the idea that many more travelers will be exposed to its fares that at present do not have access to Southwest or AirTran fares, its case is stronger,” said Maxon.

Maxon also noted that Southwest does not impose secondary charges such as baggage fees and reservation change fees while AirTran has embraced such fees.

“Between April 1, 2009, and June 30, 2010, AirTran collected $189 million in bag fees alone. All other things being equal, its passengers would have paid $189 million less to travel on Southwest because Southwest doesn’t charge for the first or second checked bag,” said Maxon.

Laura Wright, Southwest’s chief financial officer, believes that, once the merger is completed, Southwest’s annual savings will exceed $400 million by the year 2013.

“The combined revenue for the two companies for the 12 months ended June 30, 2010, was $13.7 billion. To put it into perspective, $400 million of net synergies would equate to approximately 3% of the combined companies’ 12 months ended June 30, 2010 top line revenues,” Wright said in a September 27 analyst call.

Despite an increase in fuel costs and remaining economic struggle for airlines, Southwest has maintained revenue growth. Southwest ended its previous quarter with operating income of $363 million, a 195.1 percent increase from the same period last year, and net income of $112 million, a 23.1 percent increase from last year.

These increases are a result of more efficient operations, an increase in passengers, and better management of operating expenses. Competitor American Airlines generated a 16 percent increase in operating revenue last quarter and its net loss shrank to $10.7 million from $390 million from the same quarter a year ago.

Observers predict that the merger will threaten competitors. Hobica believes the merger will “cause some heartburn over at Delta headquarters,” and that “Delta may have to rethink the fees for bags, etc. on flights to/through/from Atlanta.”

A report released by Soleil Securities predicts a “more profitable deployment of flights to a broader to a broader range of destinations that will have some negative impact of DAL (Delta Airlines).”

J.P. Morgan, on the other hand, issued an airline industry report on September 28 claiming that “Delta (is) not uniquely threatened,” by the merger.

Campus News Blog: Southwest Merger with AirTran May Benefit You

September 30, 2010 by · Comments Off 

Posted By Kassi Schmitt

Dallas-based Southwest Airlines announced Monday that it is buying AirTran for $1.4 billion. The merger of these two airlines will become the nation’s fourth-largest carrier, but what does that mean for you?  

1). Better service! We all know Southwest employees ensure great service, whether you’re on the ground or thousands of miles in the air.

2). The new airline would expand its locations and operate from more than 100 airports and serve more than 100 million customers according to an article from The Dallas Morning News. (However, the deal would remove AirTran from DFW, currently one of the cheapest carriers because of a deal with Southwest at Love Field.)

3). It’s great news for your wallets as Southwest and AirTran don’t have much flight overlap, so the merger won’t lead to higher fares.

4). Who’s in for some fun in the sun? Southwest would become an international airline if it keeps AirTran’s flights to Aruba, the Bahamas, etc. 

5). Because it’s only inevitable, if your flight is delayed or canceled you can now be re-routed thanks to a much larger route structure.

6). Unfortunately, it’s goodbye to AirTran’s business class cabin seats as Southwest will most likely move the airline to its one-cabin model and open-seat boarding process.

6). This also means that AirTran will lose its brand and will operate entirely under Southwest’s logo and colors.

The merger will NOT take affect right away. Southwest and AirTran hope to combine their operations within 24 months of the closing deal, according to Southwest chief Gary Kelly.

But if this new merger is really as good as it sounds- better service, more flights around the world at no increased cost- what’s your next vacation destination going to be?

Business News: Southwest Airlines Reports First Q1 Loss Since 1991

April 23, 2009 by · Comments Off 

Posted by Tiffany Adams

The quarter’s loss compares to a $34 million net profit in the same quarter last year.

“The fuel hedging is listed as a special charge because it is a loss not included with the day-to-day operations of the airline,” explained Trebor Banstetter, airline and business travel staff writer for the Fort Worth Star-Telegram.

Excluding special charges, Southwest lost $20 million, largely because recession-battered customers are doing less flying. Southwest’s traffic fell 4 percent.

The first quarter loss of March 1991 was released during similar conditions. The industry was experiencing high energy costs during the Gulf War as well as a mild recession. This was the last time Southwest had a loss in the first quarter.

“While the recession and weak air travel demand aren’t surprises, a loss is always disappointing,” Chief Executive Officer Gary C. Kelley said during the conference call.

In attempt to counteract the loss, Southwest has initiated an early-out retirement program, instituted a hiring freeze, and placed a pay freeze on senior management.

While there is no target on the number of employees Southwest hopes to participate in the early out program, the company is preparing to phase the employees’ exit over the year and will most likely provide incentives including providing flight passes, health care for a pre-determined amount of time, and a specified number of dollars for years worked at the company.

“Depending on the number of people taking the program, they may have to look at something more draconian,” said Banstetter on whether the airline will have to begin layoffs, “but they are going to do everything they can to avoid that.”

Additionally, the Dallas-based company has stopped fleet growth indefinitely and continues to cut out unprofitable flights. Since January, Southwest has reduced daily departures by 190.

Though the company expects another net loss in the next quarter, Kelley looks forward to the recent addition of Southwest gates at the Minneapolis-St. Paul International airport, which he reports has been an “instant success.” Southwest plans to begin service to LaGuardia Airport in New York in June and Boston Logan International Airport in August.

Banstetter predicts these new service options will help in the long term, but probably will not be too significant in affecting second or third quarter results. Kelley stated that despite the loss, the company will continue its tradition of not charging bag fees.

“I’m not at all convinced that [the bag fees] will be revenue positive and it would certainly be disruptive to all the things that we’re trying to do to build the brand,” Kelley said.

With the aggressive marketing of Southwest’s “no hidden fees,” Banstetter commented, “They’ve put themselves into a corner with not charging the bag fees. Now, if they suddenly start charging the fees, they’ll look stupid.”

Banstetter further explained that Southwest would be more likely to raise fares rather than charging fees if it needed to increase revenue. In comparison, Fort Worth-based American Airlines reported an increased $375 million loss for the quarter from the same quarter the previous year, when it lost $341 million. Other major U.S. airlines have yet to release their earnings.

With this combination of promoting its low-fare brand, no-hidden fees, schedule adjustments, and the slowing of its fleet growth, Kelley said, “I think that certainly helps explain why we are out-performing most if not all our competition on the revenue front.”

Customer Service Expected to Save Southwest Airlines

April 6, 2009 by · Comments Off 

By Tiffany Adams
tadams@smu.edu

southwestairSouthwest Airlines Chief Executive Officer Gary Kelly announced that despite the unpleasant economic environment, the Dallas-based airline expects to maintain growth. At the JP Morgan Aviation and Transportation Conference in New York on March 10, Kelly acknowledged that although the fleet size has not increased,? Suothwest’s company culture and commitment to customer service are at the core of? its strengths and will prepare? it for an upcoming messy period.

As far as the state of the company, Kelly said at the conference, “I don’t know that we’ve reached the bottom and certainly in an environment like this it makes it pretty tough to forecast.”

Terry Maxon, an airline reporter for the Dallas Morning News, said about Kelly’s announcements during the conference, “There wasn’t too many surprises but I found it interesting that they hadn’t found the bottom yet on demand.”

Demand has been steadily decreasing in the months of January and February, and Kelly expects March to show even more declines. Kelly expressed concern for the uncertainty in the amount of demand for the airline.

Challenges to Come

This messy period consists of challenges including spikes in energy prices, increasing maintenance and unit costs, and a slowdown of fleet growth.

On? fuel prices, Kelly explained that with an expected contraction in fuel supplies and an anticipated? rise in demand? when the economy turns around, prices will spike. Kelly stressed Southwest’s commitment to searching for opportunities that will adequately protect the company from? rising prices, which entails continued interest in the fuel hedge program.

As for increasing maintenance costs, Kelly explained that the rise was due to engines in? its aircraft that were due for repair.

With increasing unit costs, Kelly explained that because airport costs are fixed, when airlines reduce capacity, the unit costs increase. Unit costs are also being driven up by price inflation at? airports. As for slow fleet growth, Southwest is suspending? fleet growth indefinitely.? It currently owns 535 aircraft.

Kelly noted? Southwest’s plan to counteract the slowdown in fleet growth, which includes scheduling optimization. The company is trying to create more efficiency in flight scheduling by analyzing bookings and? cutting those flights which serve the least amount of passengers. By removing such unprofitable flights, Southwest is able to add more cities to? its network.

Southwest has opened up service to Minneapolis-St. Paul, and many of those flights are booked? after just two days of service. In addition, the airline plans to open service to New York’s LaGuardia Airport in the summer and Boston’s Logan Airport in the fall.

“That is an opportunity for us to leverage the large U.S. network that we have by adding a destination that our customers want to fly to,” Kelly said at the conference.

Customers First

The greater dedication to customer service is shown through? Southwest’s prototype program for on-board Internet service by satellite. The free trial program will gauge customers’ interest in continuing such a service.

Kelly also expressed pride in? Southwest’s no-hidden-fees policies. This lack of fees (such as fees for checked bags, snacks, and selected seating) allows Southwest to maintain its low-cost image.

“In this environment, we are really dependent upon our low fare brand to keep us strong. That’s what’s been our history in the 1990s and the early part of this decade that the low-fare airlines do comparatively better,” Kelly said.