Comments on: The challenge of a profit

By: Chip Wright

Chip Wright — Sun, 19 Sep 2010 22:23:15 +0000

I’d like to address K. Black’s comments. Southwest does indeed have $49 fares, but they are the exception, and not the rule. Most of their fares are substantially higher. That being said, what SWA has done more than anything is master efficiency. They get more flights per day from each employee and from each piece of equipment than anyone else, and that goes back to the difficulty the company had in just getting off the ground (read the book “Nuts!” for the full explanation of that). The result is that they need fewer employees per plane than other carriers. Further, they do not carry any real debt to speak of–they pay cash for their planes. But most important, they have a totally different outlook on how to treat their people, which is to say that they treat their people so well that they will bend over backwards to return the favor. That is a lesson that EVERY company should learn, not just other airlines.

They have carried that over to their customers. For years SWA concentrated a lot of its service at under-used airports. They have strategically gotten away from that to venture into the likes of LGA and EWR. Lately, they have become known as the only airline not to charge bag fees, food and drink fees, or any other fees, which has won them rave reviews, not to mention new customers. They also make getting a refund or a change in flight plans very painless and pleasant, which further allows them to win favor and attract new customers.

So, yes, $49 fares (pre-tax) can be had at Southwest, but they are not common, and they are NOT the bread-and-butter of the company’s business model. But the efficiencies mentioned do make those fares possible.

By: K. Black

K. Black — Fri, 10 Sep 2010 13:23:22 +0000

How is it possible that Southwest Airlines has been making a profit with $49 fares? This article and the first comment do not explain that. It seems to me that fares can be cheap while the Airline makes a profit. It’s just that the other Airlines (besides SWA) have not figured out how.

By: Josh

Josh — Fri, 10 Sep 2010 12:57:30 +0000

I certainly agree that the business model of $99 airline tickets won’t last, and that the flying public assumes that they are flying well-maintained aircraft flown by happy, well paid, and well rested crew. And, all in all, I believe the airlines are generally safe and flown by qualified, professional crews – if not always happy ones.
I’d like to see the results of an employee job satisfaction survey posted next to the ticket prices on the major travel websites. I’d personally spend an extra $20 – $40 per ticket to have a happy, well paid crew – and I think the overall travel experience would be much, much better as well.

By: Kyle Garrett

Kyle Garrett — Tue, 07 Sep 2010 18:35:42 +0000

Chip, you make several excellent points, and I’d like to add that “fare wars”, in my opinion, are partly responsible for an artificial deflation of airline ticket prices over the past two decades.

While you mention the incredibly overpriced cost of building, maintaining, and operating an airline, fares have, for the most part, continued to plummet due to increased competition for each seat. All this competition between carriers has “trained” the public that a seat on a short hop should only cost $99-$149 each way. Airline passengers have become so accustomed to seeing these types of prices that they just won’t pay much more than that. So while fuel and other operating costs skyrocket, fares stay put, and a simple calculation will tell you the business model can’t succeed in the long term.

One irony I find in all of this is my perception that the general public want their cake and eat it too… they demand highly maintained aircraft, veteran pilots with thousands of flight hours each, beautiful indoor shopping mall terminals, but they want it all for $99 a ticket… it just doesn’t work that way. According to an article published on the Library of Economics and Liberty website (www.econlib.org/library/Enc/AirlineDeregulation.html), “Airfares, when adjusted for inflation, have fallen 25 percent since 1991″ while most other costs associated with running an airline have increased significantly. Is it any wonder that starting pilot pay is so low and the airlines struggle to make a profit?

I believe we’ll see prices for airline seats creep up over the next few years, and hopefully the public will understand that the days of the $99 ticket may be coming to an end.