[SamAdams76]

On the subject of airlines, what makes SouthWest so exceptional? They seem to be the only U.S. airline that is still profitable and expanding. What is their secret?

[185JHP]

They only fly one airplane - the 737. Savings galore from that. They're not arrogant and insulting, behaving as if customers work for them.

[supercat]

On the subject of airlines, what makes SouthWest so exceptional? They seem to be the only U.S. airline that is still profitable and expanding. What is their secret?

Turnaround. Southwest can land, taxi, unload, reload, taxi, and takeoff faster than any of the old-line carriers. This is in part because they stay out of big airports like O'Hare, and in part because they're simply good at it.

It should be noted, though, that while Southwest does what it does better than anyone else, there are many things it does not do. For example, not only does Southwest not have any trans-oceanic flights (I don't think they even have any international flights), but they don't even serve most airports from which such flights depart. Such international airports tend to be big, and their size severely impacts turnaround. A Southwest plane at a small airport could land, taxi, unload, reload, taxi, and takeoff before a plane landing at a larger airport could even make it to the gate.

While I'm not sure Peotone is a good site for an airport, it seems much more logical to me to use smaller airports for domestic travel than to try to push everything into megaports like O'Hare.

[RLJVet]

Southwest operates on an entirely different plan from other airlines in many ways, but I am not smart on what they do enough to discuss it. For one thing, if I am not mistaken, their pilots are non unionized.

[Zetman]

What is Southwest's secret?? They take in more money than they spend!!

There are many reasons why this is true. The "big" airlines, like American and United, have EXTREMELY high-priced union labor contracts that they cannot simply break on a whim. At United, labor is the company's biggest expense (fuel is second, in case you were wondering!!). The "large" airlines have been around for a long time, and hence have entrenched unions with very restrictive work rules. All of this adds up to a lot of money. The big airlines are not allowed to make changes to their labor "situations" as the market dictates. It is difficult for them lay off workers, or farm out work to cheaper sources. This costs a lot of money too.

In addition, the big airlines maintain their own fleets. This means paying their own unionized mechanics (who hold down the highest wages in the industry), running large maintenance facilities, making sure everything is up to FAA standards, and all of the other overhead associated with running an "in-house" maintenance operation. In actuality, it would be cheaper to contract out aircraft maintenance to outside vendors.

Also, as someone mentioned earlier, the big airlines fly several different types of aircraft (737's, 747's, etc...), not just one. It is expensive to fly different types of aircraft. Each fleet requires a different maintenance regiment, and has it's own unique set of engineering and FAA standards. This multiplies the overhead tasks required. The maintenance manual for a single type of airliner can run many of thousands of pages. The people servicing the aircraft have to be certified to work on the type of aircraft they are maintaining. Pilots have to be trained and their certifications maintained for each type of aircraft they fly. A 737 pilot can't fly a 747. If you have a 757 pilot get sick, you have to find another 757 pilot to replace him/her. What this means is that the airline has to keep trained flight crews and service people on-hand for each type of aircraft they fly. These people are frequently not interchangeable, so there is a lot of redundancy of personnel. In addition, union contracts frequently mandate that the airline has to pay to keep all personnel certified and trained to work on the type of aircraft they support.

In addition, the union "work rules" cited above frequently restrict the airlines from closing down facilities that are no longer needed. At United, for example, they would like to shut down their huge maintenance base in Indianapolis, but they cannot due to contract restrictions with their mechanic's union. In addition, United would like to contract out more of it's maintenance, but again the mechanic's contract states that 70% of all of United's maintenance must be performed by United employees. The problem is that it is actually cheaper to "farm out" the maintenance of a given aircraft, and let an outside vendor handle it.

By contrast, Southwest does not suffer from these restrictions. Southwest flies only one type of aircraft: the Boeing 737. For the reasons mentioned above, this makes it much less expensive to maintain their fleet, and keep it in the air. In addition, Southwest does not maintain their own aircraft, they contract out all of their maintenance. As a result, they do not have to pay a lot of mechanics, or keep open huge aircraft maintenance facilities.

The same is true across a lot of Southwest's organization. They do not have expensive union contracts to deal with, at least not to the extent of the larger, older airlines. When these newer discount carriers were started, they learned lessons from their larger and older bretheren - they kept union contracts and union labor to a minimum. They pay much lower wages as a result, and as such are able to make profits more easily, and weather economic storms much easier than the big airlines.

In addition, I have heard that Southwest cuts costs in labor where ever they can. For example, I read once that at Southwest, the flight attendants clean the planes between flights. At the big airlines, unionized airplane cleaners come in and clean the planes between flights. The work rules (there's that term again!!) in the flight attendant's contract at the big airlines would prohibit them from performing such duties. I'm sure that if one took a closer look at the airline industry, one could find countless examples of such differences between the newer discount carriers, and the older mainline carriers.

Does all of this say that the union's greed is mainly at fault for the predicament the big airlines find themselves in?? To a large extent, yes. However, management shares some of the blame too, for allowing labor relations and compensation to deteriorate to such a level to begin with, and for various bad decisions made over the years which cost their airlines a bundle. Being a huge corporation can induce a certain amount of complancency, as well as burocratic bloat.

For years, the big airlines have relied on the high-paying business traveller, paying huge last minute and first class fares, to be their bread and butter. Well, in the current economic climate, and after 9/11, that revenue source has essentially dried up. And the big airlines don't have a "Plan B" to fall back upon. Now everyone in the flying public, including the business traveller, wants to fly economically in coach. This means that the high-paying business traveller's fares are no longer covering up for bad management decisions, over-bloated staffs, and rediculously high union labor contract costs.

So far, the newer discount carriers have avoided falling into this trap. If management maintains good realations with labor, doesn't make too many stupid decisions, and if labor doesn't become greedy and self-serving over the years, they will continue to be successful.

United Airlines, currently in chapter 11, is trying to remake themselves to be more like Southwest, at least partially. They want to create a seperate discount airline within United. It will have seperate management, seperate pay scales, and seperate access to capital markets from the "main" United Airlines. It would be a seperate entity from the main airline. Pay scales at this low-cost carrier would be less, it would fly only a single type of aircraft, and would fly only domestic routes. United wants to convert 30% of it's routes to this carrier. Predictably, the unions are screaming bloody murder over this idea. They don't want to see their current sweet deals stripped away from them. They have a million bogus reasons why the low-cost carrier won't work. However, I think that United's management realizes that it is a new world out there in the airline industry, and they can either adapt, or go the way of Pan Am and Eastern. They are trying to use Chapter 11 to accomplish a re-make of the company. There are many opinions about whether or not they are doing the right thing, or whether or not they are doing enough. Only time will tell.

Sorry, I typed a much longer explanation than I had planned about why Southwest makes money, while the big airlines do not. As you can see, it is a complex problem. That means the solutions are also complex!!!

[captnorb]

As well as Jet Blue and Hooters

[Neanderthal]

"On the subject of airlines, what makes SouthWest so exceptional? They seem to be the only U.S. airline that is still profitable and expanding. What is their secret?

I've got to fly to LA on Tuesday from the Bay Area. United wants $350 for a one-way ticket from SFO. Southwest wants $95 one-way from Oakland, fully refundable. You do the math.

[pepsionice]

Having ridden on Southwest a number of times...I can tell you that there are 3 secrets to their success. They fly only into airports that show business profit...otherwise...they don't go there. They would never go into places like Birmingham or Knoxville or Walla Walla. Second, they fire incompetent management. If you go into a job and really start to screw it up...they let you know asap...then after a couple of months to fix your problems...if you can't then adios. And finally...the profitibility of the airline is tied to a lot of their incentives for the employees. The employees actually work to make you happy and make you want to return to the same airline. We could also add that they do a lot of Vegas traffic....and that is a major plus for the airline...but its simply part of their grand scheme of things.

[pragmatic_asian]

When Soutwest came close to operating at a loss, the management actually cut their own pay first, unlike Delta. That should tell you the type of corporate culture they have.

[sphinx]

The big reason is labor relations/unionism. Prior to airline deregulation (one of the handful of things Jimmy Carter got right), the industry was a highly protected cartel. Among the predictable results were high operating and labor costs, as everyone could play gouge the consumer with federal protection. Then came deregulation. While the operating costs could be adjusted over time to meet new market realities, the labor costs were locked into bloated union contracts which the old line carriers have been largely unable to unravel.

A new carrier like Southwest has the luxury of a fresh start. They pay less, which the unions hate, but this is a classic example of market pricing vs. an entrenched union goldbricking system. They also don't have the tradition of crummy labor-management relations that characterize so many old line unionized companies. The only reason a gradually dwindling number of the old line carriers have been able to struggle along to this point is the fact that they control most of the landing slots at the top airports. Airport expansion is difficult in most places and very few new airports have opened in 30 years. Slots are at a premium and, even under deregulation, constitute a significant barrier to entry. That's why Southwest has grown in secondary markets. (Around here, Southwest is a major reason sleepy, out-of-the-way BWI has replaced Reagan National and Dulles as the airport of choice for many of us.)

It's instructive to compare deregulation of the airlines with the railroads and trucking. In rail, the existing rights of way and trackage amount to a quasi-natural monopoly. This creates a barrier to entry which can be exploited by predatory unions, and so the railroad industry continues to stagger under ridiculous labor contracts a generation after deregulation. In trucking, anybody can buy a truck and go into business, which is why deregulation has worked much more smoothly there.

The familiar principle is that unions are fine in a free labor market but chronically abuse their power in non-competitive situations. Any unionized industry that deregulates -- or that faces a new source of competition, e.g. foreign autos and steel after about 1965 -- is in for a rough ride. That's why restraint of trade is the Holy Grail of organized labor.