4 ms·

Here is where we should take note of how things were resolved (or are in the process of) and note where “throw more money at it” (fly inefficient routes, farm o

Here is where we should take note of how things were resolved (or are in the process of) and note where “throw more money at it” (fly inefficient routes, farm out fares, etc) would have also helped. Then next earnings release - when they post shareholders profits - that’s exactly how much they were willing to hold back to fix this, trading profit for people stuck for days.

smugma 4y ago
Good point. I think it will be smart for them to post a record loss for this quarter. Accrue a few billion for refunds, depreciate your software to zero, and start to set aside a few billion for new cloud whatever. Basically, take this as a huge loss and communicate that you’ve lost a lot of goodwill and trying to make passengers whole is #1 priority (after safety, of course).
- philwelch 4y ago
  Airlines are extremely low-margin businesses, discount airlines like SWA doubly so. “Posting a record loss” of this magnitude isn’t something that can be afforded. What you’re talking about is likely to turn into some form of bankruptcy. Maybe it’s a relatively minor Chapter 11 where all those refunds get written down by the bankruptcy court, or maybe SWA goes the way of TWA and Pan-Am.
  - scarface74 4y ago
    Airlines make a lot of their money from loyalty programs https://www.forbes.com/sites/advisor/2020/07/15/how-airlines-make-billions-from-monetizing-frequent-flyer-programs/ https://www.forbes.com/sites/advisor/2020/07/15/how-airlines... And loyalty programs are bigger business for the higher end airlines that cater to business travels and the more affluent. On top of that, the top 3 airlines make a lot of money off a first class and business travelers who are using other people’s money.
    - philwelch 4y ago
      You just listed a bunch of revenue sources SWA doesn’t have.
      - scarface74 4y ago
        That’s the point…
        philwelch 4y ago
        Gotcha.
  - cmmeur01 4y ago
    Or maybe their lobbyists get on the phones and secure them a nice bailout, since they’re so “essential” as we’ve just seen.
  - chasd00 4y ago
    Replying to a sibling comment. There will never be a bailout for SWA. Too small, too many competitors and based in a red state with a blue administration in power.
  - smugma 4y ago
    They lost $300M in Q1 and made $800M in Q2. They can take another $300M loss (1B?) in the short term to mitigate reputational damage and legislation.
    - panarky 4y ago
      In the last fiscal quarter pre-pandemic, they had operating income of $3 billion on revenue of $22 billion, or 13%. This is not a low-margin business. If they have operating income of eight to ten billion a year, spending a third of a billion to upgrade systems seems like it would have been a reasonable investment instead of buying back shares and increasing the dividend.

smugma 4y ago

Good point. I think it will be smart for them to post a record loss for this quarter. Accrue a few billion for refunds, depreciate your software to zero, and start to set aside a few billion for new cloud whatever. Basically, take this as a huge loss and communicate that you’ve lost a lot of goodwill and trying to make passengers whole is #1 priority (after safety, of course).

philwelch 4y ago
Airlines are extremely low-margin businesses, discount airlines like SWA doubly so. “Posting a record loss” of this magnitude isn’t something that can be afforded. What you’re talking about is likely to turn into some form of bankruptcy. Maybe it’s a relatively minor Chapter 11 where all those refunds get written down by the bankruptcy court, or maybe SWA goes the way of TWA and Pan-Am.
- scarface74 4y ago
  Airlines make a lot of their money from loyalty programs https://www.forbes.com/sites/advisor/2020/07/15/how-airlines-make-billions-from-monetizing-frequent-flyer-programs/ https://www.forbes.com/sites/advisor/2020/07/15/how-airlines... And loyalty programs are bigger business for the higher end airlines that cater to business travels and the more affluent. On top of that, the top 3 airlines make a lot of money off a first class and business travelers who are using other people’s money.
  - philwelch 4y ago
    You just listed a bunch of revenue sources SWA doesn’t have.
    - scarface74 4y ago
      That’s the point…
      - philwelch 4y ago
        Gotcha.
- cmmeur01 4y ago
  Or maybe their lobbyists get on the phones and secure them a nice bailout, since they’re so “essential” as we’ve just seen.
- chasd00 4y ago
  Replying to a sibling comment. There will never be a bailout for SWA. Too small, too many competitors and based in a red state with a blue administration in power.
- smugma 4y ago
  They lost $300M in Q1 and made $800M in Q2. They can take another $300M loss (1B?) in the short term to mitigate reputational damage and legislation.
  - panarky 4y ago
    In the last fiscal quarter pre-pandemic, they had operating income of $3 billion on revenue of $22 billion, or 13%. This is not a low-margin business. If they have operating income of eight to ten billion a year, spending a third of a billion to upgrade systems seems like it would have been a reasonable investment instead of buying back shares and increasing the dividend.