5 ms·

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 s

by 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.

by smugma 4y ago

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.