Word: southwesterly
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...sure, Southwest in the third quarter earned only about half as much as it did in the same period in 2001. Its top executives aren't certain whether the airline will be able to stay profitable for the final three months of 2002. And Southwest's pay advantage is shrinking. In recent months, as workers at other airlines have been forced to make pay concessions, Southwest unions have been signing new contracts for pay hikes...
...Southwest's core advantage isn't that its employees get paid less for their work; rather, it's that they work more for their pay. They work more productively, more flexibly and more creatively--like Johnny Bomaster. Southwest pilots routinely fly nearly 80 hours a month; United pilots fly just over 50 hours, even in a busy month. Southwest pilots are paid for each trip, not each hour, so they have a strong interest in keeping flights on schedule. And because a big chunk of their compensation comes in the form of stock options, they tend to watch costs like...
Bomaster and workers like him are a big part of the reason that amid record losses by its competitors, Southwest last week reported $75 million in earnings for the third quarter and stands as the only profitable U.S. airline among the top eight. AMR, parent of American Airlines, the world's largest, just reported a third-quarter loss of $924 million. U.S. Airways is reorganizing under bankruptcy protection, and industry experts expect it will soon be joined by United Airlines. Delta has announced that "to survive for the long term" it will lay off an additional...
...does Southwest do it? The answer starts with lower costs. The Air Transport Association reports that other major airlines (American, United, Delta, Northwest, Continental, U.S. Airways, America West and Alaska) had unit costs--measured in cost per seat for each mile flown--nearly 100% higher than Southwest. A study by the consulting arm of Unisys concluded that the other majors would need to cut spending a staggering $18 billion just to level the playing field with Southwest. The airline "has long-term, systemic advantages the other carriers can likely never match," says Vaughn Cordle, an airline pilot who heads...
Although starting pay for some positions at Southwest lags behind that of other carriers, Southwest has traditionally made up that deficit with generous profit sharing and stock options--based on shares that have dropped 24% so far this year, after almost doubling in value over the past five years. The company is valued at $10.8 billion, more than the other major U.S. airlines combined. And employees own more than 10% of Southwest's outstanding shares. Southwest also offers something even scarcer than a valuable stock: job security. While the other majors are shrinking their service and laying off workers, Southwest...