Speeches and Presentations from Southwest Leaders
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Laura Wright, Southwest Airlines’ CFO |
For both Customers and investors, the hottest topic in the airline industry is the potential merger discussion among carriers. It came as no surprise as reporters at the Reuters Aerospace and Defense Summit started off with this topic when talking with Laura Wright, Southwest Airlines’ CFO and the only female CFO for a major domestic airline.
“Further consolidation [among airlines] is good for the industry and is good for us,” said Wright. Although Southwest is not interested in merging with another carrier, Wright added it is interested in gates, routes, aircraft, and slots.
She described how Southwest was able to add additional gates in Chicago Midway, a constrained airport, through the assets it bought from ATA. Along with acquiring the airport gates, Southwest began its first ever codeshare partnership offering service to its Customers to destinations it currently does not serve such as New York La Guardia, Hawaii, and Boston Logan.
“We will be tactical and do our due diligence when it comes to opportunities resulting from a merger among airlines,” emphasized Wright. “Our preference is to grow organically.”
At this time, Southwest is not looking to take an active role in consolidation Wright emphasized. Although the airline is no stranger to mergers, back in 1985 and 1993, Southwest merged with Muse Air and Morris Air, respectively. “We can never say never when it comes to opportunities,” said Wright.
Laura went on to detail Southwest Airlines’ strength in the airline industry:
- In the third quarter of 2006, Southwest had its 62nd consecutive quarter of profitability.
- Southwest is the low-cost Leader and focuses on productivity & efficiency.
- Currently, Southwest has captured 16 percent of the U.S. market share.
- Southwest has a superior balance sheet, and a strong national network of flights and destinations.
Wright touched on Southwest’s significant cost advantage compared to its competitors and its efforts moving forward to increase revenues. With its fuel hedging strategy in place, Southwest has been able to control an uncontrollable cost - fuel. Commenting on the airline’s strategy moving forward, Wright said “we have stakes in the ground that gives us opportunities.” Southwest is hedged 85 percent at $43 a barrel in 2006, 85 percent at $49 a barrel in 2007, 45 percent at $44 in 2008, 38 percent hedged at $47 in 2009, and 17 percent at $63 in 2010.
Additionally, Laura mentioned that Southwest is actively developing ways to keep costs under control such as being active on fuel conservation by installing winglets, and not using the airplane’s auxiliary power unit while parked at the gate. It also plans to grow its distribution side by encouraging Customers to use southwest.com. Overall, productivity measures have saved the airline $100 million.
Southwest is leaving no stone unturned when it comes to revenue opportunities. Wright stated “our goal is to increase revenues without fare increases.” Wright shared how the airline installed life vests to fly more direct routes over water and plans to carry more freight in the upcoming year. Also, Southwest continues to connect the dots by adding more frequencies and new nonstop service to fortify its new and existing markets. “There are more things we want to do than we have aircraft,” Wright said.
To see Wright’s TV interview and Reuters’ stories from the summit, please visit http://today.reuters.com/summit/allsummits.aspx, and go to the left hand column and click on “Past Summits” to locate the Aerospace and Defense Summit.
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