Add a New Bulls Reason

Company: Southwest Airlines Company (LUV)
Current price:
Headline: (100 character max)
Analysis:
Cancel
79%
agree
187 votes

  Unlike competitors, LUV's growth is organic

Southwest Airlines managers (NYSE: LUV) spent only $0.03 on mergers and acquisitions for every $1.00 of shareholder value they created. By comparison Delta Air Lines Inc. (DAL) spent $2.35 for every $1.00 of value they created. In Louisiana, there's a name for this kind of strategy. It's called jumping over a dollar to get to a nickel.

(100 character max) Cancel
21%
agree
14 votes

  Southwest's Fuel Hedges Protect its Profits

Southwest hedges more fuel than any other airline, with 70% of its 2008 fuel needs hedged at $51 per barrel. In contrast, the industry average is about 30% of fuel needs hedged at about $100 per barrel. By maintaining low fuel costs, Southwest minimizes its operating expenses- for example, Southwest estimates that it saved over $686 million in fuel expenses in 2007 because of its hedges.

(100 character max) Cancel
21%
agree
14 votes

  "Unlike competitors, LUV's growth is organic"

Southwest Airlines managers (NYSE: LUV) spent only $0.03 on mergers and acquisitions for every $1.00 of shareholder value they created. By comparison Delta Air Lines Inc. (DAL) spent $2.35 for every $1.00 of value they created. And Northwest Airlines (NWA) spent $1.61 on M&A for every value dollar they created. In Louisiana, there's a name for this kind of strategy. It's called jumping over a dollar to get to a nickel.

(100 character max) Cancel
32%
agree
25 votes

  Company understands it's about earnings, not market share

Does Herb Kelleher know something about creating shareholder value that other CEOs don’t know? Perhaps he understands that in the domestic airline market earnings don’t necessarily increase with market share. Or in economics speak, changes in earnings with respect to a changes in market share may be very inelastic.

Herb Kelleher understands – as no other sitting airline CEOs seems to – this fundamental principle about competition: given

  • A capital intensive industry,
  • With few meaningful scale efficiencies,
  • Delivering a highly perishable product,
  • Within a partly regulated infrastructure,
  • Operated by talented professionals,
  • In a very price sensitive market, with
  • Free entry and court protected exit,
  • Shareholder value can best be created organically. How? By maximizing the satisfaction of employees, passengers, suppliers, partners, and shareholders. Here is the corollary to that fundamental principle:

In airlines, building market share through mergers short circuits the creation of satisfied stakeholders.

(100 character max) Cancel
25%
agree
20 votes

  Partnerships and expansions

Southwest Airlines Co. (LUV) and Canada-based WestJet Airlines Ltd. on 8th July 2008(Tuesday) announced a marketing alliance that is planned to go into effect in 2009. “This gives WestJet exactly what they need in terms of growing their trans-border flights,” Chris Murray, an analyst at CIBC World Markets Inc. in Toronto, told Bloomberg News. “The deal would make sense for Southwest to build its service into Canada, too.”

(100 character max) Cancel
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki