investmenttool.com Cover Story

Airline Mistake

The only major airline that did not announce massive job cuts the past two weeks was Southwest Airlines. This is due to a number of factors. The most important factor is that fact that Southwest is better run than any other airline. Further, their response to the crisis has been better than most airlines. Plain and simple.

What does Southwest do that others do not do? They treat their customers better. They have a sense of humor and the overwhelming majority of their employees really love their jobs.

Their load factors have been much higher than industry average due to better fares and less restrictions. By not trying to squeeze every last dollar out of the last minute business traveler, Southwest has more business travelers. Fancy that.

Southwest's response to the crisis following the September 11, attacks on the nation was different than any other airlines. They cut all fairs sharply and continue to run their planes at much higher load factors than their competitors.

Flush with cash from the government unviable airlines such as Midway Airlines will now continue to fly. The Congress thought it would not be fair to leave out weaker airlines, since they provide competition. Midway was ready for bankruptcy before the attack and will run out of money and eventually go out of business.

Southwest Airlines isn't going to do something wild like actually make money this quarter. They have a lean, mean organization though and will probably be the first airline to start showing positive cash flow as travel moves toward previous levels.

Are you listening, United, American, Delta and Continental?

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Shmuel Protter
investmenttool.com

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