Just a few thoughts for Saturday morning. Two Texas airlines reported net losses for the first quarter. No big surprise at American, other than most thought they’d lose more than the $375 million reported. Certainly a big surprise at Southwest with it’s $91 million net loss. And that was a real loss anyway you look at it. The first quarterly operating and net loss since the first Gulf War if my math is correct. I’m anxious to see results from the other Texas airline, Continental, which will report this week.
I already posted about Southwest and my suspicion that they are going to have to take action on labor costs at some point. The possibility is real that they have to approach their unions to reopen their recently negotiated contracts. They are not there yet, but I don’t think it’s out of the question. Their buy-out offer to employees will entice some to leave, I’m sure. But in this economy, I’m not convinced it will be successful enough. No matter what, I’m certain the folks at Southwest will work through this and fly through to the other side of this in better shape.
As for American, we’ll see. American’s managers are pretty bright financially, but they face enormous labor relations challenges. The unions are out to bleed the turnip just as revenue and traffic collapse. Not a good combination, and certainly not a recipe for dramatic financial recovery. It’s going to be a difficult year at American.
The “talking heads” and pundits in the press have been trumpeting the possibility of a profitable year for airlines as a result of dramatically lower fuel prices. Not outside of the realm of possibility that most airlines make a little money over the summer, but I’m not holding my breath for full-year profitability for any major carrier except Southwest (maybe).
This week, President Obama revealed an outline of his vision for high-speed rail networks throughout the country. I have long supported the idea that high-speed rail should be deployed in certain cooridors across the country. If this ultimately gets done, and let’s face it, that’s questionable, one airline stands to be hurt the most by this. That airline? Southwest.
How’s that for a post on random reflections?