FAA announced (01-Sep-2009) it has approved Southwest Airlines plan for the replacement of unauthorised aircraft parts to be completed on 82 of its B737-300 and -500 series aircraft by 24-Dec-09. [more]
FAA approves Southwest Airlines replacement plan without grounding aircraft
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Southwest Airlines and jetBlue take different paths to sustaining balance sheet strength
At nearly 46 years old and 17 years old, respectively, Southwest and jetBlue approach their financial priorities differently. jetBlue is in the process of buying a certain level of aircraft off lease to reduce debt and raise its levels of unencumbered aircraft. Southwest is concluding a hefty investment in a long overdue overhaul of its reservations system and making other significant technology investments.
Each airline also has a different capital allocation strategy. Southwest has engaged in some level of shareholder returns since the 1990s, whereas jetBlue’s shareholder return strategy is just starting to take shape – the airline is reaching a point in its leverage performance where it can contemplate more meaningful levels of shareholder returns in the medium term.
One area where Southwest and jetBlue hold similar visions is balance sheet strength, and the airlines have similar leverage goals: to support capex commitments, maintain manageable debt levels, and expand or sustain return to shareholders.
Branded fares: a philosophical shift to preserve premium product pricing for large US airlines
The Basic Economy trend sweeping the US airline market is fostering speculation about the exact results that American, Delta and United hope to achieve by introducing new tiered pricing structures into the market place. On the surface, the pricing structures are tools for those airlines to compete more effectively with ULCCs in the market. But more strategically, new pricing segmentation provides the large three US global airlines an avenue to execute their revenue management more effectively, preventing pricing dilution of their more higher end offerings.
Even the rivals that American, Delta and United are targeting with their bare bones product offerings believe that ultimately their new pricing schemes could create pricing stability in the US market – which appears on a fragile path to recovery. The logic for that conclusion rests on the ability of the Big 3 for product upsales that drive up pricing for all fares in the market.
One challenge the large US airlines face in the expansion and roll out of their new tiered pricing structures is ensuring the correct product attributes are communicated correctly through distribution channels outside their respective websites. Proper execution is key in order for American, Delta and United to realise the billions in potential revenue that they believe exists from the overhaul of their pricing structures.