dalad

Does anybody know how much they have cut back in ATL? I have noticed that we are never in a long line for departure anymore.

Columbia

The benefit they have quantified by not charging for bags is increased market share (from those airlines who do charge). They've publicly and proudly mentioned this. The downside to now charging for bags is losing much of that increased market share. They are stuck.

Columbia

As Elaine on Seinfeld (and Sailing) would say, you are "Even Steven."

Burn Notice

They are down to less than 190 flights out of ATL from a high of 230ish. Sixteen less destinations served as well.

Burn Notice

They are very stuck.

flyallnite

The more they change, the more they become something they aren't. The are rapidly losing what differentiated them from everyone else, and what's left when that's gone ain't all that great.

Wasatch Phantom

I got into BOI late one night last month and was surprised to see only two SWA airplanes spending the night. I mentioned this to the agent who met our flight and she said SWA had stopped service from BOI to SEA, SLC and RNO.

DAL has even up-gauged to mainline aircraft on some BOI-SLC flights!

I agree completely about all their "bags fly free" ads. After making such a big deal about how great they are (and spending millions doing so) how do you make a 180 degree change and not:

a.) P*ss off a lot of your customers.
b.) Look like idiots.

Dirtdiver

That might have been the same MEC guy that came by my house last week. My daughter's cat had a litter of kittens, he took them out in my front yard, buried them up to their necks, and ran over them with my riding lawn mower.

I'm pretty sure he was on FPL at the time!

Good news is that when DPA takes over, they promised to sew the heads back on. And then get age 60 back.

The Cavalier

Easy. Make a half hearted attempt to publicly campaign for congressional action to change the tax structure to make bag fees unprofitable or end them altogether. More importantly enlist the help of your customers to assist in said campaign. If it succeeds you're the hero. If it fails, as is likely, make more public statements thanking your customers for their help and apologizing that the politicians and network carrier lobbies screwed it up for them....then start charging fees and watch a smirking Gary Kelly give Wall Street investor earning reports trumpeting the success of SWA. Do you feel the Luv?

Bucking Bar

Supply Chain Is Key To Financial Success Of Bombardier CSeries
Aviation Daily Mar25, 2013 , p. 1.01
Jens Flottau



Three months before the planned first flight of its CSeries, Bombardier is grappling with supplier issues crucial to meeting its production cost targets for the 110-/135-seat aircraft. And with shareholders concerned as the Canadian airframer burns through cash at an unprecedented rate to develop the next-generation narrowbody jet, achieving early profitability is essential.

Central to the issue is the role of Chinese suppliers and their low costs in meeting Bombardier ’s pricing assumptions for the CSeries. The company pulled much of the work from its Chinese suppliers last year to mitigate delays, but said the move was only temporary. Now industry sources tell Aviation Week that Bombardier is in talks with Western suppliers to extend those agreements while retaining their pricing.

Bombardier describes reports of offers to transfer control of more work packages to Western suppliers as speculation. But suppliers claim discussions on the CSeries production ramp-up underscore the financial pressure the company faces as the first aircraft nears its initial flight, now planned by the end of June. Bombardier already has cut back massively on discretionary spending and is negotiating aggressively with suppliers on future production costs.

The Canadian airframer moved to improve its liquidity in January with a $2 billion bond offer, but is attempting a delicate balancing act. Expenditure on development of the CSeries, and new Learjet 85, greatly exceeds the cash flow from sales of its existing aircraft. A six-month delay to first flight has pushed back progress payments from CSeries customers, while launch pricing and the planned gradual ramp-up in production mean deliveries will not generate positive cash flow before 2015.

Bombardier is promising shareholders a big boost in revenues from 2015, and has said publicly it will not offer deep discounts to win CSeries orders. This puts the company at a disadvantage in campaigns against Airbus and Boeing , which have said they will use pricing to keep the CSeries out of their markets. List prices for the larger 135- to 160-seat CS300 are $10-15 million less than for the competing Airbus A319 and Boeing 737-700 , but Ryanair ’s order last week for 175 737-800s at 40-50% of list price shows how low the Big Two are willing to go. Ryanair did not consider the CSeries, but the deal makes clear the price pressure Bombardier faces in campaigns against Airbus and Boeing .

It is against this background that industry sources say Bombardier wants to place responsibility and risk for the Chinese work packages with Western suppliers while retaining the low costs of having the work performed in China.

The company initially placed manufacture of the center and rear fuselage barrel, center wing box, wing-body fairing and tailcone with Shenyang Aircraft (SAC), which also is building the fuselage of its Q400 regional turboprop. That plan was reversed for what Bombardier described as a limited time, and agreements covering production of 40 shipsets were signed with companies such as Aernnova, FACC and GKN Aerospace . According to industry sources, those contracts could now be extended to 60 units.

Bombardier says it always planned to have initial shipsets of the forward fuselage built in its Saint-Laurent, Quebec, factory, where the fuselage has to be integrated with the cockpit, and initial shipsets of the mid-fuselage, which also houses the wing interface, built at its Belfast, Northern Ireland, site. “SAC continues to produce components for its work package, and the production volume is progressively increasing as the facility ramps up,” the company says, adding, “There is no final date for full transfer—it is already under way as it was part of our plan from Day One.”

But sources close to the negotiations say that plans exist to go further and that work could stay with Western suppliers even beyond the first 60 aircraft, but not at Western cost levels. Insiders claim Bombardier has based its pricing assumptions on low-cost country pay rates for labor-intensive work of roughly $14/hr., but now wants its Western suppliers to take on the production risk. The idea is not to pull parts production from China permanently but to put it back with Chinese suppliers, although no longer under Bombardier ’s own commercial responsibility.

While describing the sources’ claims as “inaccurate and based on assumptions and speculation,” the company concedes Shenyang is not yet delivering complete forward and center fuselage barrels, although that is still the plan. “The production ramp-up at SAC is going smoothly, and preparations are being made to expatriate specific work packages for major production commencement in China in accordance with Bombardier ’s existing production plans,” the company says.

But which Western suppliers would accept the proposed low-cost terms and associated program risk? Many of the first- and second-tier aerostructures specialists are not short of alternative customers. But these companies are now making key decisions about allocating engineering capacity. Several already have been approached by Bombardier competitor Embraer regarding its next generation of the E-Jet family. With financial resources limited, they may have to opt for one or the other.

Factors influencing these decisions include not only the commercial terms, but also the market outlook for the aircraft. One senior industry source says there is an acknowledgment among his peers that the CSeries is more technologically advanced than the Embraer design, which also is a smaller aircraft. But while technology and trends for regional airlines to move up in aircraft size might suggest a greater market potential for the CSeries, there are growing concerns about Bombardier ’s ability to finance the program at terms acceptable to its industry partners.

Contributing to these concerns is uncertainty over the schedule calling for first deliveries in mid-2014. When the company late last year announced a six-month delay to first flight of the CS100, it cited late and out-of-sequence delivery of some components. Additionally, the decision to offer a 160-seat version of the CS300 required a small fuselage stretch and significant engineering work that also affected the CS100 because of commonality between the two variants.

Under current plans , supplier agreements would cover aircraft deliveries through the end of 2015, by which time the program will be reaching its full, 120-a-year, production rate. Bombardier plans a gradual ramp-up, both to avoid building up an inventory of aircraft that must be modified with changes from flight testing before delivery and to “make sure we have set up manufacturing to be as efficient as possible as quickly as possible,” Bombardier CFO Pierre Alary told analysts recently.

The 110-seat CS100 will fly first and is expected to be certified in mid-2014. The 135-seat CS300 is to fly early in 2014, for certification by the end of that year. In the first year after entry-into-service, Bombardier plans to deliver about 30 CSeries, doubling in the near year and again the following year, he says. This means the company expects to deliver just 15 aircraft , worth about $750 million in sales, in 2014, increasing to 45 in 2015.

Bombardier spent $2 billion on CSeries development and other capital investments in 2012, and will spend a similar amount this year, says Alary. This level of expenditure has exceeded BombardierAerospace ’s cash flow from operations for the past two years, by $453 million in 2011 and $867 million in 2012. Alary says investment will shrink to $1.5 billion in 2014 and to a more-normal $1 billion in 2015, at which level the company expects to generate positive cash flow.