Analysis for South West Airlines Student Karym Z Zabara SouthWest Airlines LCC SouthWest Airlines serves as a Low Cost Carrier incorporated in Texas and commenced service on June 18 1971 ID: 731818
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Slide1
Airline Productivity and Cost Analysis for South West Airlines
Student:Karym Z. Zabara Slide2
SouthWest Airlines (LCC)SouthWest Airlines serves as a Low Cost Carrier, incorporated in Texas and commenced service on June 18, 1971
As of December 31, 2012, Southwest and AirTran operated 694 Boeing jetsSouthwest and AirtTran provide their services in 97 destinations in 41 states, including the District of Columbia, and the Commonwealth of Puerto Rico
Southwest Airlines Representatives booked approximately 11.4 million reservations in the last 12 months.In 2012, Southwest's average passenger airfare was $147.17 one way.
Characteristic
SouthWest
Single Aircraft Family
Single
Cabin Service No Seat Assignment Slide3
Term DefinitionsRevenue Passenger Miles (RPM) =
Sum of all the paying passengers multiplied by the distance travelled. Available Seat Miles (ASM) = Sum of all the seat flown (available) multiplied by the distance travelled.
Revenue per Available Seat Miles (RASM) = Obtained by dividing operating income by available seat miles.Cost per Available Seat Miles (CASM): Obtained by dividing the operating costs of an airline by available seat miles (ASM).
Average fare paid by passengers, per mile flown (Yield): Revenue per RPM.
Passenger Revenue per Available Seat Miles (PRASM) : calculated by dividing passenger revenue by available seat miles. Typically the measure is presented in terms of cents per mile.
Fuel Consumed: Sum of all the fuel expenses for all the flights operated.
Fuel Cost per ASM : Fuel consumed divided by Available Seat Miles (ASM).
Non Fuel Cost per ASM : Total non fuel costs divided by Available Seat Miles (ASM).Slide4
Chart of (RPM, ASM, & SLF)Slide5
Chart Description: (RPM, ASM, & SLF)
An overall correlated rising trend exists for RPM, ASM, & SLF for the third quarter of all the years from 2001 – 2012 though some minor deviations appear.A decrease of RPM, ASM, & SLF occurs every year on the month of September, most likely due to the end of vacation season and the return of employees to work as well as beginning of classes for school.
The greatest two drop in SLF occurs on September of 2001 and September of 2008 due to the events that occurred at the time . Slide6
Chart of (Income, Expense, & Revenue)Slide7
Chart Description:(Income, Expense, & Revenue)
The general
trend shows the o
perating revenues and expenses growing together
, they
display a close
relation to each other through out the years with a minor deviation where revenue is greater than the expenses.
Due to the sky rocketing increase in the price value of crude oil lead to the loss of income on the year of the 2008 and 2011, leading the expenses to catch up with the revue values.Airtran -supposedly the smaller rival of southwest airlines- was bought by southwest airlines for 1.4 billion dollars in 2010, the process of running the new fleet increased revenues but also posed its own risks in costs in the following year of 2011.Slide8
Chart of(RASM, CASM, Yield/RPM, & PRASM)Slide9
Chart Description:(RASM, CASM, Yield/RPM, & PRASM)A growing trend for RASM, CASM, & PRASM appears over all years with a minor deviation where RASM is greater than that of CASM and PRASM.
The Yield/RPM displays a similar growth to RASM, CASM, & PRASM, yet due to the increase in fuel prices in 2008 the Average fare paid by passengers per mile flown was increased accordingly to make up for the cost of fueling the flights.Slide10
Chart of (Fuel vs. Non fuel)Slide11
Chart Description: (Fuel vs. Non fuel)Fuel Operating Expenses carry on a gradual increasing trend over the years following closely the growth in air travel demand , and increases accordingly with increase in fuel price in and after the year of 2008.
Non-Fuel Operating Expenses though scaled to fit on the graph it is a fraction of the Fuel O
perating Expenses has growing trend that grows exponentially after 2010 due to the merger of S
outhwest Airlines with AirTran.
Fuel Consumption at its lowest in 2001 raises gradually until 2009 where a drop in fuel consumption occurs most likely due to a decrease in the amount of flights to reduce costs or due to an improvement of technologies outfitted in fleet.Slide12
Chart of (Costs/ASM & Fuel Price)
Indexmundi Fuel prices: httpwww.indexmundi.com/commodities/?commodity=jet-fuel&months
=180&commodity=jet-fuel://Slide13
Chart Description: (Costs/ASM & Fuel Price)Fuel Operating Costs per ASM has a gradual increase over the years yet not significant noticeable other than the minute spike in 2008.
Non- Fuel Operating Costs per ASM though scaled to fit in the same graph, has the a gradual increase until 2008 where a the trend becomes exponential, most likely due to the increase of air travel demand, and the merger that occurs in 2010 with AirTran.Generally the jet fuel prices acquired from index-mundi display an extreme spike in 2008 by almost 75 % followed by drop in 2009 where efforts of mining more fuel was increased.Slide14
Effect of Fuel Price on Expenses (Chart 5, 4, 3) Fuel price has had a significant effect on overall SouthWest operating cost.
Between early 2008 and mid of 2010, fuel expense as a proportion of overall operating expenses ranged from 50% to 80% spikes. Even during the years when fuel price was steady, the fuel operating expense is a large factor to the overall southwest's operating expenses especially after the merger.Slide15
Airline Finance (Chart 2)Fuel price has had a modest effect on overall income of Southwest's operation in general. Almost all the periods when fuel price has increased appreciably are accompanied by an appropriate charge to accommodate for a close breakeven value with income.
Yet in some situations the effects were significant enough to force the southwest airlines to operate in a negative territory for example in the years (2008 and 2011)Slide16
Airline Network StructureComparatively, fuel price has had minimal effects on RPM, ASM and Load Factor. For the most part, RPM and ASM have increased through the years and Load factor changed very slightly in spite of fuel price.
Though, during the time when fuel price was significantly high, (2001 and 2008 ), RPM and ASM stagnated and fell.Slide17
Thank
For Your TimeSlide18
Back up slide for Chart of (RPM, ASM, & SLF)