I opened up this morning's Dallas Morning News business section to about 25 inches of good timing. Airlines reported fourth-quarter earnings this week. You tell me which airline is forced to buy politicians and which airline simply wants open markets:
- American Airlines (AMR Corp.) will report tommorow morning they lost $396 million, which is apparently good news to investors because it's not as bad as expected. Apparently revenue is up. AA has not reported a profit since 2000.
- Southwest will report a $95 million profit, the 32nd year in a row they've provided an annual ledger in the black.
AA is being given a pat on the back for cutting flights (supply) by 2.3 percent and raising rates. So consumers had fewer options, paid more, and AA still lost 2/5 of a billion.
Southwest changed nothing. They just planned better.
Most airlines have taken a hit the past two years because of outrageous fuel prices. Southwest -- which must have a real prophet on their board -- bought gas in the futures market a few years ago, which have insulated them during this time. It's called fuel hedging, and they look like future kings of the airline industry right now.
A third airline, Houston-based Contintental, reported a $109 million loss.
One more thing to consider: Two studies, one by the DOT in 1993 and a more recent one by the Office of Aviation and International Affairs refer to an economic impact called the "Southwest Effect." Basically, in any economy -- even a post-9/11 one -- when Southwest comes to town, flight trips go up and fares go down. The changes are typically between 20 to 30 percent for both figures, but sometimes exceed 100 percent. It's a consistent effect and why people like Sen. Shelby and Missouri's congressional delegation saw it as politically beneficial to overturn their portion of the Wright Amendment.