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New Member
Not sure if you have seen this but its amazing to me. Im new to this and have elarned from you all not to believe everything I hear so Im also not sure how valid it is. But I would think its got to be.
Plane Talk
See what Laura Wright, Vice President-Finance and Treasurer at Southwest Airlines, says about why every dollar counts.
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Laura Wright
Vice President - Finance and Treasurer
Southwest Airlines
"But It's Just A Few Dollars"
Frequently, the federal government, state legislatures, cities and airports impose new costs on airlines in the form of taxes, "user fees," "passenger facility charges," or airport expenses. The various governments insist there will be no harm to Southwest for two reasons:
on a per passenger basis the amount will usually be "just a few dollars;" and
we will just "pass on" such higher costs to our Customers, so Southwest is not affected.
However, over time and cumulatively over 59 airports in 30 states, the total amount of money easily reaches into the hundreds of millions of dollars. We asked Laura Wright, our Vice President-Finance and Treasurer to discuss this growing problem.
Q: Does a tax, fee, or charge of just a few dollars per passenger really matter to Southwest?
A: Yes. In the five calendar quarters since 9/11, Southwest's net profit per passenger was only $2.96. To put that in perspective, the federal sales tax on an average Southwest ticket is $6.25; federal "segment" and security fees add another $5 per segment flown; and 51 of our 59 airports have passenger facility charges of $3 - $4.50. So, government makes a lot more money off our Customers than we do!
Q: $2.96 per passenger seems small, but at least Southwest has lots of passengers and, unlike most airlines, Southwest is still profitable. So, how big a problem could this be?
A: It is a huge problem. The airline industry is in a deep recession. Our costs associated with security and other things, including higher labor costs since 9/11, have soared. Fares are being slashed to stimulate demand, yielding less revenue per passenger. Together, that means our profit margin has gone down. Let me put it this way. In the five calendar quarters since 9/11, the difference between a profit and a loss on the 1,182,484 flights (excludes charters) we have operated comes out to 2.3 passengers! In other words, had we averaged 2.3 fewer passengers on each flight over that 15 month period, we would have lost money.
Q: But if the government is right, higher taxes, fees or airport pfcs don't matter because the Customer pays them, not Southwest. Right?
A: In normal times, this is a subject on which people might disagree. But, in these times, with airlines having to cut fares to stay in business, there can be no debate. We can't pass on higher costs of any kind, be they for taxes, labor, or fuel. We are all consumers so we can all understand. If we as consumers are not willing to buy a good or service at a regular price of $100, we certainly won't buy it at $100 plus taxes and fees. As a percentage of our average fare today, the total amount of all taxes and fees can reach as high as 20% - 35%. To get people to fly, we must lower our base fare (what we get to keep) to offset the higher tax or fee. We cannot afford to lose those 2.3 passengers a flight, representing our profit.
Q: The federal government came to the airline industry's aid after 9/11, reimbursing them for losses associated with the government's shutdown of the entire air transportation system. Didn't this offset the impact of taxes and fees?
A: Not at all. Granted, Southwest got $283 million in loss reimbursement. But, that didn't cover all our losses. At best it only made us close to even, so to speak. Furthermore, the reimbursement was subject to federal and state corporate income tax. Thus, we only got to keep $172.6 million. Then, right after the federal government passed a law to reimburse us, it also enacted two new security taxes: $2.50 per passenger segment plus another tax we pay directly to the TSA every month. Southwest is responsible for generating $16.5 million a month, money that goes to the government that could be going to us. At that level, it takes us only 10.46 months-less than a year-to give back to the government the reimbursement it gave us. At the end of the 10.46 months, the taxes don't go away. Like most taxes they go on indefinitely. So, in less than one year, Southwest will fully repay our "loan" and begin "bailing out" the government!
Q: So what's the bottomline?
A: Every dollar matters. Remember, I said our average net profit per passenger the last 15 months was a mere $2.96? If we got to keep every dollar that currently goes to taxes and fees, obviously our profit per passenger would rise accordingly, along with our profit sharing and the price of Southwest's stock.
Q: Meaning, Southwest would be rich?
A: Not exactly. If we make more money, federal, state, and local governments together still take a huge chunk. The federal corporate income tax rate alone is 35%. So, there is no escape. But, it is inescapable that at the present time, every single dollar of new taxes and fees, regardless of source or need, is a dollar off our bottomline.
Q: Why should people, other than Southwest Employees, care?
A: Because aviation is truly the lifeblood of our modern economy. According to a recent national economic study, aviation represents 10% of all economic activity. The five states that benefit the most in terms of dollars (California, Texas, Florida, New York, and Illinois) are states we serve. (Figures, doesn't it!). Another (Nevada) gets the biggest proportional benefit. There, aviation makes up 19% of everything that happens economically-almost one dollar out of every five. So goes aviation, so goes the economy.
Q: What can we do?
A: Do not hesitate to share this information with your coworkers, families, friends, and Customers. Before we can hope to get the government to understand, more people must understand why-and how much-we matter to them and their daily lives.
Updated: September 8, 2003
Plane Talk
See what Laura Wright, Vice President-Finance and Treasurer at Southwest Airlines, says about why every dollar counts.
--------------------------------------------------------------------------------
Laura Wright
Vice President - Finance and Treasurer
Southwest Airlines
"But It's Just A Few Dollars"
Frequently, the federal government, state legislatures, cities and airports impose new costs on airlines in the form of taxes, "user fees," "passenger facility charges," or airport expenses. The various governments insist there will be no harm to Southwest for two reasons:
on a per passenger basis the amount will usually be "just a few dollars;" and
we will just "pass on" such higher costs to our Customers, so Southwest is not affected.
However, over time and cumulatively over 59 airports in 30 states, the total amount of money easily reaches into the hundreds of millions of dollars. We asked Laura Wright, our Vice President-Finance and Treasurer to discuss this growing problem.
Q: Does a tax, fee, or charge of just a few dollars per passenger really matter to Southwest?
A: Yes. In the five calendar quarters since 9/11, Southwest's net profit per passenger was only $2.96. To put that in perspective, the federal sales tax on an average Southwest ticket is $6.25; federal "segment" and security fees add another $5 per segment flown; and 51 of our 59 airports have passenger facility charges of $3 - $4.50. So, government makes a lot more money off our Customers than we do!
Q: $2.96 per passenger seems small, but at least Southwest has lots of passengers and, unlike most airlines, Southwest is still profitable. So, how big a problem could this be?
A: It is a huge problem. The airline industry is in a deep recession. Our costs associated with security and other things, including higher labor costs since 9/11, have soared. Fares are being slashed to stimulate demand, yielding less revenue per passenger. Together, that means our profit margin has gone down. Let me put it this way. In the five calendar quarters since 9/11, the difference between a profit and a loss on the 1,182,484 flights (excludes charters) we have operated comes out to 2.3 passengers! In other words, had we averaged 2.3 fewer passengers on each flight over that 15 month period, we would have lost money.
Q: But if the government is right, higher taxes, fees or airport pfcs don't matter because the Customer pays them, not Southwest. Right?
A: In normal times, this is a subject on which people might disagree. But, in these times, with airlines having to cut fares to stay in business, there can be no debate. We can't pass on higher costs of any kind, be they for taxes, labor, or fuel. We are all consumers so we can all understand. If we as consumers are not willing to buy a good or service at a regular price of $100, we certainly won't buy it at $100 plus taxes and fees. As a percentage of our average fare today, the total amount of all taxes and fees can reach as high as 20% - 35%. To get people to fly, we must lower our base fare (what we get to keep) to offset the higher tax or fee. We cannot afford to lose those 2.3 passengers a flight, representing our profit.
Q: The federal government came to the airline industry's aid after 9/11, reimbursing them for losses associated with the government's shutdown of the entire air transportation system. Didn't this offset the impact of taxes and fees?
A: Not at all. Granted, Southwest got $283 million in loss reimbursement. But, that didn't cover all our losses. At best it only made us close to even, so to speak. Furthermore, the reimbursement was subject to federal and state corporate income tax. Thus, we only got to keep $172.6 million. Then, right after the federal government passed a law to reimburse us, it also enacted two new security taxes: $2.50 per passenger segment plus another tax we pay directly to the TSA every month. Southwest is responsible for generating $16.5 million a month, money that goes to the government that could be going to us. At that level, it takes us only 10.46 months-less than a year-to give back to the government the reimbursement it gave us. At the end of the 10.46 months, the taxes don't go away. Like most taxes they go on indefinitely. So, in less than one year, Southwest will fully repay our "loan" and begin "bailing out" the government!
Q: So what's the bottomline?
A: Every dollar matters. Remember, I said our average net profit per passenger the last 15 months was a mere $2.96? If we got to keep every dollar that currently goes to taxes and fees, obviously our profit per passenger would rise accordingly, along with our profit sharing and the price of Southwest's stock.
Q: Meaning, Southwest would be rich?
A: Not exactly. If we make more money, federal, state, and local governments together still take a huge chunk. The federal corporate income tax rate alone is 35%. So, there is no escape. But, it is inescapable that at the present time, every single dollar of new taxes and fees, regardless of source or need, is a dollar off our bottomline.
Q: Why should people, other than Southwest Employees, care?
A: Because aviation is truly the lifeblood of our modern economy. According to a recent national economic study, aviation represents 10% of all economic activity. The five states that benefit the most in terms of dollars (California, Texas, Florida, New York, and Illinois) are states we serve. (Figures, doesn't it!). Another (Nevada) gets the biggest proportional benefit. There, aviation makes up 19% of everything that happens economically-almost one dollar out of every five. So goes aviation, so goes the economy.
Q: What can we do?
A: Do not hesitate to share this information with your coworkers, families, friends, and Customers. Before we can hope to get the government to understand, more people must understand why-and how much-we matter to them and their daily lives.
Updated: September 8, 2003
