Monthly Archives: July 2005

Great Management: Southwest Grows Airline Profits

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Southwest Airlines continues to make it happen in what is obviously a very difficult market – the airline business.

But Wall Street’s focus remains on Southwest’s ability to fight off the crippling effects of high oil prices with financial contracts that have essentially locked in lower fuel prices for the airline while its competitors groan under heavier costs. Though oil prices topped $60 a barrel in the quarter, Southwest has secured financial hedges that limit 85% of its fuel costs during the year to an equivalent average oil price of $26 a barrel.

The hedging strategy saved Southwest $196 million in fuel costs during the quarter, reducing the increase in Southwest’s per-gallon jet fuel expenses to 25%, compared to twice that for its competitors. Through other cost cuts and productivity improvements, Southwest said it was able to drive down its overall unit costs in the quarter by 3.5%, to 7.81 cents per available seat-mile flown from 8.09 cents a year earlier.

“Considering soaring oil prices and the enormous operational challenges our company and industry have faced over the past four years, our operating cost performance was exceptional and better than we expected,” said Mr. Kelly. Excluding fuel, expenses per seat-mile flown fell 7.7% to 6.27 cents.

If only they flew to Madison…

Dean’s Madison Visit

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Kristian Knutsen:

Moving into his speech, Dean talked about his work trying to build the Democratic Party across the country, noting a stop in Mississippi. He said that the Dems need to fight in all states, particularly in the Mississippis and Kansases, not just in the Wisconsins and Michigans.

An early theme was fiscal responsibility, with Dean stating that the Democratic platform “looks like a 1970s Republican Party platform” with regards to balanced budgets. He emphatically stated one of his regular points – “you can’t trust a Republican with your money” – repeating that they “borrow and spend” and “borrow and waste.”

Tax law Lobbying: A Powerful Look at the Details

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Brody Mullins:

On Monday, Accenture lobbyists Richard Grafmeyer and John Talisman met top tax counsels for Rep. Charlie Rangel of New York, the ranking Democrat on the House Ways and Means Committee, and Republican Sen. Charles Grassley of Iowa, chairman of the Senate Finance Committee. Accenture lobbyists spoke yesterday with Montana Sen. Max Baucus, the top Democrat on the Finance panel. The two have also met with aides to Ways and Means Chairman Bill Thomas, Republican of California.

Mr. Grafmeyer, who once worked as a top Republican tax counsel on Capitol Hill, and Mr. Talisman, a former senior Democratic tax advisor at the Treasury, have met success: All but Mr. Rangel have agreed to include new language for Accenture in the technical-corrections bill that could be introduced by week’s end. “Clearly, this is not considered fair…in a time of war for people to be looking to avoid taxes,” Mr. Rangel said. Mr. Rangel and his staff have refused to participate in discussions on the provision.

Once introduced, the technical-corrections bill is expected to sail through Congress. That would represent a victory for a company that was portrayed as a corporate bad-boy on Capitol Hill as recently as last year.

I wonder who, if anyone speaks for the taxpayers in these closed door meetings! Mullins did an excellent job digging up the details on this.

Consumer Directed Health Care Eclipsing Managed Care?

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Holman W. Jenkins, Jr.:

Managed care, whatever its prospects for running Medicare better, is facing gradual eclipse in the private sector by the new strategy of consumer-directed health care, based on tax-free health savings accounts, enacted in the same 2003 Bush-promoted law that gave us giant subsidies for the managed-care business. In a new report, McKinsey likens the arrival of HSAs to the creation of 401(k)s in the 1980s, an opportunity that largely bypassed traditional banks and pension managers and was captured by mutual fund firms like Fidelity and Vanguard.

Tufte in Madison

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Presenting Data and Information: A One-Day Course Taught by Edward Tufte is in Madison August 8, 2005 ($320/person):

I attended his course in Chicago last year. Highly recommended. More on Edward Tufte.