GSE buyer: Southwest Airlines
Posted Date: 27/06/2009
Issue: Airside International July 2009
Publication: Airside International
It is commonly accepted that Southwest Airlines is the oldest and most successful low cost airline in the world. It may have created the blueprint for many other low cost airlines’ business models but it has a relatively unusual business model on the ground in that it self-handles and therefore buys most of its own GSE. Airside International (AI) speaks to Larry Laney (LL), Director of Ground Support at Southwest Airlines
It is commonly accepted that Southwest Airlines is the oldest and most successful low cost airline in the world. It may have created the blueprint for many other low cost airlines’ business models but it has a relatively unusual business model on the ground in that it self-handles and therefore buys most of its own GSE. Airside International (AI) speaks to Larry Laney (LL), Director of Ground Support at Southwest Airlines
AI Do you have a rolling investment programme for ground support equipment at Southwest Airlines or do you buy on an ad hoc basis?
LL We don’t really have a rolling GSE investment programme. Every year we do the best we can to plan and budget for just the equipment we think we will need to support the operation the next year. During a normal year, when we are growing 5-8%, our GSE spending would be $9-11 million however, there hasn’t really been a normal year since 9/11.
AI Do you prefer to go to as few suppliers as possible or do you buy according to quality and value wherever you see it?
LL Our GSE strategy is a lot like aircraft strategy: fleet standardisation is very important to us for all the same reasons: operator familiarisation, training, less spare parts, etc. This strategy lends itself to fewer suppliers. Recently we have been negotiating longer term agreements with our primary suppliers (two to three years) to protect our costs and it would also limit any ad hoc buying with other suppliers.
AI Is there a policy of buying new equipment for locations at which there is a large number of Southwest aircraft movements which is then handed down to low volume airports? Or does equipment stay where it is once it has been placed on site until it is no longer maintainable?
LL Our philosophy is actually just the opposite; whenever possible we put the newer equipment in the smaller to medium size stations and when the equipment ages we will start bringing it to our larger stations for the remainder of its life. The reason? Most of our smaller stations have contract GSE maintenance providers, so we send the newer equipment to these stations to improve the stations operational reliability as well as keeping our GSE maintenance cost down. Then we move the older equipment to stations where we have our own GSE mechanics to maintain them. Obviously we don’t shuffle equipment every time we order a new piece because of the freight cost, however this is our big picture plan.
AI Where do you draw the line in terms of GSE? Which equipment tends to come from the airports so you would not wish to purchase it yourself?
LL None of the GSE we use comes from the airports or any other source. Occasionally we will rent a piece of equipment but that is pretty rare. Airports providing equipment has not really caught on in the US yet.
AI Do you also lease GSE or is it all outright purchased?
LL Does Southwest Airlines lease GSE or purchase it out right is really a financial question that I have left up to our financial experts. They have looked at this several times and we have not leased any GSE that I am aware of. I think the main reason is because we know that we are going to keep the equipment 15 to 20 years rather than turning it over. I would not rule out leasing in the future if we were to change our strategy or needed some equipment short term.
AI What about pre-owned equipment – does this interest you?
LL Now that we own almost 14,000 pieces of equipment, we already have lots of gently used pre-owned equipment! Used equipment does interest us if it matches our fleet, if newer and would provide us a good value. We do buy used equipment occasionally at auctions and from used equipment suppliers.
AI Do you rely on the manufacturers for maintenance and repair or do you have your own GSE maintenance shops?
LL Of our 65 Stations, 27 of them have contract maintenance providers which do include our manufacturers. All other stations have our own GSE mechanics take care of the equipment.
AI Are you becoming more environmentally aware in your GSE purchasing decisions? Are you buying electric instead of diesel powered equipment in some cases?
LL Southwest prides itself in being a very environmentally friendly company and I am very proud of what our mechanics and my department has done in this area. We do buy electric equipment as well as CNG and all other equipment we order has the latest cleanest engines available. We are the only carrier I know that has an internal programme to convert some of its existing fleet of belt loaders and pushback tractors from gas or diesel to electric. We have a dedicated shop in Phoenix, AZ, converting at least two per month. Most of our capital spending this year is environmentally driven.
AI Have you had to invest in any special equipment to assist passengers with reduced mobility? How do you accommodate this section of the travelling public?
LL The only location where we have had to buy specialty equipment to handle these passengers is Burbank, CA. That is because we do not have loading bridges or our passenger’s board via mobile air stairs. We purchased several custom lifts from ground support specialist to handle them.
AI Have you had to invest in cargo loading equipment to accommodate your freight business too?
LL Since we only fly 737s and we bulk load our cargo just like we do our bags we haven’t had to buy any container loaders or other specialty equipment to handle cargo. The only exception is some high speed tugs at some locations because of the distance to the freight house.
