Archive for September 3rd, 2009

Hey, Southwest … what happened to free luv?

September 3, 2009

Warning: Ken is hacked !  Really hacked!

Last week, SWA got nailed for using uncertified maintenance parts on its 737s. Bad news, but I can live with that … you gotta take some risks, right?

But, this SWA policy change is personal since (a) I’m cheap and (b) I’ve gotten the “fast-trigger online check in” down to a science. 

I just may cancel my SWA Freq Flyer credit card …

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What has Ken so upset ?

Southwest Airlines will begin charging $10 to some passengers looking to board its aircraft before others.

For the extra $10 fee each way, passengers can reserve their boarding spot while buying their ticket.

Under the Dallas-based low-fare carrier’s current policy, passengers can begin to check in 24 hours prior to their flight. Passengers who check in the earliest get to board first.

A Southwest  spokeswoman  said the new option allows passengers to not have to worry about checking themselves in.

While many airlines have been charging passengers fees for beverages and baggage, Southwest has aggressively marketed its “no frills” consumer policies to set itself apart. What sets this option apart?  Southwest’s passengers have a choice of paying the $10 fee.

“These are opportunities that customers can have the option of taking advantage of, instead of being forced to pay the additional fee,” she added.

Washington Business Journal, Southwest Airlines adds $10 fee to reserve boarding spot, September 2, 2009
http://washington.bizjournals.com/washington/stories/2009/08/31/daily56.html?ed=2009-09-02&ana=e_du_pub

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Posted in Airlines, Mktg - Pricing | 4 Comments »

Cash-for-Clunkers: The “Re-Leveraging Effect”

September 3, 2009

Bottom line: the C4C program jacked $3 billion from about 100 million tax payers, redistributed it to 750,000 clinker owners (some tax payers, some not), and leveraged the rebates dollar-for-dollar into $3 billion in new consumer debt.

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Talk with friends over the weekend turned to the C4C program … specifically, how many rebate-takers were driving clunkers because they couldn’t afford a fancy new ride.  Consider the implications if that’s true.

Running some back-of-the-envelope numbers, it’s likely that C4C buyers took on debt (auto loans) equal or greater than the tax payer provided rebates.

Here’s the logic, using rough, top-of-mind assumptions:

Assume that a clunker qualifies for a $4,000 rebate, that the clinker owner applies the rebate to a new $24,000 car, and that $20,000 balance is rolled into a shiny new auto loan. (Note: no money down – just like the home deals that got us into this mess).

Assume the $20,000 is financed at 6% over a 4 year term.  The monthly payment is just a bit under $500.

So, the clunker-trader walked into the showroom with a clunker and no auto loan payments. 

He rides out with a cool new ride and a new $500 monthly payment.  Hmmm.

Assume that 1 in 4 clunker-traders are rich folks who pay cash, and that the other 3 take out auto loans.

Project the numbers to the whole program (calcs below) … and PRESTO – the C4C program jacked $3 billion from about 100 million tax payers, redistributed it to 750,000 clinker owners (some tax payers, some not), and leveraged the rebates dollar-for-dollar into $3 billion in new consumer debt.

Frankly, I’m not sure if that’s good or bad.  Maybe the stimulative effects are worth it.

But, it begs the question: isn’t this how we got into this mess in the first place?

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copyright K.E. Homa 2009, All Rights Reserved

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Posted in Autos - Travel | Leave a Comment »