Monday, August 7, 2017

It will shake you...

All stakeholders love profit making companies. Loss is a dirty word in finance and banking, except when it refers to the competitor's financial statements. The era of computer accounting has changed how financial statements look now. In the days of manual accounting, black was indeed beautiful. It was so because loss was shown in red ink in the statements then. Companies pride themselves in stating that they have an interrupted profitability record. Investors love to invest in profit making companies, and more particularly regularly dividend paying companies. All companies do not make profit every year. Even those who make profits are unable to declare dividend every year. Regularly profit making companies also skip dividend payments in some years. Most regularly profit making companies declare dividend once in a year. Shareholders look to these annual announcements with interest and hope. Occasionally they are rewarded with bonus shares or a bumper dividend. It could even be said that receiving dividends on investment in shares depends on the companies profits as well as investors luck. Some companies declare mid-year or interim dividend followed by a final dividend. A dividend every quarter is almost unheard in the annals of business enterprises.

Then there are industries and businesses that follow a cyclical pattern. They have their up years and down years. Good years are almost certain to be followed by bad years. Managements of such companies have special strategies in place to deal with such cyclical patterns. There are industries whose performance depends on performance of the economy in general. They ride on good times and wobble during bad times. Thus consistent profit making and dividend paying is indeed a golden achievement for companies in such industries, during these turbulent times.

How about a company that has continuous profit making as well as dividend paying record? Also a record of paying dividends every quarter for a long period of time?

Southwest Airlines is a company that belongs to this rare category. It has all these features. As a company in the airline industry, its performance is directly linked to the performance of economy in general. It is a part of the turbulent industry, literally and figuratively. In a boom year the performance can be better and in the years of depression it has all possibilities of nosediving. But Southwest Airlines has  a record of continuous profits for 44 years. It has been paying dividends every quarter for the last 41 years. The Airline recently declared dividends for 164th consecutive quarter!

Southwest Airlines is indeed a very interesting case study for academicians as well as business enterprises.

What makes Southwest Airlines such a distinguished company? Those who use its services frequently are well aware of these features. Some of them are:
  • Goodwill earned over a period of time by providing efficient low-cost flying experience.
  • One of the best overall on-time performance.
  • "When you fly, your bags fly free". The airline allows two checked-in bags as against one bag by most other airlines.
  • "No assigned seat" seating system. Seat numbers are not assigned at the time of booking or checking in. Instead a boarding group number is given and one can choose any available seat once inside the aircraft. 
  • The company uses only Boeing 737-700 and 737-800 aircrafts. While this in itself may not be a special feature, this facilitates training of all crew members efficiently and flying as well as cabin crew are at home on any aircraft in the fleet. (Those of us who were in banking industry during the initial years of computerization with different vendors know the difference!)
  • Friendlier cabin crew and courteous behavior.
  • "Bring your own food" system that allows flyers to bring food from home and use it on flights.
  • "Not charging change fees" that allows flexibility in travel plans and last minute changes without extra cost.

A statement printed on the paper napkins reads "In a world of many "No"s, we are a company of many "Yes". 

The flight to Chicago Midway airport had taken off as scheduled from Philadelphia International airport at 5.30 PM on Saturday, 5th August, 2017. There was some anxiety in the mind as the connecting flight from Chicago to Seattle was to take off within one hour from the scheduled landing at Chicago. The airline policy of no assigned seats came in handy as seat 1C, the first seat for getting out of the cabin on landing was available for grabs. 

The usual message from the CEO in the airline magazine, kept with safety instructions to be followed in the aircrafts, made interesting reading. Gary Kelly, Chairman and CEO of Southwest Airlines had mentioned that he would sum up his 31 year experience with the company in "Our People". I was going through the article when the cabin attendant enquired about the choice of soft drink to be served. The CEO had mentioned that the company looked for three qualities when they hired people: a Server's Heart, a Fun-LUVing Attitude and a Warrior's spirits.

I was just handed the apple juice cup when the pilot advised on the PA system, all the passengers to get back to the seats and fasten seat belts. He said that we may experience some heavy turbulence for the next few minutes. We were cruising at 36,000 feet and generally not much of it happens at that height. For first time flyers turbulence can indeed be scary, but seasoned travelers take them in their strides. There were indeed some instances in the past when drinks were spilled during such extreme movements of aircraft in the air. But what happened at this time was indeed different. The violent shaking threw out all the liquid from the cups of all three of us in the front seats. The cabin assistant had to use sheafs of paper napkins to wipe the soaking liquids. The turbulence continued for several minutes. Cabin attendants ran to their seats and buckled themselves. It was indeed an experience! Many might have suddenly remembered long forgotten prayers on their lips. After about 15 minutes, things were back to near normal and rest of the flight was uneventful with smooth landing at the Chicago airport. We got extra serving of juice to compensate for the wet dresses!

The entire thing fell in perspective when a news item on the next morning was read and understood. 

An American Airlines flight (flight number 759) had taken off from Athens in Greece to Philadelphia nearly ten hours ago when our experience on southwest airlines happened. The flight was full of people who had spent their vacation in Greece. The 10 hour flight was another normal flight and the aircraft had cleared its flying over the Atlantic. Passengers later even described that the American landline was visible from the sky. A sudden strong bout of turbulence hit the plane. A man who was on his seat flew high, hit the ceiling and landed hard on his father sitting on the next seat. Ceiling of the aircraft was splattered with coffee and there was coffee flowing in the cabin. All flight attendants ran for safety. After sometime, one attendant appeared and said that she was the only one able to serve others; other flight attendants were injured and needed help themselves. The turbulence lasted for sometime, but final landing at Philadelphia was indeed smooth. 

Ten people including seven flight attendants were hospitalized after the flight landed in Philadelphia. Travelers said that it was as if the aircraft was on a free fall. The experienced pilots and the capabilities of modren aircraft had saved the day. There was no forewarning and the previous aircraft that had just passed that area had only reported mild turbulence. There was no time to react or go around the troubled area in the sky.

We were on the Southwest flight to Chicago, a few hundred miles to the west in the sky, around the same time.

Safety instructions like being with seat belts on at all times while seated and reading safety instructions are often ignored by travelers, especially the frequent flyers. The American Airlines flight 759 experience is a timely reminder to highlight the importance of safety instructions. 

Thomas Campbell's Loichiel's Warning mentions ".... And coming events cast their shadows before.."  It is a famous quote that is often used to say that shape of things to come are given out by some warnings well in advance.

Not always, as this turbulence showed.


  1. Highlighting the real experience for scrupulous compliance of safety instructions at all times on all occasions , more so during flying .

  2. Real life experience well narrated sir. Thank you.

  3. So quick to pen down!The experience of a parallel flight has been so well connected. The caution has also been put across so well.

  4. A Great Experience that everybody should know to be alert during their international long journey travels.

  5. Truly worthwhile read, especially on safety precautions, majority of the passengers ignore the safety precautions demonstration before the take off!