Southwest Rapid Rewards - WaPo: WN Sticks To Strategy of Growth Despite Tough Climate

http://www.washingtonpost.com/wp-dyn/content/article/2007/05/25/AR2007052502107.html

Never afraid to spurn conventional wisdom, Southwest Airlines is doing it again.

While other airlines are reducing domestic seats in response to softening demand, the quirky low-cost carrier is doing the opposite, expanding routes and flights in pursuit of a decades-long growth plan.

But that approach comes with risks and may require executives to begin tweaking a business strategy that has helped revolutionize commercial aviation. [...]

Since its inception, Southwest has pursued apolicy of adding flights, seats and planes to gain market share, even in tough times. [...]

But its growth, analysts say, has forced it to find airports that it had long avoided or abandoned: congested hubs dominated by major carriers and served by other low-cost airlines.

Last year, for example, Southwest moved into Denver and Washington Dulles International Airport, both served heavily by United Airlines. In 2004, it launched service in Philadelphia, a hub for US Airways. [...]

Already, the number of passengers on each Southwest aircraft has fallen. The jets are about 69 percent full on average this year, compared with 71 percent during the corresponding period in 2006.

Flights out of Dulles, where the carrier started service in October, were barely half full during the first two months of the year, according to the most recent data available from the Bureau of Transportation Statistics. Other carriers at Dulles were far more successful: Their planes were 73 percent full.

In Philadelphia, planes were also just more than half full, the statistics showed.

Southwest performed better in Denver -- its planes were 66 percent full -- but still fell far short of other carriers that operate there. [...]

The biggest change could come in the next two years. Southwest is considering getting into a code-sharing agreement with an international carrier or offering its own overseas flights, Kelly said. [...]

As for his company's expansion plans and performance in Philadelphia, Denver and Dulles, Kelly said he was optimistic.

"We are famous for being patient in developing our markets," he said.

Interesting. I can see the value of expanding into what you perceive to be a temporary dip in demand; especially for WNs client base. You steal more market share, and then you generate additional profit from that market share by riding the bounce back on the basis it is often easier to keep clients than get them in the first place. Only problem is if the demand stays stagnant, you've just lost yourself a lot of money.

The expansion for international flights is different issue. Not sure how they'll be able to make this work. The normal flexibility WNs enjoys for overbooking, maintenance, turn-around time, etc... on the basis you always have another flight (or almost always) disappears. You need different aircraft, generally higher paid pilots, etc... Look at flyglobespan for an example of how not to expand - i've heard so many horror stories about their new "scheduled" services that I wouldn't fly with them ever regardless of the price. Possibly a "charter" style international service at first for the expansion phase (while your building up your expertise, planes, training, etc... for the new type of flying) and then rotate into a full blown service a few years later building on the goodwill. Going to/from US only - Atlanta area to the UK, Denver to Paris (Orly), etc..

Many of us speculate international expansion will be to islands in the Caribbean, Mexico and/or Canada. AFAIK those routes can be serviced with existing aircraft. Didn't SW just add life rafts to all their planes which allows them to service those destinations? The same kinds of routes currently being serviced by Jet Blue and Spirit.

I'd be surprised if SW started flying overseas any time soon.

I know the Washington Post article mentions overseas flights but I suspect the newspaper did a bad job paraphrasing the quote.



The expansion for international flights is different issue. Not sure how they'll be able to make this work. The normal flexibility WNs enjoys for overbooking, maintenance, turn-around time, etc... on the basis you always have another flight (or almost always) disappears. You need different aircraft, generally higher paid pilots, etc... Look at flyglobespan for an example of how not to expand - i've heard so many horror stories about their new "scheduled" services that I wouldn't fly with them ever regardless of the price. Possibly a "charter" style international service at first for the expansion phase (while your building up your expertise, planes, training, etc... for the new type of flying) and then rotate into a full blown service a few years later building on the goodwill. Going to/from US only - Atlanta area to the UK, Denver to Paris (Orly), etc..

Thanks for posting. ^ Interesting article.

I've enjoyed watching WN expand, and particularly some of their recent decisions (e.g., increasing numbers of long-haul flights beginning a few years back, the recent expansion into SFO & DEN, etc.)--which seem driven by Wall Street's need for them to continue to grow, even as that growth comes from places that are less traditionally "Southwest-y."

I'd thought WN's relationship with ATA might be the beginning of international flying, and it would make sense that WN might follow Frontier's lead to resort and other south-of-the-border destinations, rather than looking to overwater flights. There must be more domestic routes, though--and I wonder what the low-hanging fruit is starting to look like, domestically.

-Hayden

There must be more domestic routes, though--and I wonder what the low-hanging fruit is starting to look like, domestically.

-Hayden

I always thought that Minn/St. Paul would be a good place for WN. I think fares from there are usually expensive and competition not very strong (probably why fares expensive). No major airport anywhere near, so flyers from within 200 mi. go there for travel. And I think there is enough volume to justify a lots of flights each day.

Probably others know of reasons why this does not make sense.