Southwest Airlines fundamentally changes long established business model

Southwest Airlines 737-7BD (33925/1967) N7728D, ex AirTran Airways N290AT/328, taxies at John Wayne Orange County Airport (SNA/KSNA) on March 29, 2014.

(Photo by Michael Carter)

High fuel prices and entry into the international market via its acquisition of AirTran Airways have led Southwest Airlines to fundamentally change its business model from short haul to longer flights, Southwest chairman and CEO Gary Kelly said this week.
                                                                       
Addressing an audience at the US Chamber of Commerce Foundation Aviation Summit in Washington DC Thursday, Kelly said the rise in oil prices over the past few years has been a game changer for the airline industry. “At Southwest, it means we have had to be less dependent on the short-haul markets and we have pivoted away from them so that the majority of our passengers today are asking for routes that are not short haul,” he said.

The acquisition of AirTran in 2011 has brought more network changes. Kelly said the integrated airline has 24 more city destinations, including Southwest’s first international routes to Mexico and the Caribbean.

“With international, the opportunity right now is south. We have a project in Houston to build our first international facility and that will be up and running in the fourth quarter of 2015. And we have the potential to expand into Canada. We will look at the international opportunities and see what makes sense,” Kelly said. “The Mexican economy is strong and it’s a very exciting opportunity for us.”

Asked if this expanded network meant Southwest might consider joining a global alliance or form international codeshare agreements, Kelly said it was important first to create a more robust reservation system, which would allow the carrier to more easily codeshare with other airlines if Southwest made that tactical choice.

“Our focus is on the integration with AirTran, which will be complete by the end of 2014, and to grow international after this year. We have labor restrictions on codesharing and we will have to make a decision as to whether we want to pursue discussions on that going forward,” he said.

(Karen Walker - ATWOnline News)