In Southwest Airlines’ third-quarter earnings call, the airline’s executives presented the current crisis as an opportunity. After over a year in an aircraft-deficit position, the airline now finds itself in an aircraft surplus position and has plans to take advantage of it.
How Southwest got to an aircraft surplus position
Over the last few years, Southwest Airlines had some big plans. The airline retired the 737 Classic fleet and was keen to fly the latest-generation Boeing 737 MAX. In addition, the 737 MAX would also help modernize the airline’s fleet by replacing older 737-700s. As Southwest’s most cost-effective aircraft, the airline is keenly awaiting the opportunity to fly them and extend its time as an all-Boeing airline.
The issue, however, is that the MAX has been grounded for well over a year. While CEO Gary Kelly can see the light at the end of the tunnel, the plane is not yet in revenue service. Even after the aircraft is ungrounded, the airline expects a three- or four-month gap before the plane enters revenue service on Southwest.
With the MAX grounding, Southwest Airlines had to park 34 Boeing 737 MAX aircraft and put the brakes on aircraft retirement, all while maintaining a robust and fully-booked schedule. Naturally, this led to cancellations and put Southwest in an aircraft deficit position. Essentially, it did not have enough aircraft to grow, let alone fly all the frequencies it already had scheduled.
Then, the current crisis hit. The airline had to pare back flight schedules significantly and now finds itself in an aircraft-surplus position with over 60 non-MAX planes parked. Not to mention, its current jets are not all flying the heavy schedules Southwest is known for.
What Southwest is doing with those planes
So, seeing an opportunity, Southwest’s team has decided to grow its operations. The airline expanded frequencies in existing markets, such as those out of South Florida, California, Denver, Chicago, and Houston. Then, the airline added new cities to its route network.
From mid-November, Miami (MIA) and Palm Springs (PSP) will join the airline’s route network. In December, Southwest is growing in Colorado with new flights to Hayden (HDN) and Montrose (MTJ) – two popular destinations for those seeking a winter getaway.
Come 2021, Chicago O’Hare (ORD) and Houston’s Bush Intercontinental (IAH) will open up to Southwest travelers and complement the airline’s extensive bases out of Chicago-Midway (MDW) and Houston-Hobby (HOU). That was not all. Next up on the airline’s list is Colorado Springs (COS), Savannah (SAV), and Jackson (JAN).
Tom Nealon, President of Southwest, framed the new routes as an opportunity to put its idle planes and staff to work while also strengthening its market position. Plus, the airline can now finally start to tackle its list of commercial opportunities.
There is still room for growth
Southwest Airlines still has room to grow. The airline has no flights to Montana or Wyoming, with the former being a state that has seen some growth– especially out of Bozeman, which is one of the fastest-growing cities of its size.
After that, Southwest has no flights to Alaska, no flights to Canada, and plenty of room for growth in the Caribbean and Central America. Once the airline gets the MAX back in service, international growth to places like Panama, Colombia, Guatemala, or islands in the Caribbean could be natural points to grow and expand.
Now also is a great time to grow. New route planning is never easy, and sometimes airlines have to weigh the opportunity cost of launching new services. Now, however, is the time to search for as many new sources of revenue as possible, and launching new routes could serve Southwest well as it seeks to move back towards profitability.
Do you think Southwest is taking the right approach by putting its idle aircraft to use? Let us know in the comments!
