Southwest Airlines has been on an expansion spree. The airline, which has announced a whopping 17 new destinations since the start of the crisis, has accelerated its route network expansion, and, so far, that has paid off well for the airline. As the airline looks to the future and threading a fine line between expansion and restoring its network and frequencies, it has continued to bet on the Boeing 737 MAX, and particularly the MAX 7 and MAX 8.
Southwest’s new cities have done well
Tom Nealon, Southwest’s President, discussed the new routes on the airline’s first-quarter earnings call. He stated the following on the performance of those cities:
“At this point, we have opened 10 of our announced 17 new airports, and all of them are performing terrificly. In fact, there’s not a clunker in the bunch. All of them are generating new customers, additional revenue, and collectively are contributing positively to our cash performance. We feel really good about what we are seeing first hand.”
The new stations, according to Mr. Nealon, have been on Southwest’s radar for years. So far, the airline has welcomed the following new airports into its network:
- Miami (MIA)
- Palm Springs (PSP)
- Steamboat Springs (HDN)
- Montrose (MTJ)
- Chicago O’Hare (ORD)
- Sarasota/Bradenton (SRQ)
- Colorado Springs (COS)
- Savannah/Hilton Head (SAV)
- Santa Barbara (SBA)
- Houston Bush (IAH)
Service to Fresno (FAT) will start on April 25th. Destin/Ft. Walton Beach (VPS) will launch on Maxy 6th. Highly anticipated services to Myrtle Beach (MYR) will begin on May 23rd, followed by Bozeman (BZNA) services from May 27th, just in time for the Memorial Day holiday. Jackson (JAN) will return to the airline’s network on June 6th, while Eugene (EUG) will enter the network from August 29th. Service start dates for Bellingham (BLI) have not yet been announced.
With the current slate of announced new routes and anticipating Bellingham starts before the end of the year, the airline will have added 13 new airports in one year. For context, in 2019, Southwest only added four cities – all in Hawaii. It added no new cities in 2018, only three in 2017, and two in 2016.
A balance between expansion and rebuilding the network
Mr. Nealon provided some additional color on restoring the network:
“The network is not going to get back to what it was because we have 17 new cities on the network. But what I can tell you is when you think about the principles in the characteristics of the Southwest network, those will be intact. Point-to-point, you should expect to see a very similar mix of short, medium, long, a similar mix of direct and connecting traffic, and our focus, once we begin to see business demand thaw, is we got to begin to put the depth back into the markets like the St. Louis and Milwaukee’s and intra-Cal business markets and such.”
Southwest also has a sizable order book for Boeing 737 MAX jets. If the airline exercises all of its options, it will fly over 600 of the type. While Southwest has moved to retire some Boeing 737-700s, it is also looking at its order book for more jets to expand the network. It can do so faster now because it had extra planes sitting idle, but in the future, a combination of new aircraft and freed up mid-life jets not ready for retirement will be important.
No MAX 9s or MAX 10s
Southwest has solely ordered the Boeing 737 MAX 7 and MAX 8 jets, and that is all it wants to take. When Simple Flying asked Southwest about the possibility of the carrier taking larger MAX 9 or MAX 10 aircraft to use on some routes to free up smaller aircraft, Mr. Nealon returned to the fundamentals of Southwest’s point-to-point model:
“I think the downside for us taking a MAX 9 or 10 is it doesn’t fit our network. Our network is built around point-to-point. We don’t want to have too many connections and you start getting to a [MAX] 9 or [MAX] 10, you’re quickly into a 200 passenger aircraft, that’s just too big for our network, the way we run our business.”
Mr. Kelly added the following:
“I think we’d rather see Boeing. If that’s our challenge, we like the seven, as well as we like the eight. We’re not certain what mix of those model numbers we’ll have in the future. But, just as a rule of thumb, call it, 50-50, 60-40, but if that is the issue, I think we’d be pressing Boeing to increase their production rates. And that would be a high-quality problem.”
Southwest has pivoted slightly to a hub-and-spoke model. Most of the initial flights out of new airports have been to bases like Las Vegas, Oakland, Denver, Dallas, Baltimore, Nashville, and others. However, that has not stopped the airline from going back and adding new flights to other destinations after judging the initial response.
Ultimately, the carrier is focused on maintaining its status as an all-Boeing operator, but it wants to stick closer to the smaller side of jets, focusing mostly on the MAX 7 and MAX 8 aircraft, which are roughly in line with the Boeing 737-700 and 737-800, respectively.
