Southwest Airlines’ CEO Gary Kelly believes his airline went into COVID as the best prepared to survive this challenging period. He notes that a strong route network, robust customer loyalty and focus on efficiency of operations has allowed Southwest to thrive, and sees more opportunities to come out of COVID bigger and better than ever.
The best prepared
Speaking in an interview for Aviation Week, Southwest’s CEO Gary Kelly highlighted the competitive advantages that his airline has to survive COVID. He noted that he believes Southwest was the most well prepared out of all the US airlines to get through this tough environment. He said,
“Early on in this pandemic, back in the spring, we really looked at our strategy, and we said, “this is a really different environment that may go on for a while, so let’s just make sure that we don’t miss anything”. And our conclusion was we are the best prepared for this environment of all the competition.”
That’s a bullish statement, but in many ways has been backed up by the results achieved by Southwest through the pandemic. Its most recent quarterly results showed revenues down 68% year on year, compared to Delta’s 76%, American’s 73% and United’s 78%. It’s still a big loss for Southwest, but in comparison to the other big airlines in the US, is significantly less painful. So what sets this airline apart?
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The low-cost model prevails
Southwest is widely acknowledged to be the airline responsible for really pioneering the low-cost model of air travel. It’s a model that has inspired a multitude of other no-frills airlines. While Southwest’s added extras and somewhat higher fares than some of its contemporary competitors might threaten its status as a true low-cost airline today, efficiency is still at the heart of everything it does.
Add to this the almost 50 years of operating passenger services it has under its belt, and the picture begins to form. The loyalty it has built up over those years continues to be one of its strongest assets, as the CEO explained:
“For one, nobody can match the breadth of our route system domestically. We are poised to be able to add the new destinations like we’re doing. We have a very strong customer following, a very large frequent flyer program, and it’s arguably the most generous in the world.
“So that, along with the low fare brand, and our low cost structure, the really strong business model all the preparedness … financially, just puts us in a in a really strong position to compete.”
Playing the offence
While many airlines have been scaling back, cutting routes and shrinking their operations to ensure survival, Southwest has taken a different track. The airline has been notable for the number of new leisure routes it has launched in recent weeks, adding capacity to snow and sun destinations in the hope of snagging as much of the latent demand as possible.
However, that’s not all Southwest has been doing. Kelly explained how the airline is also seeking to grab a slice of the business travel segment, playing the offense against the legacy airlines in a market it is not wholly familiar with. He said,
“One way that we’re mitigating that risk is we are jumping in with both feet into the large corporate account market, which we’ve historically not been a major player there. We don’t get our fair share. And that’ll be a growth opportunity for us.
“That’ll be tough on the legacy carriers for sure. So we’ve got multiple fronts that we’re trying to be play offence on, if you will. And it all comes down to, in terms of winning customers, having a great product at a low price at Southwest Airlines.”
Although business travel is predicted to take some time to come back, Kelly believes that his strategy of capitalizing on leisure now while simultaneously sewing up contracts for business travel in the future is what will see his airline come back from COVID stronger.
Well prepared but it’s still tough times
Despite Kelly’s optimistic outlook regarding the future of Southwest, he was under no illusions that things were going to be easy. With all its financial preparedness, strong brand and unbeatable network, Southwest, like all airlines, is still facing its biggest test in history. Kelly said,
“We’re looking forward to our 50th anniversary next year, so this isn’t our first rodeo, so to speak. But this is absolutely by far the biggest challenge we’ve ever faced.
“it’s just a testament to Herb Kelleher and our founders and all the leaders that came before us, to make sure that we were always prepared with plenty of cash, modest debt, and a low cost structure. In the end, you’re only sustainable if you have something that customers want and if you have competitive advantages. All those things together, I think put us in a really great position to get through this. But it is hard.”
