Southwest Airlines adds cities, courts business travelers
DALLAS -- It's a sucker's bet, of course.
Southwest Airlines' CEO knows he'll never have to pay up. There's no way to prove him wrong because airlines don't know the purposes of many customers' trips.
Kelly maintains that internal research shows Southwest is already No. 1 in domestic business travel, and he is steering Southwest to capture even more of the business-travel market in 2009. To accomplish that, he's doing some heavy tinkering with a business model that has kept the airline profitable for an unprecedented 35 consecutive years.
It's risky, but in a deepening recession, it may be less risky than standing pat. Southwest will shrink overall next year — the first time it's ever done that — but the nation's largest low-fare airline will also expand aggressively in some big business markets because that's where the most profitable travelers are.
Two new airports are already on the agenda: Minneapolis-St. Paul in March and, at a still-to-be-determined date, New York's LaGuardia, which will host Southwest's first flights at any of the three major New York metro airports. Kelly this month said he wants to launch service in a third big market in 2009. Southwest is also set to increase service on heavy business-travel routes to and from airports such as Chicago Midway, Denver, Los Angeles and Nashville.
Meanwhile, other important changes have come or are in the works. Airport gates have been updated with business-traveler-friendly features such as laptop workstations. It still doesn't assign seats, but Southwest's formerly chaotic boarding process has been changed to move its best customers and those willing to pay a higher fare to the front of the line so they get first choice of seats.
Less noticeable, but just as important, Southwest last year began using a sophisticated computer system that enables it to offer up to 15 different fares. The old system, in use for 20 years, offered as few as three fares on many routes. The new pricing system enables Southwest to boost its total revenue without resorting to huge across-the-board price increases. Similarly, a new flight-scheduling system that Southwest began using earlier this year is allowing it to better match capacity to demand. It gradually is reducing flight frequencies on lower-demand routes and adding flights on more-lucrative, heavy-demand business-travel routes.
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