Southwest sticks to fleet strategy as revenues remain unstable
By Lori Ranson
As revenues remain weak and no bottom for the current down cycle is apparent, Southwest Airlines doesn't plan to veer from the workhorse of its fleet - the Boeing 737-700.
Addressing attendees at the JP Morgan Aviation and Transportation conference today Southwest CEO Gary Kelly says the carrier was satisfied with revenue production in January of this year, but its performance in February was weaker. The carrier's unit revenues for the first week of March were down 7% year-over-year.
"I don't see that we are stable on the revenue front at this point," says Kelly. "I don't think we've seen the bottom."
Responding to a query regarding the operation of smaller jets Kelly says that is "something we've spent quite a bit of time looking at off and on for the last five years". Highlighting the complexities of its business even as Southwest tries to keep its operation simple, Kelly says there are a lot "of consequences to taking that approach [the addition o of smaller aircraft]".
Pointing out the "higher attendant costs" of operating regional jets Kelly says that business it dependent on low wages and that situation in and of itself creates challenges.
The chief executive says in the current environment the carrier wouldn't want to take on that risk. "Maybe one day we'll make something work in the 100-seat range," he says.
There are also complexities in operating larger Boeing 737-800s that average about 40 more seats than Southwest's 737-700s, says Kelly, such as an additional flight attendant. While he says that aircraft might make sense in the future, Kelly explains Southwest would need roughly 50-75 of the type to make it work. However, he cautions that "undertaking that risk in this environment would be absolutely foolish".
One lever Southwest is pulling to cope with the current economic situation is optimizing its schedule through the reduction of early morning and late evening flights. Kelly says the carrier realizes that results in lower aircraft utilization but also stresses that eliminating a 9 p.m. flight with 10 passengers is more "profit productive".
