Southwest’s CEO explains that the airline’s survival in the current crisis hinged on them having the right strategy well before the wonderful year of 2020. The airline’s CEO, Mr. Gary Kelly, believes that Southwest went into the crisis best prepared to survive. He explained:
“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.”
This is an unprecedented crisis, for aviation and most other industries. For many, cutting away any fat is their only hope for survival. Southwest’s business model meant that the airline was most of the way there already. Part of it had to do with knowing where to save money from. More traditional airlines, with complex short, medium and long-haul operations, had to find their feet. Southwest didn’t.
But this was not all. Strong customer loyalty with a positive public image was important. Airlines having to fly with many empty seats, makes it a buyer’s market. People will go with what they like – if the price is right. People have to think about their own survival too, and Southwest had the right prices.
Having the right network was the final piece in the puzzle. Many American airlines still operate using a form of hub & spoke system, as we’ve explained previously. With the right resources, they’ve all been expanding with point-to-point routes, but again, Southwest was there already. The catch was, how to maintain that network. And to do that, airlines need to keep planes flying, which requires cash.
Southwest’s Network As A Survival Target
Most airlines tried to save money in the crisis by cutting down routes and closing bases. Low-cost airlines did it too, to ensure their survival, but Southwest and others kept one eye at market share. They made sure to stay ahead of other airlines, with Southwest actually expanding routes in the process. They airline would combine multiple flights between city pairs, to increase capacity, then send the unused aircraft to new routes.
We’ve already seen how low-cost carriers paid attention to things like having wholly owned instead of leased aircraft. Southwest is the airline that began the low-cost model, with quick turnarounds and an aggressive strategy. Mr. Kelly added:
“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 really strong position to compete”.
Sure about its survival, Southwest even sets its sights on business travellers. The airline knows this wasn’t its strong suit before 2020, so now it is making this its next market share battleground.
The airline world will look different after the crisis. Some airlines will fare OK, others will suffer. Southwest seems poised to look beyond survival. Maybe even to growth… and that’s something we don’t hear much about, in 2020.