The Shape of the Airline Industry | TravelResearchOnline

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The Shape of the Airline Industry

Forecasting the fate of the airline industry is chancy in the best of times, and these certainly aren’t the best of times.  The entire economy is obviously mired in uncertainty, which never bodes well for our airlines—or for travel agents.  The “aughts” have already been such a tough decade, but many are calling our current industry situation worse than the aftermath of 9/11.  We are in the midst of what experts are calling the worst recession in the last 50 to 75 years, and getting a loan at any interest rate is almost impossible right now.   This worldwide recession is causing cutbacks in business-travel spending, declining leisure travel, bankruptcies and layoffs, and the list goes on.

Of course, no one knows the future, and I will be the first to tell you I had no idea this financial crisis was coming the way it erupted this fall.  But I can tell you emphatically that Southwest Airlines was prepared for it.  Just like we were prepared for 9/11, and just like we were prepared for the first Gulf War in 1991.  We’ve got cash in the bank, we have a line of credit, we have modest levels of debt, and we have manageable commitments.

So, it remains to be seen what will happen with the economy and on Wall Street in 2009, but I feel very, very good about the Southwest Airlines brand and where it is headed.  At Southwest, we’re all working together to find areas where we can improve productivity and reduce discretionary spending so we can continue to provide longterm job security for our deserving Employees.  Just as importantly, we want to continue offering affordable, friendly, and of course, safe, air travel to our Customers.

In terms of thinking about the near future, we have to be very cautious.  There’s a lot of risk built in to our industry, and we’re obviously not immune to those risks or their effects in today’s volatile economic environment.  Our plan is to keep our fleet growth relatively flat in 2009, although we are adding Minneapolis-St. Paul with a modest opening in March, and hope to acquire slots at New York’s LaGuardia Airport in the next few months.

One opportunity we’re already aggressively pursuing is deeper penetration in the markets we serve.  We currently carry more Customers than any other airline in the world—at least until Delta and Northwest begin operating as a single carrier.  So by logical extension of that, we also carry more business Customers than any other airline in the world.  Historically, we’ve had more of a one size fits all approach.  Now we’re trying to make investments in our Customer experience to broaden that appeal, especially to the business Customer.  The wildcard is what our competitors will do.  Many are already pulling flights out of Southwest markets, so we’ll see.

Regardless, 2009 will be a critical, but exciting, year for us.  We’ve started a lot of work to continue positioning ourselves for the future including our first international venture with codeshares to Canada and Mexico, and the coming year is the time when we’ll be executing a lot of these initiatives.  So we’re putting a lot of pressure on ourselves to do that and do it well.  In all, one thing is sure:  2009 will definitely keep us on our toes.

Gary Kelly serves as the Chairman of the Board, President, and Chief Executive Officer at Southwest Airlines.  A 22-year Southwest veteran who became CFO in 1989, Gary has worked closely with Southwest’s legendary Cofounder and Chairman Emeritus Herb Kelleher and President Emeritus Colleen Barrett to build the nation’s fifth-largest airline—and the undisputed low-fare leader. www.southwest.com

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