Arguments that robust competition from low cost carriers will remain intact if United and Continental are successful in merging have spurred some interesting predictions about the future of Southwest Airlines.
I’ve listened in on most of the Congressional hearings for the last two days, essentially taking what I feel like is a virtual road trip with the airline execs and other participants.
Most of what you expect was discussed — job protection, ample competition to protect consumers, etc. Some legislators, such as Senator Lautenberg, even slipped in personal preferences for airline service. Lautenberg in particular expressed his strong desire against the introduction of cell phone use in flight.
But one of the most intriguing topics was an assessment by Hudson Securities analyst Daniel McKenzie about what he deems as the “sophistication of Southwest”.
Using an American baseball analogy McKenzie says while most US carriers are in the 7th inning while Southwest is in the 4th or 5th.
Southwest is in the midst of developing a new revenue management system that McKenzie believes will allow the carrier to tap into smaller communities over the next two-to-four years.
The carrier is already “sticking its toe in the water” with new flights to Panama City, Florida that debuted last month. McKenzie says normally Southwest will serve cities with a population of at least 200,000, but Panama City comes in just under that at 150,000.
Southwest does have some cushion with the Panama City service through a three-year revenue guarantee from a Florida real estate developer that donated land the new airport now sits on. So perhaps some smarts sits inside of its evolving sophistication.
The interesting bit about the potential evolution is can Southwest’s new revenue management system support the deployment of its standard 737 fleet into those smaller markets? Delta is serving Panama City primarily with regional jets, offering flights to Atlanta, Memphis, Harrisburg, Pennsylvania and Knoxville, Tennessee.
So the big question is what, if any, fleet decision will accompany the growing sophistication of Southwest? Earlier this decade there were some musings about the Embraer E-190, but those quickly evaporated.
It’s not only a question for the grandaddy of all LCCs Southwest. Canadian low-cost carrier WestJet is also examining its options to delve into smaller Canadian markets to expand its domestic market share.
But for the moment each carreir remains mesmerized by the 737, content to let simplicity take precedence over sophistication.
photo credit — reviewjournal.com