In Business Q and A
Gary Kelly, chief executive of Southwest Airlines
Interviewed by Richard Velotta / Staff Writer
Southwest Airlines jets are shown at McCarranInternationalAirport in January.
Photo by Sam Morris
When Southwest Airlines started service in Las Vegas on Jan. 31, 1982, it offered five daily nonstop flights to Houston and Phoenix and it was the 15th city in the Southwest system.
With the silver anniversary of that startup approaching, things have changed dramatically.
Today, not only is Southwest the busiest air carrier at McCarran International Airport, but Las Vegas is the busiest station in the Southwest system with 225 flights a day to 52 destinations.
The city's importance to Southwest is not lost on Chief Executive Gary Kelly, who frequently credits the city as one of his company's top success stories.
Kelly joined Southwest in 1986 as controller, then moved up the corporate ladder as chief financial officer, vice president of finance and executive vice president. He was named vice chairman and chief executive officer in 2004.
Kelly talked with In Business Las Vegas about Las Vegas' role in the Southwest story.
Question: October was a pretty good month for Southwest Airlines with the repeal of the Wright Amendment. How big is this for the future of the company?
Answer: It's big. First of all, it's the end to the restricted era. It's something that we've suffered under since 1979 and really earlier than that. It brings closure to a festering issue. I could not go to a social event in Dallas without being peppered with questions by friends and family and business colleagues about "When are we going to get rid of the Wright Amendment?" And so now, that long, festering problem is gone.
The immediate benefits are real. There is a phase-out, of course, of the restrictions over an eight-year time period, but as a practical matter, even if it wasn't legislated that way, it was going to take time to add airplanes, to refurbish facilities and to add service and lower fares at Love Field.
The immediate benefit is huge, fares have come down by as much as two-thirds and we want to keep it fresh and new. We want to offer what we can until its fully repealed in 2014 and the major offering that we have is price, of course, and we're famous for low fares and we're going to use that to our advantage and use it often.
In many respects, isn't this like starting up a new city?
It is, indeed, exactly like starting a new city. There's an excitement that comes along with that. Our employees feel it and you can see it in their eyes and in their step. It's always fun to offer a market something new and the best thing we have to offer in our business is a new route or a new flight time on a route. So, yes, this is big, to be able to offer instantly overnight, 25 new destinations is a lot of fun. We're just beginning to work with the landlord, the City of Dallas, on refurbishing the airport so that we can handle more flights and more passengers in the future.
Although everybody's pretty happy about the repeal, didn't it come at a pretty steep price — you aren't able to start nonstop flights to Dallas until 2014, right?
You just have to compare it to the alternative, which is not even one-stop service, forever. It's just an enormous step forward. I can't justify the eight years, other than that's what it took to get an agreement by the other parties and without that five-party agreement, I don't think Congress would have ever acted. It's just the price we had to pay to get that concurrence. In the end, the eight years will pass, we'll at least benefit from much lower fares in the meantime. The competition has matched, so the economic benefits began Oct. 19 and it's obviously something to be very proud of, a lot better result than where we were before.
Have you gotten any initial reading on your loads connecting into Dallas?
The load factors are up, noticeably up. We run 60 to 70 percent load factors on our Dallas routes routinely and they're up a couple of percentage points which isn't a remarkable change, but it is a noticeable one. That suggests that we still have seats that I would expect we would sell. How full those flights get between now and some future date when we add more flights is anybody's guess. But what we can promise is that travelers will at least have a lot more access to low fares than they had before.
Southwest had a high-profile experiment with assigned seating. What happened with that?
Well, it's ongoing. It wasn't so much an experiment as it was a test of the time it takes to board the aircraft. The long-standing theory is that it takes more time to board an aircraft with assigned seating and we had a theory, at least, that we wanted to explore that if the boarding was orderly — in other words, where people were arranged in such a way based on their seat — that it actually might be faster. So we tried a variety of methods. They weren't remarkably different than open seating. Nothing was faster, at least convincingly. They were all roughly the same or slower. We learned what we wanted to learn. We weren't too surprised with the findings, but we have hard facts now to move forward.
In the meantime, we are finishing out the technology construction to be able to assign seats and that will take well into next year before we can have that completed. In the meantime, we're continuing to evaluate that whole boarding and seating process and see if can come up with something that improves customer service and also our efficiency, so no determination has been made yet, mainly because the pacing item is the technology construction.
Gary Kelly, chief executive of Southwest Airlines
Interviewed by Richard Velotta / Staff Writer
Southwest Airlines jets are shown at McCarranInternationalAirport in January.
Photo by Sam Morris
When Southwest Airlines started service in Las Vegas on Jan. 31, 1982, it offered five daily nonstop flights to Houston and Phoenix and it was the 15th city in the Southwest system.
With the silver anniversary of that startup approaching, things have changed dramatically.
Today, not only is Southwest the busiest air carrier at McCarran International Airport, but Las Vegas is the busiest station in the Southwest system with 225 flights a day to 52 destinations.
The city's importance to Southwest is not lost on Chief Executive Gary Kelly, who frequently credits the city as one of his company's top success stories.
Kelly joined Southwest in 1986 as controller, then moved up the corporate ladder as chief financial officer, vice president of finance and executive vice president. He was named vice chairman and chief executive officer in 2004.
Kelly talked with In Business Las Vegas about Las Vegas' role in the Southwest story.
Question: October was a pretty good month for Southwest Airlines with the repeal of the Wright Amendment. How big is this for the future of the company?
Answer: It's big. First of all, it's the end to the restricted era. It's something that we've suffered under since 1979 and really earlier than that. It brings closure to a festering issue. I could not go to a social event in Dallas without being peppered with questions by friends and family and business colleagues about "When are we going to get rid of the Wright Amendment?" And so now, that long, festering problem is gone.
The immediate benefits are real. There is a phase-out, of course, of the restrictions over an eight-year time period, but as a practical matter, even if it wasn't legislated that way, it was going to take time to add airplanes, to refurbish facilities and to add service and lower fares at Love Field.
The immediate benefit is huge, fares have come down by as much as two-thirds and we want to keep it fresh and new. We want to offer what we can until its fully repealed in 2014 and the major offering that we have is price, of course, and we're famous for low fares and we're going to use that to our advantage and use it often.
In many respects, isn't this like starting up a new city?
It is, indeed, exactly like starting a new city. There's an excitement that comes along with that. Our employees feel it and you can see it in their eyes and in their step. It's always fun to offer a market something new and the best thing we have to offer in our business is a new route or a new flight time on a route. So, yes, this is big, to be able to offer instantly overnight, 25 new destinations is a lot of fun. We're just beginning to work with the landlord, the City of Dallas, on refurbishing the airport so that we can handle more flights and more passengers in the future.
Although everybody's pretty happy about the repeal, didn't it come at a pretty steep price — you aren't able to start nonstop flights to Dallas until 2014, right?
You just have to compare it to the alternative, which is not even one-stop service, forever. It's just an enormous step forward. I can't justify the eight years, other than that's what it took to get an agreement by the other parties and without that five-party agreement, I don't think Congress would have ever acted. It's just the price we had to pay to get that concurrence. In the end, the eight years will pass, we'll at least benefit from much lower fares in the meantime. The competition has matched, so the economic benefits began Oct. 19 and it's obviously something to be very proud of, a lot better result than where we were before.
Have you gotten any initial reading on your loads connecting into Dallas?
The load factors are up, noticeably up. We run 60 to 70 percent load factors on our Dallas routes routinely and they're up a couple of percentage points which isn't a remarkable change, but it is a noticeable one. That suggests that we still have seats that I would expect we would sell. How full those flights get between now and some future date when we add more flights is anybody's guess. But what we can promise is that travelers will at least have a lot more access to low fares than they had before.
Southwest had a high-profile experiment with assigned seating. What happened with that?
Well, it's ongoing. It wasn't so much an experiment as it was a test of the time it takes to board the aircraft. The long-standing theory is that it takes more time to board an aircraft with assigned seating and we had a theory, at least, that we wanted to explore that if the boarding was orderly — in other words, where people were arranged in such a way based on their seat — that it actually might be faster. So we tried a variety of methods. They weren't remarkably different than open seating. Nothing was faster, at least convincingly. They were all roughly the same or slower. We learned what we wanted to learn. We weren't too surprised with the findings, but we have hard facts now to move forward.
In the meantime, we are finishing out the technology construction to be able to assign seats and that will take well into next year before we can have that completed. In the meantime, we're continuing to evaluate that whole boarding and seating process and see if can come up with something that improves customer service and also our efficiency, so no determination has been made yet, mainly because the pacing item is the technology construction.