Article in yesterday's Dallas Morning News. Good overview of why SWA's revenues are going up despite fewer seats. More seats being added (see PHL-BOS thread) in 2Q and 3 Q...always a good thing.
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Southwest adjusts schedule in bid to seek more connecting fliers
12:00 AM CST on Sunday, February 21, 2010
By TERRY MAXON / The Dallas Morning News
[email protected]
If Southwest Airlines Co. put up a stone tablet engraved with its operating philosophy, the top item might be: "We are a point-to-point airline."
Since its beginning in 1971, the Dallas-based carrier has made it clear that it focuses on carrying passengers nonstop from one city to another.
There has been far less focus on getting passengers who take one flight then connect to another to get where they're going.
But that's changing. At least, a little bit.
Southwest is now lining up flights at a number of its big airports so that they arrive at about the same time and depart shortly afterward about the same time. The goal: to get more people making connections to other Southwest flights.
"We're still primarily point-to-point. We've got a network built around point-to-point," Southwest executive Bob Jordan said. "All that we've really done is go back and look at flight times in a way that we could better arrange some of these connecting opportunities."
Some might call that a version of the hub-and-spoke system used by major competitors such as American Airlines Inc., Delta Air Lines Inc., United Airlines Inc., Continental Airlines Inc. and US Airways Inc.
Those airlines use a common philosophy that builds their schedule around banks of connections.
The hub is the operation at the big airport; the spokes are the flights to and from other cities. At a hub, all the flights come in within a narrow time span and exchange passengers who connect to different flights, and then all the airplanes go out in a narrow time span.
But Jordan and other Southwest officials express emotions akin to horror at any suggestion that their scheduling change makes them anything like that of the hub-and-spoke airlines.
How it works
On an average day, Southwest operates about 3,200 flights. Jordan said only about 400 to 425 flights are arranged specifically for connections, primarily at Phoenix, Baltimore, Las Vegas, St. Louis, Denver and Chicago.
"We're still talking about just north of 10 percent of our flights where we're tweaking the times to allow connecting opportunities," said Jordan, executive vice president of strategy and planning.
"But the network is built around the point-to-point philosophy. We're tweaking that to allow for better connections in our bigger cities. I would not call it banking," he said.
"They're not a hub-and-spoke carrier," agreed aviation consultant Stuart Klaskin. "They're a carrier that's got a lot of connecting opportunities at focus cities."
As an example of how the revamp worked, Jordan cited flights going through Baltimore, one of Southwest's busiest airports. Before, passengers couldn't make a connection from Islip, a New York-area airport, to West Palm Beach, Fla., because the connecting time in Baltimore was too long.
After Southwest reworked its schedule last spring, the Islip flight and others were arranged to arrive in Baltimore with short connecting times to a lineup of outbound flights. Immediately, the number of passengers on flights increased.
Jordan said the average load factor, or percentage of seats filled with paying passengers, increased 22 percentage points on Southwest's flights from Baltimore to West Palm Beach, for example. That compares fourth quarter 2008, prior to the change, to fourth quarter 2009.
By reworking its Chicago Midway schedule, Southwest saw its westbound flights from Chicago to Portland, Ore., register load factors that jumped more than 16 points on average.
"These aren't people who were just flying a different route on us before" the changes, Jordan said. "These were folks that were not flying Southwest Airlines on the route at all because we couldn't sell them that O&D [origin and destination]."
Klaskin applauded Southwest for making the changes.
"It's not a fundamental change in strategy but a notable shift in tactics," said Klaskin, a founder of consulting firm Klaskin, Kushner & Co. "I think it's a great idea. I think they're going to have a lot of success with it."
Increased loads
The loads on the average Southwest Airlines flight have been on a sharp rise in the last year. In early 2009, Southwest began showing monthly loads that were up noticeably compared with the prior 10-year average for those months.
By late 2009, the months were running far ahead of the 10-year average. From September through this January, Southwest's monthly load factors averaged nearly 11 points higher than the 10-year average. In 10 of the last 12 months, Southwest has set an all-time monthly record for load factors.
Jordan said the schedule changes are only part of the reason for fewer empty seats on Southwest flights. The carrier's "bags fly free" advertising campaign is obviously paying off, as well as efforts to trim less successful flights.
"But there is some piece of that load factor improvement that is due to these connections because you're literally putting more people on planes," he said. And it's done it as it reduced capacity in 2009 and is holding it flat in 2010, he said.
"You're putting more product on the shelf without having to add more aircraft," Jordan said.
Ohio State University professor Nawal Taneja, who focuses on the airline industry, said Southwest will use the technique only on its bigger cities that have a sufficient "critical mass" to support banks of incoming and outgoing flights.
"They won't do it in cities where there are only two flights a day, one in the morning, one in the evening," said Taneja, who chairs Ohio State's aviation department in its engineering college. "Then, if you miss the morning flight, you're stuck there for the rest of the day."
Jordan said he doesn't see Southwest expanding the percentage of flights lined up for connections to more than about 15 percent of its schedule.
"You push the concept too far and you begin to add cost in the operation," he said. "You begin to actually hurt your on-time performance because you're holding flights. There's a balance between operational performance and the passenger traffic."
As an experiment, Southwest scheduled San Francisco flights to Denver so passengers could connect with flights heading east from Denver. But the carrier eventually took most of the San Francisco flights off the lineup because they were too often delayed.
Although traditional connecting hubs can pay off with a lot of revenue and passengers, they aren't compatible with Southwest's intent to focus on point-to-point flying, Jordan said.
"The beauty of a hub-and-spoke system is the efficiency of the hub. You can leverage the costs because you're driving all kinds of activity over one location," he said.
"But the downside is that the only way that works is that you've got to build your entire operation around those hubs and make them work that way."
_____________________________________
Southwest adjusts schedule in bid to seek more connecting fliers
12:00 AM CST on Sunday, February 21, 2010
By TERRY MAXON / The Dallas Morning News
[email protected]
If Southwest Airlines Co. put up a stone tablet engraved with its operating philosophy, the top item might be: "We are a point-to-point airline."
Since its beginning in 1971, the Dallas-based carrier has made it clear that it focuses on carrying passengers nonstop from one city to another.
There has been far less focus on getting passengers who take one flight then connect to another to get where they're going.
But that's changing. At least, a little bit.
Southwest is now lining up flights at a number of its big airports so that they arrive at about the same time and depart shortly afterward about the same time. The goal: to get more people making connections to other Southwest flights.
"We're still primarily point-to-point. We've got a network built around point-to-point," Southwest executive Bob Jordan said. "All that we've really done is go back and look at flight times in a way that we could better arrange some of these connecting opportunities."
Some might call that a version of the hub-and-spoke system used by major competitors such as American Airlines Inc., Delta Air Lines Inc., United Airlines Inc., Continental Airlines Inc. and US Airways Inc.
Those airlines use a common philosophy that builds their schedule around banks of connections.
The hub is the operation at the big airport; the spokes are the flights to and from other cities. At a hub, all the flights come in within a narrow time span and exchange passengers who connect to different flights, and then all the airplanes go out in a narrow time span.
But Jordan and other Southwest officials express emotions akin to horror at any suggestion that their scheduling change makes them anything like that of the hub-and-spoke airlines.
How it works
On an average day, Southwest operates about 3,200 flights. Jordan said only about 400 to 425 flights are arranged specifically for connections, primarily at Phoenix, Baltimore, Las Vegas, St. Louis, Denver and Chicago.
"We're still talking about just north of 10 percent of our flights where we're tweaking the times to allow connecting opportunities," said Jordan, executive vice president of strategy and planning.
"But the network is built around the point-to-point philosophy. We're tweaking that to allow for better connections in our bigger cities. I would not call it banking," he said.
"They're not a hub-and-spoke carrier," agreed aviation consultant Stuart Klaskin. "They're a carrier that's got a lot of connecting opportunities at focus cities."
As an example of how the revamp worked, Jordan cited flights going through Baltimore, one of Southwest's busiest airports. Before, passengers couldn't make a connection from Islip, a New York-area airport, to West Palm Beach, Fla., because the connecting time in Baltimore was too long.
After Southwest reworked its schedule last spring, the Islip flight and others were arranged to arrive in Baltimore with short connecting times to a lineup of outbound flights. Immediately, the number of passengers on flights increased.
Jordan said the average load factor, or percentage of seats filled with paying passengers, increased 22 percentage points on Southwest's flights from Baltimore to West Palm Beach, for example. That compares fourth quarter 2008, prior to the change, to fourth quarter 2009.
By reworking its Chicago Midway schedule, Southwest saw its westbound flights from Chicago to Portland, Ore., register load factors that jumped more than 16 points on average.
"These aren't people who were just flying a different route on us before" the changes, Jordan said. "These were folks that were not flying Southwest Airlines on the route at all because we couldn't sell them that O&D [origin and destination]."
Klaskin applauded Southwest for making the changes.
"It's not a fundamental change in strategy but a notable shift in tactics," said Klaskin, a founder of consulting firm Klaskin, Kushner & Co. "I think it's a great idea. I think they're going to have a lot of success with it."
Increased loads
The loads on the average Southwest Airlines flight have been on a sharp rise in the last year. In early 2009, Southwest began showing monthly loads that were up noticeably compared with the prior 10-year average for those months.
By late 2009, the months were running far ahead of the 10-year average. From September through this January, Southwest's monthly load factors averaged nearly 11 points higher than the 10-year average. In 10 of the last 12 months, Southwest has set an all-time monthly record for load factors.
Jordan said the schedule changes are only part of the reason for fewer empty seats on Southwest flights. The carrier's "bags fly free" advertising campaign is obviously paying off, as well as efforts to trim less successful flights.
"But there is some piece of that load factor improvement that is due to these connections because you're literally putting more people on planes," he said. And it's done it as it reduced capacity in 2009 and is holding it flat in 2010, he said.
"You're putting more product on the shelf without having to add more aircraft," Jordan said.
Ohio State University professor Nawal Taneja, who focuses on the airline industry, said Southwest will use the technique only on its bigger cities that have a sufficient "critical mass" to support banks of incoming and outgoing flights.
"They won't do it in cities where there are only two flights a day, one in the morning, one in the evening," said Taneja, who chairs Ohio State's aviation department in its engineering college. "Then, if you miss the morning flight, you're stuck there for the rest of the day."
Jordan said he doesn't see Southwest expanding the percentage of flights lined up for connections to more than about 15 percent of its schedule.
"You push the concept too far and you begin to add cost in the operation," he said. "You begin to actually hurt your on-time performance because you're holding flights. There's a balance between operational performance and the passenger traffic."
As an experiment, Southwest scheduled San Francisco flights to Denver so passengers could connect with flights heading east from Denver. But the carrier eventually took most of the San Francisco flights off the lineup because they were too often delayed.
Although traditional connecting hubs can pay off with a lot of revenue and passengers, they aren't compatible with Southwest's intent to focus on point-to-point flying, Jordan said.
"The beauty of a hub-and-spoke system is the efficiency of the hub. You can leverage the costs because you're driving all kinds of activity over one location," he said.
"But the downside is that the only way that works is that you've got to build your entire operation around those hubs and make them work that way."
