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Southwest Airlines Is the (_____) Company on Earth : a) Zaniest b) Savviest : Answer: Both

There's Definitely a Method to the Madness as Southwest Airlines--and Just Watch the Rest of the Industry Try to Copy It

June 09, 1996|JESSE KATZ | JESSE KATZ is The Times' Houston bureau chief. His last article for the magazine was a personal essay on his work covering L.A. street gangs

But early on, Southwest also made some deliberate business moves, unsexy nuts-and-bolts decisions that had equally profound impacts. Almost from the beginning, it began buying and operating only one type of aircraft--Boeing 737s--a simple policy that resulted in immeasurable savings on parts, repairs and training. The airline also rejected the conventional hub-and-spoke approach to mapping routes, which requires planes to wait at a hub city for connecting flights to arrive. Other carriers use that system to help them fill seats, funneling passengers from diverse locales onto a single plane. Southwest saw that as an inefficient way to utilize equipment, which generates revenue only when it's in the air. Southwest instead adopted a point-to-point formula, selecting pairs of cities and saturating them with dozens of back-and-forth flights.

The convenience of that system, coupled with bargain-basement prices, put Southwest more directly in competition with the automobile than with any other airline. There are so many daily departures from, say, Los Angeles to Oakland--at least one an hour between 5:30 a.m. and 10 p.m.--that you can pretty much just show up at the airport without even knowing the schedule, plop down your $74 (no advance purchase or Saturday stay-overs required) and be on the next flight. Because seating is open, the stampede to the gate can be unseemly, giving rise to comparisons with a cattle car. It's also not the best situation for cross-country travel, unless you want to spend nine hours in the air, stopping several times and feeding only on peanuts. But then, Southwest long ago found its niche and stuck to it, never trying to compete with the Deltas or Uniteds in the first-class wide-body market.

"Southwest is very good at delivering exactly what they promise; they just don't promise a lot," says Dean Headley, a marketing professor at Wichita State University, whose annual Airline Quality Rating report for 1995 ranked Southwest as the nation's best overall carrier.

Without wavering from that no-frills formula, Southwest has grown into the country's fifth-largest airline, carrying some 45 million people a year on more than 2,100 daily flights. Although it's still tiny compared to the big-name carriers, Southwest has set the pace for an industry that's only now emerging from years of post-deregulation bitterness and bankruptcy. As the only major airline to make a profit between 1990 and 1992, Southwest was cited by a 1993 federal study as "the principal driving force" behind fundamental changes sweeping the business. Wherever it enters a market, fares plunge and traffic soars, earning South-west its distinction as the "Wal-Mart of the air."

That didn't matter as much a decade ago, when Southwest could be dismissed as a regional player. But in recent years, its tentacles have begun to reach nearly every corner of the country, winning the highest market share in 94 of the top 100 city-pairs that it serves. Because Southwest's low prices tend to expand the market, rather than steal from other carriers, communities across America are begging to be added to that list. A year after inaugurating service from Louisville to Chicago, for instance, the total number of travelers making that trip soared 154%. This year, Southwest expanded into Florida, adding 54 flights to Tampa, Orlando and Ft. Lauderdale. Its next big push is rumored to be in the Northeast--the last significant conquest on Southwest's battle map--with reports indicating that Connecticut, New Hampshire, Rhode Island and suburban New York were all being considered as possible sites.

"We don't do any long-range planning in the conventional sense," says Kel- leher, declining to discuss the specifics of any future moves. "Once you've defined your values . . . things flow pretty easily and pretty freely from that."

But the steady pace of expansion still poses daunting challenges for Southwest, which depends on exploiting secondary airports that are overpriced and underutilized. Until now, the company has avoided the Northeast, fearful that congestion and cold would hobble the quick turnarounds demanded by its hyperactive itinerary. (Service to Denver was actually discontinued a few years back because heavy snow created too many delays.) Southwest also is battling many imitators, from major-carrier clones like Shuttle by United in California to cheap knockoffs like ValuJet, a formidable opponent in Florida until one of its aging DC-9s plunged into the Everglades in May. In 1994, rapid growth and competition conspired to hand Southwest one of its worst financial quarters ever, cutting the value of its stock by more than half to a low of $15.50; it has since rebounded, now trading at about $30 a share.

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