From ATW:
Southwest slows growth, cuts 2008 aircraft deliveries
Thursday June 28, 2007
Southwest Airlines said yesterday that it will slow its growth to contend better with weak economic conditions and fuel costs, lowering capacity growth to 6% from 8% for the 2007 fourth quarter and full-year 2008, dropping unprofitable routes, adding new ones (including five new destinations from Denver) and taking delivery of 19 net aircraft next year instead of the previously planned 34.
Additionally, in what may be a bid to win more business fliers, it will unveil a new "boarding/seating method" in the fourth quarter, replacing its open seating policy.
Speaking to analysts and investors in New York yesterday, CEO Gary Kelly said, "Given the slowing US economy and fuel cost pressures, we are taking these steps to adjust our capacity growth rate, which will help to restore profit growth. If we find that conditions change, we will reevaluate our growth plans for future periods. In this economic environment, we simply need to take less risk and grow more slowly."
The comments were in line with those he made earlier this month at the Merrill Lynch Global Transportation Conference, when he characterized the carrier's 8% growth this year as "too high" in the face of soft demand (ATWOnline, June 14). It is rationalizing its network by eliminating 39 daily flights from its schedule while adding 46 in "key growth markets."
Routes to be dropped in early July include Baltimore-Los Angeles, BWI-Oakland, Chicago Midway-Orange County, Cleveland-Phoenix, LAX-Philadelphia and OAK-PHL. Dropped effective yesterday was El Paso-Midland/Odessa. Services to be added beginning early next month include flights from Denver to Seattle (four-times-daily), Albuquerque (thrice-daily), Amarillo (twice-daily), Austin (daily) and Oklahoma City (twice-daily), plus thrice-daily Birmingham-New Orleans service and a daily OAK-Tucson flight.
Kelly said the airline plans to implement new revenue initiatives by year end, including undisclosed enhancements to its fare structure and loyalty program and a new advertising campaign. "In all, we are targeting more than $1 billion in incremental revenue over the next few years," he said. SWA led the US industry with $93 million in net income in the first quarter (ATWOnline, April 20), but he conceded that the results fell short of expectations and that revenue growth was failing to surmount "cost pressures."
by Aaron Karp