Southwest Airlines is adding new service to Miami and Palm Springs. That’s not just a desperate attempt to find new leisure travelers, but a recognition that Southwest Airlines has little room to grow in existing markets.
Southwest Airlines Focuses On Breadth Over Depth
In an interview with The Dallas Morning News, CEO Gary Kelly laid out why Southwest Airlines would suddenly start service to Miami when it is already so strong in nearby Ft. Lauderdale.
First of all, there are huge numbers of growth opportunities remaining for Southwest.
Number two, we’re in an environment where our business challenge is customers. We’ve had a catastrophic reduction in customers flying — off 65% versus a year ago. And so what we need to remedy our business problem is more customers. At this point in time, there’s no way to get more depth in the market. Right now, there are only so many people that are going to fly between Dallas and Houston. I’ll call that depth.
The opportunity for us is more breadth and tap into new destinations that will give our loyal customers another opportunity to choose Southwest. We serve multiple airports in the Washington, D.C., metro area. We serve multiple airports in the Boston metro area, in the San Francisco Bay Area and the Los Angeles basin area. We believe South Florida offers the same kind of potential. Miami is obviously a very vibrant area and it’s a leisure destination. In addition to that, we’ll win a few new customers in those markets, even though we’ll be a relatively small presence.
Palm Springs is similar and different. It’s is a unique destination. You get a little seasonal contradiction there — its high season is in the winter months, which is helpful. We’re already the No. 1 airline in California in every way.
As long as we’re covering our flight costs, we’ll be contributing cash. And that’s key when we have so many assets that are being underutilized and so many employees that are also not working to their full potential. That makes the marginal cost of adding the service really, really small.
A Wide But Thin Route Map
Kelly’s analysis is poignant and highly logical. With extra aircraft, extra crew, and tepid demand between existing lines on the route map, why not try something new? Why not enter Miami as well to truly corner the South Florida market? Why not start service to Palm Springs? As airlines slashed service in response to plunging demand, airports were left extra space. Now Miami and Palm Springs will roll out the welcome mat for Southwest.
This is not so much a strategy of hoping that something will stick as it is of recognizing how limited demand is between any two cities at this point in time. It’s why we have seen other airlines like American and United embrace a similar strategy.
Southwest Airlines will focus on breadth over depth as it continues to adjust to a new era of demand in which business travel is practically zero. Its new service to Miami and Palm Springs are examples of that strategy in action.
image: Stephen M. Keller / Southwest Airlines