Southwest Airlines has been rumored to have Iceland in its sites for European expansion of its network. Yet another misstep by its wayward management team.
Southwest Airlines Rumored To Add Iceland To Its Map
I’m not breaking any news that Southwest Airlines is looking to expand internationally. It filed five weeks ago for permission to fly any to any country in the Open Skies treaty.
“The Dallas-based carrier wants the go-ahead to fly in any country subject to the Open Skies agreement, which would set the stage for future flights to more than 130 countries that are subject to the agreement, according to a report in Bloomberg.” – KSDK
While I can appreciate the broad scope with which it has filed its application, not limiting itself to certain markets nor tipping its hand to where it might be headed next, Ghana, Khazikstan, and Korea are probably not on the list.
This week, rumors surfaced detailing Southwest’s intention of that Open Skies filing, adding Iceland to the map. Reports suggest flights will go on sale from Baltimore (BWI) to Reykjavik in the fall of 2025 for Spring 2026 departures.
Aligns With Interline Partner, Iceland Air
This site covered Southwest’s partnership with Iceland Air back in February, asking the question as to whether Southwest customers will book one to two stop service to Europe on narrow-body aircraft. Due to fleet range limitations, there’s few options to reach Europe nonstop and Southwest’s market position in the northeast US is limited with Baltimore being its largest presence. The concept will be for Iceland Air to carry passengers to 35 destinations beyond Iceland.
IcelandAir already runs the route to Baltimore and has for many years. The point of the interline agreement is to take Southwest passengers that want to fly to Europe to carry them to mutual gateways for their onward journey. Baltimore doesn’t likely have enough direct demand to warrant the second aircraft. Factoring in the greater Washington DC and NOVA market might lead one to that conclusion, but Iceland Air operates additional flights to Washington Dulles as well. So why fly the segment on Southwest aircraft at all?
“Southwest has strong labor unions, and in order to allow the airlines to codeshare, pilots are reportedly requiring that Southwest also fly its own metal to Iceland.” – OneMileAtATime
There’s not really another market that makes sense for Southwest, but the flight itself doesn’t efficiently utilize the agreement, it complies with its own contracts making this European expansion a folly.
Southwest Needs Growth
The truth is that Southwest was stagnating and some of its chickens came home to roost. Failing to update its technology for decades caused a melt down over the holidays in 2022 resulting in a cost and penalty of nearly three quarters of a billion dollars. Its archaic technology also couldn’t take payment in Canadian dollars so when it might have added Vancouver and Toronto to its route map, it simply couldn’t. Its fleet limitations and operating costs have kept it from being able to size down to smaller markets for new growth. It expanded in a significant way to the Hawaiian islands in recent years, only to pull back on inter-island routes and some of the long hauls.
If the airline can’t fly into smaller markets for growth because its equipment is too large for the market, can’t fly into Canada because of its tech, can’t easily reach into continental Europe, has covered the busiest leisure markets in North America, where to for growth?
Gol operates a 737-MAX 8 from Brasilia to Orlando. Southwest holds a significant presence in Orlando and Ft. Lauderdale. Elsewhere in South America, Cartagena, Colombia sees Florida service from JetBlue, American, Avianca, and Spirit. Lima held flights from American, Spirit, and JetBlue those some of those routes have changed. Copa and American fly from Panama to Florida and Texas. In short, Latin America holds some opportunity but not, perhaps, completely green fields.
Still, a number of islands in the Caribbean send Southwest customers to the competition when demand is likely there, and those customers might prefer to fly the airline because of loyalty, preference, and presence in their markets.
The Unspeakable
There is another alternative for growth. It could buy larger jets capable of delivering growth through common travel markets that can absorb additional carriers. Southwest has abandoned nearly every identifiable differentiator from free checked luggage, to offering basic economy fares, why not free itself of the bonds of the 737 and its range and passenger count limitations. Alaska has already done this with both Horizon (for smaller markets long ago to feed into its broader network) and with its acquisition of Hawaiian.
Know Your Customer
Lastly, what Southwest always knew well was its customer base. Elliott Management doesn’t seem to understand that at all. Southwest started as the discounter that delivered a fun, affordable experience to mid-level markets. Its customers grew up and as the network broadened, disenfranchised travelers loyal to flag carriers sick of spending time in hubs began to explore the little carrier that could. A year or two ago, it seemed that Southwest’s passengers were more or less domestic road warrior consultants and reasonably well-heeled middle American families that preferred to pay for an all-in fare that included luggage rather than be hassled with rules and fees. They don’t care about upgrades and they didn’t need their airline to regularly fly to a dozen airports in Europe and as many in South America or Asia.
But now that Southwest is just another carrier, their customer base will change. They may need to add Europe but to do so, they probably need to rethink their approach to equipment. The best case scenario of this approach is someone in Kansas City flies to Baltimore, then Reykjavik, then Paris? And they are going to do all of this in coach? How many core customers are signing up for that vs just doing what they always have and flying via Atlanta on Delta, United or American from Chicago or the New York market and then onto their destination on an airplane that at minimum has a plug at each seat and an IFE at every seat.
Southwest knew their customer. Elliott clearly does not. This latest expansion effort displays the lack of focus and folly of its approach. While this might open up a small market for Southwest, it won’t deliver the growth the airline needs and if it’s serious about staying relevant then it should expand where it can find an advantage. If it’s going to just become another carrier – something it seems destined to achieve – then Iceland is less than a half measure.
What do you think?
Khazikstan?
Huh. Yeah the cookies and pretzels aren’t going to enhance this expanded experience.
Southwest is really half-assing this change to being more like a legacy carrier. Unless they start investing in larger planes, first class sections, adding ovens to their existing planes, and a lounge network, they will never be serious competition for the big 3.
“in its sites”
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