Southwest to make changes to boost revenue, profitability

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Southwest will slow its growth, cease service on a few of its transcontinental routes in October and unveil a new seating and boarding method in the fourth quarter of this year as part of an attempt to boost its revenue and profitability, the airline said June 27.

Also in the fourth quarter, the airline plans to "enhance its low-fare structure," although it didn't specify what that means; "enhance" its Rapid Rewards frequent flyer program to increase its appeal to business travelers; and launch a new advertising campaign aimed at those business travelers.

 

It's widely assumed the new boarding and seat method will include some assigned seating, which Southwest has been testing, and while CEO Gary Kelly didn't quite confirm that, he did say the upgrades Southwest had to make to its systems to enable assigned seating would be ready by 2008.

The transcontinental routes Southwest will be ending as of Oct. 4 are Baltimore-Los Angeles, Baltimore-Oakland (Calif.), Philadelphia-Los Angeles, Philadelphia-Oakland, Chicago (Midway)-Orange County (Calif.) and Cleveland-Phoenix. In addition, Southwest is ending its El Paso (Texas)-Midland/Odessa (Texas) service Nov. 4.

They are part of the 39 frequencies Southwest is taking out of its current flight schedule. At the same time Southwest is adding 46 flights in what it called "growth markets," such as Denver and New Orleans. For details on the flight changes, visit www.southwest.com/about_swa/press/070627_chart.pdf.

Denver is getting the most new routes in October and November, with new service to Albuquerque, N.M.; Amarillo and Austin, Texas; Oklahoma City; and Seattle.

Kelly said rising fuel costs and a softer-than-expected U.S. economy necessitated some schedule "optimization" to redeploy aircraft to more profitable routes. But he said the cessation of some of the transcontinental routes does not signal a shift away from long-haul flying.

More than a third of the airline's departures are to airports more than 750 miles away, and many of its longer-haul routes are successful, he said.

As for the slowdown in growth, the airline said it plans to grow its available seat miles, the standard measure of airline capacity, by 6% year-over-year for the fourth quarter of this year and for all of 2008. That's two percentage points less than under its previous plan.

As part of that slowdown, Southwest now plans to grow its fleet by 19 aircraft in 2008, which is 15 fewer than its previous plan.

"In this economic environment, we simply need to take less risk and grow more slowly," Kelly said.

To contact reporter Andrew Compart, send e-mail to [email protected].

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