Southwest had been among the more bullish U.S. airlines. But this fall, it will shrink considerably. It probably has no other choice.
During some of the worst days of the Covid-19 pandemic in May, Southwest Airlines bet on a quick recovery, with executives saying the carrier might resume its full schedule as soon as December, so it could win share at the expense of competitors. Now, though, Southwest is pulling back.
A couple of weeks after the airline’s president told investors August demand was “much softer than we anticipated,” and promised changes to future capacity, Southwest has made hefty cancelations to its September schedule. Southwest now will fly an average of 2,680 flights per day between September 6 and October 7, about 26 percent fewer than it had planned the last time it updated its schedule.
“In the context of second quarter results, we said that a ‘re-evaluation’ was under way for August, September, and fourth quarter due to weakness,” Brad Hawkins, a Southwest spokesman, said in an email. “This is a manifestation of that evaluation.”
Southwest is one of many U.S. airlines grappling with the new reality. Despite the comments on the earnings call, summer demand held up OK for Southwest, at least compared to March and April. Some leisure travelers did take advantage of the airline’s fare sales and bonus point offers.
Fall could be another story. Typically, in September, leisure travel dries up, usually until Thanksgiving. Normally, even at Southwest, business travelers fill planes from September through November. But no airline is counting on that this year, as many corporations are still asking employees to work from home.
Almost every airline — including American Airlines, Spirit Airlines and Southwest, all of which had been reasonably bullish a couple of months ago — is preparing for a long and slow, fall and winter.
“Those green shoots Southwest and other airlines saw in late May and June have withered away,” said Madhu Unnikrishnan, editor of Airline Weekly. “This schedule cut starkly illustrates Southwest adapting to a new, smaller reality.”
Southwest didn’t provide much detail on its cuts, but two analysts probed schedule data and found the airline made widespread reductions across its network.
Hunter Keay, of Wolfe Research, said in a report he expects Southwest now will fly 40 percent less capacity in September, year-over-year. About Southwest changes, Keay wrote, “cuts were widespread and no one market accounted for more than one percent of the gross reduction.”
According to Keay’s calculations, Southwest’s changes are similar to American’s domestic plans (down 43 percent), though less than reductions from Delta Air Lines and United Airlines. Technically, Delta is down about 42 percent, Keay said, but that does not account for seats the airline blocks for social distancing. United has cut 59 percent, Keay said.
Brett Snyder, a blogger, went further on Southwest’s cuts. Snyder looked closely at one week, September 9 through September 15, and found Southwest plans to cease flying 128 routes that it had once planned. Using schedule data from Cirium, he found cuts in nearly every corner of Southwest’s network, including from Gulf cities that recently had climbing demand, like Tampa and Fort Myers, Florida, and New Orleans, Louisiana.
“It’s just a wholesale pulldown,” Snyder said in a post. “And there are another 294 routes that lose frequency.”
There were some additions, Snyder said, but not many. He said 58 routes will see added frequencies, but only nine will get an extra daily flight or more.
“This looks like it goes back to the skeleton May schedule when Southwest became more hub-like in order to focus on maintaining connectivity despite the massive cut in flights,” Snyder said.
What About Market Share?
Southwest executives love to talk about prior successes during industry downturns, including after 9/11 and the Great Recession. Both times, Southwest capitalized on competitor weakness to earn new market share.
That had been the plan here. Southwest executives had hoped the airline’s unique strengths — it has lower costs than major network airlines and does not fly long-haul international routes — would help it recover faster. Eventually, that may be true, but it’s probably too soon to implement a share-shift strategy, Unnikrishnan said.
“They can grab share only if there’s share to grab,” he said. “In other words, demand hasn’t returned to anything approaching what was forecast earlier this year.”
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Photo credit: Southwest Airlines will fly less than expected this fall. Pictured are some of the airline's Boeing 737s. 330126 / 330126