Airline Weekly founding editor Seth Kaplan writes at The Points Guy that Southwest Airlines may be doing worse at New York LaGuardia than at Newark, and they pulled out of Newark. He says they shouldn’t pull out of LaGuardia, though, and shouldn’t have left Newark.
The challenge of course is that at this point, given slot controls at two of the three New York airport and shortage of gates, it’s incredibly difficult to re-enter the market if you leave.
Of course the analysis needs to consider how much money the gates and takeoff and landing slots at LaGuardia could fetch, not just whether they can stem the losses.
Kaplan believes that part of improving the airline’s revenue is going to involve:
- Charging for seat assignments
- Charging for checked bags
- Distributing fares through travel agencies
In other words, while American Airlines CEO Doug Parker says his airline will never give you the flexibility that Southwest offers Kaplan thinks Southwest will move to become more like American Airlines.
It’s worth remembering that Southwest’s current model has made it the largest carrier of U.S. domestic passengers. Their stock trades at a higher price-earnings ratio than Delta, United, or American. And given their limited international flying they have a great deal more growth opportunity than the largest U.S. carriers overall. Southwest has the strongest long-term record of profitability in the industry.
In any case Southwest already charges seat fees in the form of early bird check-in, and checked bag fees drive down fares, and make the airline operation less efficient (increasing turn times, and even requiring use of additional planes to fly the same schedule).
So clearly Southwest’s business model isn’t working, and needs to mirror that of their less successful competitors. Kaplan predicts these changes within 10 years, and he may well be right. Never underestimate airline industry executives to make decisions that undermine their business.