At the beginning of the pandemic I wrote that while it makes tremendous sense for airlines to cut back their operations significantly in the face of reduced demand, if there was one airline that didn’t do this to nearly the same extent they could benefit in an outsized manner as travel began to return.
Since they’re still paying employees anyway, still making lease payments on planes (or own them), and fuel is cheap the variable costs of flights are fairly low. If one carrier could aggregate the bulk of demand it could be a better financial strategy than shrinking (even if both are money-losing for awhile). Of course this falls apart once a second and a third airline begin to add flights, too.
I thought back to this claim, that readers found controversial at the time, twice in the past week. First when Southwest Airlines extended its schedule through winter and included the same number of flights (albeit fewer routes) that they operated at the end of 2019 – although I fully expect that they will cut flights from this initial schedule – and second listening to former Spirit Airlines CEO Ben Baldanza talking about a 1990s board game in the June 3 Airlines Confidential podcast.
Ben is known for his collection of board games and talked about Airline Baron where you would have to declare at the start of each round whether you’d engage in a fare war.
The goal of the game was to earn the most profit, and if you were engaged in a fare war you wouldn’t earn any profit that round. However it gave you the opportunity to expand routes and obtain gates at congested airports. You could grow your airline relative to the rest of the industry (other players), taking a disproportionate amount of business, and position the carrier to earn more money in subsequent rounds.
Southwest is well-positioned to restart flights compared to competitors, with a single class of service (so they aren’t worried about a return in premium demand) and with a largely domestic route network, indeed one that focuses heavily outside of the Northeast that has so far been hardest hit by the COVID-19 pandemic.
Nonetheless I think it’s overly ambitious to offer the same level of flying year-over-year a mere six months from now. Indeed, if even Southwest believed it they wouldn’t be offering such generous voluntary quit packages to convince large numbers of employees to leave. That’s one reason I’m confident that Southwest will drop flights from their overly ambitious winter schedule, even if they wind up a materially larger domestic airline than competitors when we reach that point in the calendar.