Speeches and Presentations from Southwest Leaders
|
The airline industry, which has been plagued by carriers operating in bankruptcy, record high jet fuel prices, and labor woes, is prime for a shakeout, Southwest Airlines CEO Gary Kelly told the Aero Club of Washington recently.
Kelly addressed the crowd gathered for the monthly luncheon and said the airline industry cannot improve until excess capacity is removed. “Consolidation needs to take place,” he said. “Clearly there are cost problems, but there is also too much capacity.”
Federal bailouts for ailing carriers are perpetuating the capacity problem, Kelly said, because carriers continue to add seats in the marketplace and are losing money doing so because of the low fares travelers are commanding. Southwest, in contrast, is poised for growth.
“We are the low cost producer,” he said. “We are positioned to grow profitably and all the trends are moving in the right direction.”
Part of that growth strategy is tied to Southwest’s next destination, Denver, which will begin in January 2006. Kelly said the Mile High City was long a hole in the airline’s route system. He disputed perceptions that the airport is costly, saying that Southwest expects its costs per passenger to be in the $8-9 range. “The outlook for the airport’s future spending is benign,” Kelly said, “and, it’s time to go there.” The carrier will begin service from Denver International Airport on Jan. 3, 2006, with 13 daily departures.
Other opportunities for Southwest to grow and maximize revenue include its codeshare agreement with ATA Airlines. Original revenue estimates from the codeshare were in the $50 million range annually, Kelly said, and the carrier expects to exceed that. “It’s a nice partnership, and I think we’d be open to considering other codeshare arrangements that make sense. No one is teed up at the moment, but we want to be prepared to explore those opportunities.”
Southwest also took bold moves in the last 12 months to continue its growth, first announcing in November 2004 that it would no longer tolerate an antiquated federal law known as the Wright Amendment, which restricts operations at Dallas Love Field, Southwest’s home airport. Kelly said reductions in shorthaul travel post Sept. 11, 2001, led the carrier to publicly announce it would seek repeal of the Wright Amendment in order to serve cities in the Southwest route system (like Los Angeles, Las Vegas, Chicago, and Baltimore/Washington) that it currently is prohibited from serving from Dallas Love Field.
The Wright Amendment was enacted in 1979 to protect then fledgling DFW Airport. Restricting flight activity at Love Field would put the focus for growth on the new airport Dallas and Fort Worth built together. Southwest argues the Wright Amendment is outdated legislation that protects DFW and its largest tenant, American Airlines.
“The airline industry is facing significant challenges; we have to overcome increases in fuel costs and airport operating costs, and we have to find new opportunities to grow and make money,” he said. “The Wright Amendment is just another form of federal bailout.”
Return to List of Previous Articles
