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Is Southwest Soaring?

Every major airline is reducing capacity, right? Wrong. Southwest (NYSE: LUV  ) is adding flights, even as UAL's (Nasdaq: UAUA  ) United, AMR's (NYSE: AMR  ) American, and Denver's Frontier -- among others -- are cutting flights.

Southwest's plan, revealed last week, isn't linear. The low-fare pioneer says it will eliminate 31 low-profit routes and add 40 in markets where it attracts higher-margin business, such as Denver.

"We have a much different story to tell today than our competitors," CEO Gary Kelly said in a company statement. He also said that Southwest is still growing and chastised peers for adding fees.

He has a point. Over the past week:

  • Delta (NYSE: DAL  ) said it would add a fuel surcharge of up to $50 to tickets bought with frequent-flier miles. Expect every one of the majors to follow suit, including United and Continental (NYSE: CAL  ) , which recently agreed to a partnership that, when effective, will allow frequent fliers to redeem miles with either airline.
  • U.S. Airways (NYSE: LCC  ) fired its skycaps. Over time, the carrier expects curbside check-in to be an automated affair. (Oh, goody.)
  • Finally, let's not forget American, which began charging a $15 first-bag fee earlier this month.

Contrast all of this with what Southwest has planned: more flights and a $5 to $10 per-segment fare increase, its third this year.

By itself, that's a pretty unremarkable statistic. (Of course Southwest is raising fares; oil is more than $140 a barrel!) What's interesting is that customers are willingly paying more. Southwest's load factor -- a measure that determines how full, on average, its aircraft are upon departure -- rose to 71.4% though May, up from 70.1% a year ago. 

Higher prices; more fliers. Talk about impressive.

Southwest isn't soaring. But, unlike far too many of its peers, it isn't dying, either.

Taxi toward related Foolishness:

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. He's also a member of the Rule Breakers team. You can find the rest of Tim's portfolio here and his latest blog entry here. The Motley Fool has a market-beating disclosure policy.


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  • Report this Comment On July 01, 2008, at 6:17 PM, ratherblucky wrote:

    What is the point of the article? The only reason Southwest is making money was a that they had the cash that allowed them to hedge fuel. The 71% filled seats is far below other carriers.

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