Thursday, June 23, 2016

Southwest Airlines CEO Kelly Talks Expansion, Cuba, TSA and Checked Bags

Southwest Airlines CEO Kelly Talks Expansion, Cuba, TSA and Checked Bags
Southwest itself is growing, with a capacity increase of nearly 5% in
current quarter
June 22, 2016 4:44 p.m. ET

The U.S. airline industry is growing faster than the gross domestic
product, and that has created "some real pockets of aggressiveness
throughout the country," Southwest Airlines Co. Chief Executive Gary
Kelly said Wednesday.

Lower fuel prices, rapidly expanding discount carriers and the improved
financial health of the major airlines has led to more flights and lower
fares, he said.

The nation's No. 4 airline by traffic and the biggest hauler of domestic
passengers, Southwest itself is growing by a relatively fast clip, with
a capacity increase of nearly 5% in the current quarter. But that
expansion is the continuation of a trend begun in 2014 when it boosted
its number of flights at Dallas Love Field by 50% after federal flight
limits on that field were lifted.

Moreover, Southwest is adding international routes, something it never
did until it acquired AirTran Airways in 2011 and later integrated some
of AirTran's Caribbean and Mexican routes into its own operations.
Today, flying to 11 international destinations accounts for just 3% of
Southwest's capacity, but it plans to make additions, particularly when
its new international terminal opens in Fort Lauderdale, Fla., next year.

Southwest recently won authority to fly to a couple of secondary Cuban
airports and hopes to win approval to serve Havana, once the
Transportation Department chooses among the many competing applications.
Mr. Kelly said in an interview that Southwest tied its application for
Havana authorization to the route rights to the small airports. If it
doesn't win any flights to Cuba's capital, he said, the company will
have to decide whether to proceed with the smaller destinations.

He noted that Southwest had no history on which to base its forecast for
Cuban flights and "guessed" on its route application. There have been no
scheduled flights between the U.S. in Cuba in more than 50 years and
there will be many challenges as Cuba's infrastructure develops. For
now, U.S. citizens aren't allowed to visit strictly for tourism and
their trips must fall into categories allowed by Washington.

On another matter, the longtime CEO said the Transportation Security
Administration is managing through a crisis that began earlier this year
when a shortage of security screeners led to such long lines for
travelers that some fliers missed their planes. The agency has added
some screeners and authorized overtime pay for others, which has reduced
the lines.

Southwest alone is spending about $5 million this summer to hire
contracted employees to help the TSA by performing nonsecurity
functions, such as helping manage the lines and restocking the screening
bins and checkpoints. Other airlines and airports are doing the same.
The TSA has told the industry it intends to take back those duties after
Labor Day, raising questions about whether the faster processing of
passengers is sustainable.

Mr. Kelly also said the loss of flights to some of the nation's smallest
cities in recent years was inevitable for economic reasons, and has
little to do with four megamergers creating four carriers that control
more than 80% of the domestic market. When oil prices go up, fares go up
and small cities lose traffic because more people drive, do their
business remotely or find other means, he said.

Fifteen years ago, Southwest served numerous short-haul markets. Today,
those routes are less numerous, medium-length routes are flat and long
flights have grown in number, he said. But recently, with low fuel and
low fares, short-haul routes are making a bit of a comeback.

In news from the luggage carousel, Mr. Kelly reiterated that Southwest
currently has no "discussion, thought, debate or plan" to end its policy
of allowing passengers to checked two suitcases without charge. "Our
customers would be enraged if we started charging for bags," he said.

Write to Susan Carey at

Source: Southwest Airlines CEO Kelly Talks Expansion, Cuba, TSA and
Checked Bags - WSJ -

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