DALLAS — LaGuardia Airport is the smallest of the three major airports in the New York area, with just two main runways. Planes often sit in long lines on the tarmac, waiting their turn to take off.
So why would Southwest Airlines, a carrier that boasts about its on-time prowess, want to go there? In many ways, because it has to.
Southwest prospered by offering low fares to leisure travelers whose only other affordable option was a car trip. It flew primarily to America’s secondary airports, where costs are low and productivity is high because incoming planes can land, drop off passengers, take on the next group and get back in the air quickly.
On Sunday, Southwest started service at LaGuardia, one of the nation’s most congested airports. This should bring cheaper ticket prices to New York-area vacationers flying to Chicago, Baltimore and beyond. But the move is also part of a risky transition that Southwest knows it has to make to win the loyalty of business travelers, who increasingly will dictate its future prospects for success.
The Dallas-based carrier serves 65 cities, including Denver, and carries more than 100 million U.S. passengers per year, more than any other airline.
There are still no first-class cabins and no assigned seats on Southwest, giving it the air of a carrier for penny- pinching vacationers.
“We’re very dependent on business travelers, so we’re not a leisure airline like some of our smaller competitors are,” chief executive Gary Kelly countered in an interview. He said company surveys show that in normal times, at least 40 percent of his customers are traveling on business.
Airlines covet business travelers because they make repeat trips and often pay higher fares for booking at the last minute. Southwest needs that revenue now. The Dallas-based airline has been profitable for 36 straight years, but has been in the red since last fall. Traffic is down, costs are rising.
Robert Crandall, who competed against Southwest when he ran American Airlines in the 1980s and ’90s, said Southwest has stuck to a well-defined business model of low fares and low costs at secondary airports.
“Going into LaGuardia is a change to that model,” Crandall says, “but they’ve decided they don’t have any choice — they need the (passenger) volume to grow.”
Kelly became CEO in 2004. In pursuit of business travelers, he bent the traditional “first come, first served” seating rules with “Business Select.” Passengers pay a few bucks more to get a spot at the front of the boarding line, an extra frequent-flier award and a free drink. He also pushed Southwest into the kind of huge airports it once spurned.
Now it needs the big Eastern cities to buttress its service at Chicago’s Midway Airport, Southwest’s second- busiest hub.
“If we’re holding ourselves out to Chicagoans saying, ‘We want to be your business airline,’ we’ve got to be able to take them” to New York, Boston and Minneapolis, Kelly said.
Southwest Airlines
Headquarters: Dallas
First flight: 1971
Traffic: About 3,300 daily departures from 65 airports. It carried 102 million passengers in the U.S. last year, more than any other airline. Other U.S. carriers are larger by the number of miles flown by paying passengers, the standard measurement in the industry.
Financial results: The company, which has made money for 36 straight years, earned $178 million on revenue of $11.02 billion last year, down sharply from the 2007 profit of $645 million. The airline has lost money in the last three quarters.
Fuel hedging: Southwest saved several billion dollars this decade by successfully hedging against rising fuel prices. However, those contracts soured when oil prices tumbled beginning in mid-2008. Fleet: Southwest had 539 aircraft as of April 16. They are all Boeing 737s, the only plane Southwest has ever used.
Top markets: By daily departures, Southwest’s busiest airports are Las Vegas, 234; Chicago Midway, 214; Phoenix, 187; Baltimore- Washington, 162; Houston Hobby, 135; Dallas Love Field, 134; Los Angeles International, 120; Oakland, Calif., 118; Denver, 115; and Orlando, Fla., 115.
Employees: About 35,000. The workforce is the most heavily unionized in the airline industry. Southwest recently negotiated labor contracts that give most workers annual raises of about 3 percent, although pilots rejected a tentative contract. Southwest is trying to reduce its ranks by offering bonuses to employees who quit. The Associated Press
