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There's A New Low-Fare Airline In The Works
It's coming in the next 18 months. America's newest airline. In a very real way, it will re-write much of the book on airline operations, and be one very nasty competitor.
It'll Be Big - Real Big - From The Start. No bootstrapping here, this carrier's going to be big - a fleet of several hundred airliners, eventually comprised of units from 100 to 140 seats. It won't follow the nonsense espoused by empty-suit academics who claim just one airplane type is best - it'll have a fleet that's structured to flexibly access maximum revenue, not win an "A" grade from some zipperhead professor at the Whartog School of Business. Probably it will end up with at least three airliner types between 100 and roughly 150 seats. No RJs - the airline knows better. No widebodies, either.
Low Fares - But To Smaller Markets, Too. The route system will be huge, with at least four de facto connecting hubs, plus linear flying as well. The plan will certainly be be focused on large, high-density markets. But it may also identify emerging growth points, even at communities that today generate as few as 500,000 annual O&D passengers, and have the ability to produce strong price-based stimulation. The airline will look hard at any such community that's also experiencing strong industrial investment. Hence, the 100-seat airliners. Probably E-Jets.
A Simple, But Competitive Product. The new airline knows that the best product is one that gets the customer to the destination as quickly and as anxiety-free as possible. So the new airline will provide excellence in all aspects of customer service. It will offer a single-cabin product with advanced seat assignment system-wide. IFE systems may be in the plan eventually, but having video screens in every seat-back isn't a priority. Instead, in-flight service will be simple and efficient. This airline may dabble with innovative snack items - as long as the cost is about the equivalent of a bag of pretzels.
Competitively Carnivorous. Other airlines are best advised to not mistake the new carrier's excellent customer service as being an indication of how it views competition. These are not nice people when it comes to dealing with other airlines. Strong, dominant revenue share in chosen markets will be the goal. If that means some incumbents end up singing the blues, so be it.
This is a management team that fully understands that a strong economy won't last forever, and they know that traffic can and will flatten. They'll view every passenger now on American, United, Frontier, AirTran or anybody else as potentially theirs, and they will have as a basic marketing plan to change "potentially" to "now." They won't put other airlines out of business. Instead, they'll offer a level of service that will have consumers do it for them.
New In Concept & Direction. But Been Around Awhile. The new airline's name? Well, it technically won't be a new carrier, just one re-born and polished to meet the future, even if it does mean breaking with lots of things in the past.
Write this prediction down: the "new carrier" is Southwest.
This is an industry that's facing more wrenching changes, and airline "models" must change, too, even if they go counter to what "everybody thinks."
Despite high labor costs and a diminishing fuel hedge advantage, it would be foolish to assume that WN will stick with an MO that worked in the past, but won't do as well in the future. Southwest is most of the way there. They effectively have two airliner types now - 737-300/500s and 737-700s. They are moving to assigned seats. They are muscling into markets where they have to take share from incumbents, not just stimulate traffic with low fares.
Another type of aircraft isn't out of the question, notwithstanding the howls of cackling that would come from the ill-informed financial parrots on Wall Street. Southwest knows full well that the future can no longer depend just on low ASM costs - accessing emerging revenue streams is the name of the new game, and a flexible fleet is key to that. If a 100-seater, or even a mainline-cabin 70-seater can contribute, it'll come on property.
Most importantly, Southwest has management that, down deep, doesn't take any of the good press about Southwest seriously. They know the challenges they face, and they're dealing with them. Take it to the bank: they see the future, and they're taking nothing for granted.
If other airlines thought Southwest was a tough competitor in the past, give it another 18 to 24 months. Passengers and mid-size communities will get the best end of the deal, because WN's going to come knocking in any market where there's money to be made.
But for the competition, Southwest'll make Attila the Hun will look like a wus.
(c) 2006, The Boyd Group/ASRC, Inc. All Rights Reserved
