Southwest seeks to take advantage of the “clear and stable” upward trend in Corp. Travel Demand

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Southwest’s Andrew Watterson discusses:

  • A surprise rebound in the convention / meeting business
  • Channel change from Southwest’s GDS strategy
  • Obtain operations beyond “acceptable” levels

Last week Southwest Airlines celebrated the 15th anniversary of its launch of operations in Denver, which has since become one of the largest hubs of activity for the carrier. Southwest’s EVP and Commercial Director Andrew Watterson spoke with BTN Transportation Editor Michael B. Baker at the event on the effect Southwest’s growth in Denver has had on corporate travel, the carrier’s strategy for recover from recent operational challenges and its prospects for corporate travel recovery.

BTN: Airline executives have generally said they expect slower business travel growth this year and then accelerate next year. Is that what you expect?

Andrew Watterson: This is the current hypothesis, although the forecasts for the return of business travel have been wrong for a year and a half, but it is a clear, steady and upward trend that we are seeing. [Small and medium-sized businesses] they were the first to get back on the road, but we are seeing that the vast majority of our accounts are active. It’s the account travelers who are really depressed, but for travelers who travel, their travel rate has only dropped by around 10%.

About a year ago, people were saying that conventions and internal travel aren’t coming back, but we’re seeing a lot of meetings and conferences, because they’re open. People travel on business to Las Vegas or Orlando to hold a convention or meeting and interact with others, and we’re seeing many businesses, particularly professional services firms, gather in their offices. They can’t travel to a customer site, so they’ll move their teams to a centralized office, work there a couple of days a week, and then go back to their home office. It was a surprise, because if I had asked anyone 12 to 15 months ago, they would have said they would be the last things to come back, but they were the first things.

BTN: Will it eventually return to pre-pandemic levels?

Watterson: Many times people focus excessively on being able to reach 100% of the travel demand. The fact that the business travel community has returned to 80% or 85% is important. There will be different types of business travel. While I don’t minimize it, it’s true with every recession. If you go back to the Great Recession or 9/11, these have changed the nature of business travel, so it’s common for an economic downturn to translate into a change in the perception of business travel. After 9/11, we had security problems, which hindered short-haul flights. During the Great Recession, many of the great conventions were vilified, and so there was a stigma about the conventions that lasted for a few years.

BTN: nach your recent announcement of capacity adjustments, are you sure Southwest will be ready for the upcoming vacation request?

Watterson: You never know what the weather will be like. What we are seeing is that with the summer we have increased our capacity and we have not fired anyone, but we have had people on extended leave. We were calling them back, and then hiring more people, and just like the rest of the economy, we found that we couldn’t hire people as fast as we were able to hire, and some people who came back from leave for whatever reason would turn around and he would have asked for unpaid leave. A combination of hiring goals and unpaid vacation meant staff were not right this summer. So, we immediately adjusted to capacity and reduced our capacity. We won’t be back to the same levels as this summer until early March or maybe later, so this gives us more time to increase the hiring we need. There will be fewer flights this holiday season than summer and more people we’re hiring, which puts us in a good position.

BTN: Outside of that weekend, how has Southwest’s operational performance been over the past few months?

Watterson: Since we made the immediate reduction that began in September and beyond, we have achieved acceptable on-time performance. We’d like to do better, but it’s good enough. We do not receive any complaint letters from it. We know that daily recoverability will be aided by the denser web we get with each passing month. At this time, the reliability is at an acceptable level, but it needs to be better. In general, we had planned to increase our depth for the return of business travel, which we anticipate in 2022.


We won’t be back to the same levels as this summer until early March or maybe later, so this gives us more time to increase the hiring we need. There will be fewer flights this holiday season than summer and more people we’re hiring, which puts us in a good position. “


BTN: What feedback have you received from corporate customers regarding the new destinations Southwest has added?

Watterson: A good portion of these are for leisure, and for business travelers, they like it, because they can use the points earned on business to fly for pleasure. The ones that have a direct commercial advantage are the larger city airports, such as Chicago O’Hare, Bush Intercontinental and Miami, but we also have medium-sized city airports such as Colorado Springs, Fresno and Bozeman, (Mont.,) Where there is business it happens there too and the companies that are there or that send people there are happy. We see in large metropolitan areas, where we are in multiple airports, offering choices to people.

Denver is a big goal for us. It is our largest airport. We walked in modestly 15 years ago and then, as we saw an increasingly robust response, we became what we are now. We’re getting 16 more gates as they finish our contest, for a total of 40 fights, so we’ll have ample opportunities to fly to new destinations and add more frequencies. We find Denver to be a market where air travel is essential to doing business. If you think about big cities, in most cases you can drive to another big city. We are based in Dallas and you can drive to Austin if you want or to Houston if you want. If you live in New York, you can drive to Boston or Philadelphia or take a train. But Denver, big cities are not reachable by car, so you have to fly to do business. It has brought greater utility to the Denver business community, especially with our flexibility inside and out. We continue to add more people here and more flights here, and we are grateful to have been welcomed by the city and the business community.

BTN: Now that you are in contact with all the major global distribution system providers, have you seen many channel changes?

Watterson: We are seeing decidedly incremental business from being in the three full-featured GDSs. We know there is a change and when we made the business case and planned to do it, we counted on the big change. What we’re seeing now is that businesses will continue to use multiple channels for different purposes. There may be a senior group that gets top-notch support from the travel management company and goes through the GDS, and there may be a standalone, self-service business unit using Swabiz. Something in between could use a direct connection. The final channel change will depend on the purpose of the trip for each of these segments.

BTN: What response did you see to the recent announcement of a new Rapid Rewards Business program?

Watterson: We’ve been doing beta for a while just to get rid of the nodes. We got a real surge in interest once we made it public and saw a lot of signups. It is a way for companies that are not old enough to have a negotiated discount but still want to favor us with some activity to actually get a discount, in terms of accumulated points that they can redeem for corporate travel. This is a way for them to earn a discount through proven performance.

BTN: What about your recent one announcements about sustainability?

Watterson: We are allowing more options for companies, depending on their sentiment and how they want to engage. If your company is large enough to finance the acquisition of sustainable aviation fuel, we can work together to get a direct line for you, down to the lower end, as an individual or company, where we offer compensation for a particular flight. what are you taking. We’ll give you Rapid Rewards points for it and match your gift, so we end up contributing more than you.

BTN: Is code sharing or interlining with other carriers still something Southwest is considering?

Watterson: It’s on our radar. Every year we review our tech budget to see how to spend it. Things like [Extended-range Twin-engine Operational Performance Standards] to fly to Hawaii, the GDS or the refreshing Swabiz. We’ve also just rolled out a brand new maintenance system, which you can also use for something like codeshare and spacing, so it’s not on that short to-do list yet. It’s something we still want to do going forward. We think it’s a good financial advantage as well as giving travelers extra options, but for us it’s the icing, not the cake.

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