Southwest Airlines ‘absolutely’ harmed by MAX grounding
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
Southwest Airlines has “absolutely” been harmed by the grounding of the Boeing 737 MAX, said CEO Gary Kelly in no uncertain terms Thursday.
The Dallas-based carrier is short 75 MAX jets that it expected by the end of last year, a fact that has forced it to slow growth and cut flights — even as its competitors continued to grow — to make up for the lack of new planes, Kelly said during a quarterly earnings call Thursday.
“Sitting here dog-paddling for a year while our competitors grow right past us, is costing us six or seven million customers,” he said, adding that there is little Southwest can do about this “until we can get airplanes, until we can grow again.”
The airline shrank by 1.6% year-over-year in 2019, something it has seldom had to do in the past. Passenger traffic fell 1.5% during the period.
Only Delta Air Lines has acknowledged a benefit from the MAX grounding. Earlier in January, CEO Ed Bastian said without elaborating the Atlanta-based carrier had picked up “some marginal revenue” from competitors due to the MAX in 2019.
Delta’s narrow-body orderbook only contains Airbus A220, A321 and A321neo models.
American Airlines and United Airlines, two of Southwest’s largest competitors, are also hit by the MAX grounding. They have also been forced to cut capacity growth and selectively trim routes to make up for the shortfall in new deliveries.
Southwest does not expect the MAX to return to service until after the summer schedule, executives said Thursday. Boeing anticipates re-certification of the jet by mid-2020, a guidance update that Kelly told Bloomberg surprised him.
Related: Boeing issues new 737 MAX guidance
Southwest has trimmed some of its longer-haul routes while boosting short- to medium-haul ones to make up for the lack of MAX aircraft, said president Thomas Nealon on Thursday. These adjustments aim to provide “quality” connections to customers who would otherwise have flown nonstop.
“In no way are we walking away from long-haul flying,” said Nealon. “With the MAX out of service, when we have opportunities to replace profitable but below system average RASM [revenue per available seat mile] long-haul nonstop itineraries with high-quality connecting itineraries, we will do that.”
Among the longer routes that Southwest has suspended are flights between Austin (AUS) and San Francisco (SFO), Houston Hobby (HOU) and Orange Country (SNA), and Los Angeles (LAX) and Pittsburgh (PIT), according to Cirium schedule data for the first quarters of both 2019 and 2020. The airline also ended all service to Newark Liberty (EWR) in November.
While executives declined to provide capacity guidance for 2020, Nealon said Southwest will continue to grow at its Baltimore/Washington (BWI), Denver (DEN), and Houston bases, and to Hawaii this year.
Southwest has adjusted its fleet plan where it can to make up for the MAX. The airline extended the lives of seven Boeing 737-700s by two years in 2019, and has cut planned retirements of the -700s by at least half to 11 this year, said Southwest chief financial officer Tammy Romo on Thursday.
The airline continues to work to postpone 737-700 retirements where it can, and to acquire used 737-800s, she added.
Featured image by Marco Garcia/The Points Guy.
Welcome to The Points Guy!
Earn 90,000 bonus miles after you spend $3,000 in purchases within the first three months of card membership. Plus, earn a $200 statement credit after your first Delta purchase within the first three months. Offer ends 7/28/21.
With Status Boost™, earn 10,000 Medallion Qualification Miles (MQMs) after you spend $25,000 in purchases on your Card in a calendar year, up to two times per year getting you closer to Medallion Status. Earn 3X Miles on Delta purchases and purchases made directly with hotels, 2X Miles at restaurants and at U.S. supermarkets and earn 1X Mile on all other eligible purchases. Terms Apply.
- Limited Time Offer: Earn 90,000 Bonus Miles after spending $3,000 in purchases on your new Card in your first 3 months and a $200 statement credit after you make a Delta purchase with your new Card within your first 3 months. Offer expires 7/28/2021.
- Limited Time Offer: Plus, get a 0% intro APR on purchases for 12 months from the date of account opening, then a variable 15.74%-24.74%. Offer expires 7/28/2021.
- Accelerate your path to Medallion Status, with Status Boost®. Plus, in 2021 you can earn even more bonus Medallion® Qualification Miles (MQMs) to help you reach Medallion Status.
- Earn 3X Miles on Delta purchases and purchases made directly with hotels.
- Earn 2X Miles at restaurants worldwide, including takeout and delivery and at U.S. supermarkets.
- Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. *Payment of the government imposed taxes and fees of no more than $75 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
- Enjoy your first checked bag free on Delta flights.
- Fee Credit for Global Entry or TSA Pre✓®.
- Enjoy an exclusive rate of $39 per person per visit to enter the Delta Sky Club® for you and up to two guests when traveling on a Delta flight.
- No Foreign Transaction Fees.
- $250 Annual Fee.
- Terms Apply.
- See Rates & Fees