Southwest Airlines is using the coronavirus to solidify its dominance in California
Southwest Airlines warns in its boiler plate to investors that "outbreaks of disease" could negatively affect its business. But the carrier does not suggest that a global pandemic could also be a long-term boon to its business.
Yet the coronavirus pandemic is proving to be something of the latter to the Dallas-based carrier, at least in terms of network expansion. Miami (MIA), Palm Springs (PSP) and Steamboat Springs, Colorado (HDN), will all join the Southwest map by year-end. This is a surprisingly robust expansion timetable for an airline known for its metered, cautious approach to adding new dots.
This is not to say COVID-19 has not hit Southwest hard. The airline expects its first annual loss since 1972 this year and roughly 17,000 staff have taken leaves of absence or departure packages to help reduce expenses. The voluntary staff reductions mean Southwest will not furlough any workers this year, but involuntary cuts could still come in 2021.
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"As we've seen in past downturns, we've been able to capture substantial demand post the downturn," Southwest commercial chief Andrew Watterson said of the airline's crisis strategy in a May interview. "We'd expect no different this time."
This is where Miami and Palm Springs come in. While the former is a seemingly clear-cut push into South Florida's primary airport, the latter is something of a mash up. Palm Springs offers both outdoor-oriented attractions for social distancing-minded travelers and closes one of the last gaps in Southwest's robust California network.
The popular desert destination "is the largest California city that we do not serve," Southwest CEO Gary Kelly told TPG in an exclusive interview. "We are the number one airline in California by every measure. So here it's an opportunity for us to plug it in [to our network]."
Related: Southwest CEO says Miami push part of long-term strategy, not 'pandemic play'
Palm Springs was the 11th-busiest airport in California with 2.6 million travelers in 2019, according to U.S. Bureau of Transportation Statistics data via Cirium. And, as Kelly said, Palm Springs is Southwest's busiest unserved market in the state since the carrier added Long Beach (LGB) flights in 2016.
Southwest has its work cut out for it at the Southern California airport. All of its major competitors already serve Palm Springs, with Alaska Airlines leading the market with a nearly 24% share of passengers in 2019, BTS data shows. American Airlines had just over a 22% share and United Airlines 22%.
But the carrier's California expansion is not limited to Palm Springs. Southwest was awarded all of 17 slots JetBlue Airways' is giving up in Long Beach following that airline's decision to close up shop and move its West Coast base to Los Angeles (LAX) beginning in October.
Related: Southwest Airlines grows route map, will add Miami and Palm Springs
Alaska, JetBlue and Spirit Airlines are also growing in California during the pandemic. Alaska is using the drop in air travel on some of its bread-and-butter business routes to add more than a dozen new routes along the West Coast, particularly from Los Angeles to the Pacific Northwest. JetBlue will open a new LAX base next month and expand it with new routes in November and December. And cuts by other airlines allowed Spirit to add slot-restricted Orange County (SNA) to its map.
Southwest has not said what routes it will fly with the new slots in Long Beach or from Palm Springs. Kelly declined to provide a hint for either. But, looking at Palm Springs, don't be surprised if flights to key bases like Denver (DEN), Oakland (OAK) and Phoenix (PHX) are high on the list.
Related: Southwest Airlines wins JetBlue's abandoned slots in Long Beach
The Golden State expansion comes 30 years after Southwest first elbowed its way into the intra-California market. The carrier used the Gulf War crisis and ensuing recession to expand rapidly in the state —a move that eventually forced American Airlines and USAir (later US Airways) to retrench there.
Southwest anticipates being roughly a quarter smaller at the end of the year than it was in December 2019.
Related: US airlines 'fighting for survival' with no hope of V-shaped recovery
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