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Southwest Airlines is using the coronavirus to solidify its dominance in California

Sept. 16, 2020
5 min read
Southwest Airlines is using the coronavirus to solidify its dominance in California
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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’

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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

Featured image by Marco Garcia

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Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
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10XEarn unlimited 10X miles on hotels and rental cars booked through Capital One Travel
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Why We Chose It

The Capital One Venture X card is one of the best all-round travel credit cards ever launched. Not only is it offering a tremendous welcome bonus, but cardholders can earn tons of miles on everyday spending and receive a 10,000-mile anniversary bonus to boot. Its annual fee is $395, but cardholders can count on up to $300 in statement credits toward travel booked through Capital One Travel each year and other valuable benefits like access to Priority Pass lounges and Capital One’s own growing family of airport lounges.

Pros

  • Excellent welcome offer worth 75,000 miles after you spend $4,000 on purchases in the first three months.
  • Up to $300 in annual travel statement credits toward bookings make through Capital One Travel.
  • 10,000 bonus miles (worth $100 toward travel) each account anniversary.

Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
  • Earn unlimited 10X miles on hotels and rental cars booked through Capital One Travel and 5X miles on flights booked through Capital One Travel
  • Earn unlimited 2X miles on all other purchases
  • Unlimited complimentary access for you and two guests to 1,300+ lounges, including Capital One Lounges and the Partner Lounge Network
  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
  • Named editors' choice for "Best New Credit Card of 2021" by The Points Guy
  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023