“Wild times”: Southwest’s Gary Kelly announces service to MSP, discusses challenges in airline industry

Southwest Airlines chairman, president, and CEO Gary Kelly announces new Southwest service to Minneapolis-St. Paul.

DALLAS — Southwest is well-positioned in tricky times for the airline industry and will launch new service to Minneapolis-St. Paul in March 2009, Southwest Airlines chief Gary Kelly said today. The Twin Cities are the first new Southwest market since 2006, and the first planned service will be nonstop to Chicago’s Midway Airport.

The announcement of expansion comes at a time when the airline industry is contracting. Southwest has been on a cautious and slow expansion track, focusing more on filling in gaps between its current cities than opening new markets. The new service comes after one of the most difficult summers for the airline industry. “It is a wild time” for us, Kelly said. “We’ve got to get our revenues per departure up. . . . Our costs have gone up. I don’t see costs going back down.” Even so, he said, “if you take out fuel, our unit costs are way below the legacy carriers.”

Minneapolis represents a “true, new addition to our route system, so we have no risk of cannibalizing other markets.” The small launch (only one destination from MSP) will allow Southwest to build brand awareness in the Twin Cities, Kelly said. One reporter asked if it was a shot across the bow of the Delta-Northwest merger, but Kelly denied that. “The Delta-Northwest merger has nothing to do with our choice of Minneapolis. The opportunity to add a new market, more customers, more profits, is what it’s all about.” Southwest will serve the Humphrey Terminal, the smaller, newer terminal home to all the non-SkyTeam airlines at MSP.

Kelly also said that Southwest is in a strong position in the industry. “The brand is very strong. Our brand recognition is not only healthy, but it is improving, and it is arguably the best.” He cited a survey that reinforced these findings, even after “the difficulties we faced with the FAA this spring.”

He also cited Southwest’s prudential track record: “In the toughest decade in the history of aviation, we’ve made money not just every year, but every single quarter, even in the first quarter after 9/11. . . . We were prepared for [the current financial crisis], just like we were prepared for 9/11, just like wer were prepared for the first Gulf War.” In the current situation, Kelly said, “there is plenty of opportunity for Southwest Airlines to expand.”

Miscellany

• With respect to a potential competition from foreign carriers through an open skies agreement with Europe that might allow foreign ownership or cabotage, Kelly said that “the devil’s in the details,” but in general, he welcomed the competition: “We’re all about competition, and all about access.” He added that Southwest would be able to compete through its soon-to-begin codesharing to international destinations.
• When asked about the FAA penalty that is being negotiated, Kelly said: “We are most interested in sitting down with the FAA and reaching a settlement on that civil penalty. . . . Nothing more to report.”

Photos by Evan Sparks