Air Transport World

29th industry achievement awards.

Airline of the Year Southwest Airlines

Thirty consecutive years of profit is a remarkable performance in any business, but in the airline industry it borders on the miraculous. And yet, unless a volcano buries Dallas Love Field under a mountain of lava, it seems inevitable that Southwest Airlines this year will notch its 30th year of profit without a break, including during the post-9/11 recession.

While most US Major carriers were cutting capacity 10%-25% and laying off 110,000 workers in the past 16 months, Southwest hired 6,000 people. While passengers on US sectors of up to 750 mi.--where the majority of Southwest routes lie--were declining 10%-25% in 2002, Southwest's RPMs increased 2% for the year.

The airline has nor backed down in these hard times, adding 5.5% in ASMs and boosting its fleet with 22 new airplanes last year and 17 more this year while increasing its order backlog to 396 aircraft in the 200412 period.

In 2001 when US carriers were losing more than $7 billion, Southwest earned $511.1 million in net profit and carried 64.4 million passengers, making it the fourth-largest carrier in the world in passenger numbers. In 2002 as massive contraction was the order of the day elsewhere, Southwest carried more than 63 million passengers and at this writing seemed likely to earn more than $400 million. Meanwhile, US carriers are wrapping up a loss in the neighborhood of $9.5 billion.

The story of how Southwest continues to produce this string of incredible performances has been told many times and with each retelling changes very little. It is the original template for how low-fare airlines are supposed to operate and how they can continue to prosper despite the ravages of economic distress and the pressures of a mature corporation. Amazingly few have bothered to copy this template for success, but those that have stayed true to the model are reaping similar rewards.

However, being first has its advantages, and Southwest's growth rate on top of its substantial existing business means that in a very few years it will fly more passengers than any other airline in the world.

At the top of the list of Southwest's business model priorities--ahead of avoidance of congested, expensive airports and sticking with a single-model fleet--is its key focus: Maintaining control of costs. Cost per ASM, excluding fuel, has declined or held steady since 1999. Using costs as its base, Southwest sets fares at levels sufficient to 1) reward employees and managers, 2) attract more passengers and 3) satisfy shareholders, who include many employees.

And yet, keeping costs under control does not explain how Southwest has been able to keep its passengers satisfied. …

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