Flying against the storm

While most airlines continue to flounder, Southwest and Air Canada go against the grain with profitable bottom lines and generally satisfied customers. What’s behind their success?

Southwest’s strategy so far has been to expand routes and flights to meet a decades-long growth plan. But there are some signs of trouble such as the low-cost airline’s stock, which has been stagnant. The airline may also be starting to lose its benefit of aggressive fuel hedges.

“The current environment is a little tough,” chief executive Gary C. Kelly conceded in an interview with The Washington Post, adding quickly that Southwest is “stronger than at any other point in our history.”

But despite that, last year Southwest became the largest US airline in terms of domestic traffic for the first time in its history.

One factor in its success is that it has always pursued a policy of adding flights, seats and planes to gain market share, even in tough times.

While other carriers were reeling from a major economic downturn and slashing their fleets, Southwest added 120 planes since 2002, bringing the total to 494. It also increased the number of flights by 15%.

Southwest’s strategy has been mainly to use its growing fleet to serve less-expensive secondary airports near major areas such as Baltimore Washington International Thurgood Marshall Airport. That allowed Southwest to keep down costs and boost efficiency while reaching large numbers of customers.

Southwest also served some larger airports where executives felt it could quickly gain market share.

Air Canada, for its part, has been successful in large part through some innovative ideas. It sells bulk travel to individual customers, for example.

“That’s just one of a half-dozen innovations by Air Canada in recent years that have US rivals glancing northwards to monitor their acceptance by travelers,” writes the AP.

The airline, which used to be a money-loser, has been known recently as a profitable pioneer finding ways to sell passengers only the services and amenities they want.

With Air Canada, for example, a traveler can cut fares by agreeing to leave a suitcase at home or by forgoing loyalty points. Or the traveler can choose to pay more for reserving a seat.

Since the travel bust earlier this decade, Air Canada, the world’s 13th-biggest airline, has broken from the pack of big airlines by focusing on customers rather than deep cost cuts, said Perry Flint, editor-in-chief of Air Transport World.

Some innovations:

Ø       Air Canada last year became the first North American carrier to implement a la carte pricing. Bare-bone prices are available with flyers paying extra for reserved seating or more schedule flexibility.

Ø       In 2004, the airline started selling passes that let customers buy 10 or 20 flights for travel in specified zones over a set period of time.

Ø       Air Canada last year introduced subscriptions which allow buyers to take an unlimited number of flights for three or six months. In March, the carrier started selling them for the first time in the US.

Ø       Air Canada is the first airline in the world to install digital entertainment systems in every seat, even in its smallest 70-seat jets. The system is free.

Ø       This spring, Air Canada will begin testing technology that lets travelers check in, check bags and ultimately board Air Canada flights with just a cell phone or mobile device. A traveler will be able to receive boarding pass information through a tiny bar-code image on a cell phone or mobile device.

In short, Canada’s biggest and oldest carrier is showing its US competitors a new way of doing business that could become the future of air travel.

Report by David Wilkening