Earlier this month, Southwest Airlines President Tom Nealon came to Pittsburgh to meet with business leaders about expanding the airline’s corporate sales. He sat down for an interview with Blue Sky and PIT staffers. Here’s an excerpt from that conversation.
Where do you see growth opportunities in Pittsburgh?
I’m not sure what the ultimate opportunity size is or how big it becomes or at what pace. But a conversation I just had, it’s actually really interesting, because the economy has really transformed. The university centers you have here; programs that are leading-edge – Pittsburgh is a hotspot. I was impressed today in our corporate customer meeting that there were lots of tech-oriented companies in there, a lot of health(care).
I think we have work to do in building our large corporate customer base. But I think there’s a really healthy opportunity – our sweet spot – for our small, medium enterprise opportunities. … I think the growth is going to be the business side in Pittsburgh.
What does that mean in terms of additional routes or frequencies?
I don’t know. I’m not sure what it means right now. I think the question is, what are the markets we feel we need to go to? Where do we feel like we are underserving the Pittsburgh business community? Where actually we are so large in other markets – San Jose, we are dominant. San Diego, Sacramento, the whole California West Coast.
Are we serving Pittsburgh enough from those locations? It’s as important – not just getting Pittsburghers out to the West Coast – it’s as important to get the others into Pittsburgh. It’s inbound and outbound. I’m not sure what those markets are right now but that’s why we have network planners thinking about that. It’s hard for me to say how big we think it is but I do believe it’s underdeveloped. I think we have significant opportunities to grow the Pittsburgh market for us. … I think it’s to be seen how big it can be, but I think the source of the growth will be on the business travel side.
I think we have significant opportunities to grow the Pittsburgh market for us. … I think it’s to be seen how big it can be, but I think the source of the growth will be on the business travel side.
There’s always talk in the media of Pittsburgh becoming a focus city for Southwest. What’s your reaction to that?
Well, it depends how you define ‘focus city.’ … But in terms of what role could it play in our network, I think you want to move beyond a fair-share definition. Actually, I don’t think we have our fair share. I think we’re way underdeveloped from our fair share, but we’re kind of in a fair share mode right now.
I think the opportunity is much more than that. We’re the leader. We’re not a leader by as much as I would like. Our relative market share is slightly more than one, but we should be more than that, so I think we’re underdeveloped here.
It’s not a question of not wanting to invest in Pittsburgh. It’s a question of, ‘Where are the competitive battles across the network?’ When you think about the network – it really is a network. Just putting a flight into Pittsburgh, it may not make sense for the broader network. But it’s a very competitive market right now. There’s opportunity in Pittsburgh but there’s not a battle going on in Pittsburgh. And a significant portion of our capacity over the past several years has been toward the West Coast, toward California, where there really is a battle for California, which we are doing just fine in. And we’re real excited about the opportunity in Hawaii, which takes a significant portion of our capacity for 2019. And that’s very strategic and very long-term. We’re going to build it out; we’re going to stick with it.
We’re continuing to invest in Baltimore; we’re continuing to invest in Atlanta, Fort Lauderdale. Pittsburgh is one we always say, ‘How can we invest more in Pittsburgh?’ We all want to invest more. It’s just when you look at where the battles are and you get done allocating them, there’s not enough aircraft again. We’ll get there. I don’t think it’s a race. I just don’t see it happening real quickly, especially in light of the Max grounding. But we have added a few frequencies – that’s a good start, but it’s not as much as we should be doing.
What are the type of things that register on your radar as a company when you’re looking at where to invest?
Well, the first thing you look at is where do people want to go to? Where do people want to fly to? What is the traffic? There’s enough data out there you can see what the traffic numbers are for city pairs. You can get that through lots of sources. We’ll certainly look at that. We’ll look at the local economies. We know where the vibrancy is, we know where the softness is. We look at the business environment. We know, ‘Here are the key corporations we should be working with.’
But at the end of the day, you have to look at how does the network fit together? You can’t just say, ‘It would be great to have this route from here to here.’ It really does have to fit into the context and the structure of the network so you can route the aircraft, crew them properly, get them to the maintenance bases, start the next day properly. It is a multi-dimensional chess game. It really comes back to – I can make this really simple – where’s the biggest fight and are we in the right fight?
Will Southwest fly to Europe?
I think more likely is Southwest will codeshare with someone to carry our passengers to Europe.
Maybe at some point. I think more likely is Southwest will codeshare with someone to carry our passengers to Europe. At some point, if we want to fly to Europe, I think that the 737 can do a very modest portion of the mission – maybe London, Scotland, Ireland. But you’re not going to do a true Europe network with a 737, which brings you into a larger fleet. You could do that at some point, you could bring a wide-body in. I don’t see that happening because there’s so much growth opportunity in our core network, why would you introduce complexity until you need to begin to search for new, fallow fields to grow? We’re not anywhere near that point.
We probably have 400-500 aircraft worth of growth within our core network, and that’s more frequencies in places like Pittsburgh, it’s through city pairs to Pittsburgh. We have those opportunities all across our network. So at some point maybe there’s a wide-body in the future of Southwest, but why would you even think about that when there’s so much opportunity within your core? We’ll accomplish what you asked through codeshare.
What was the reaction to your corporate luncheon in Pittsburgh?
I thought it was really good, very positive. I thought it was great we had customers showing up wanting to talk to us. They love the brand, they like the product. They think we’re deficient in some of our services – whether it’s customer care or the ability to change tickets or transferability. That’s what you have to do to be in the corporate sales business and we’re deficient right now. We’re going to have to fix those deficiencies and we will.
There’s not a business class product with Southwest. Is that an issue?
We think we have a great product for what we stand for and it’s worked for 48 years. If we need to enhance the product, we can enhance the product. But it probably doesn’t incorporate assigned seating – it could; it may not. It won’t, in my mind, incorporate class of service. That’s not who we are. It changes the economics. It changes the business model. But I think we have a really great product for the corporate traveler. I think it’s going to get better. We haven’t even begun to introduce our loyalty program or credit cards. There’s a whole host of things when you get into this business in a serious way, you have to get into the business.