Southwest Leaves Mexico City, Shows the Limitations of Its US-Focused Strategy

Below, you’ll find a map of Southwest’s destinations outside the continental US. One of these dots is a different type of destination than the rest. Which one is it?

Southwest Airlines international route network via Southwest.com

If you said Mexico City, you’re right. Mexico City is very different from the rest of these destinations, and it’s different in a way that makes it hard for Southwest to serve profitably. So it should come as no surprise that Southwest quietly announced it was pulling out of Mexico City entirely at the end of March. If anything, this move shows the limitations of Southwest’s strategy as it expands into the international realm.

When Southwest first started flying internationally, its charge was clear. It would fly Americans to foreign leisure destinations. This was about expanding the appeal of the network to people in the US, not those abroad. And for most of these destinations, that’s exactly what has happened. (Havana is a bit more complex, but it’s still, I presume, a leisure/friends/family focus.) Mexico City was different. That isn’t a leisure destination, so it may have seemed like an odd choice.

I can only assume that Southwest fell for the trap that all airlines fall for… Mexico City is a slot-constrained airport, therefore, I MUST FLY THERE. Just having slots creates a perception of them being valuable. So Southwest began flying to Mexico City from both Houston and Orange County.

Orange County was an immediate failure, and it wasn’t all that long before Southwest pulled the plug on that. (A loss of slots at Orange County only hastened its demise.) But in 2017 when Delta and Aeromexico were forced to divest slots in Mexico City, Southwest wanted some so it could grow further.

It had plans to grow Houston flying (and re-time it to better departure times), plus it wanted to fly to Ft Lauderdale and Los Angeles. The latter two never happened, and Southwest gave those slots back. In recent times, Southwest has been flying four daily flights between Mexico City and Houston/Hobby and nothing else.

Now, Southwest says at the end of March, it will pull out entirely. So what went wrong?

Mexico City was just never a market that would work well with the Southwest model. Southwest has always looked at international as an extension of the US market, and that was the first problem for Mexico City’s survival in the network.

Since Mexico City is not a big leisure destination for people in the US, it’s a market that needs to rely both on business travel and travelers originating in Mexico. Southwest just isn’t built to make that happen.

For business travelers, Southwest couldn’t even book international flying on its SWABIZ portal for a long time, so that shows just how important it was for Southwest to cater to. Southwest also had such limited service to Mexico, that it would be hard to convince people to connect through Houston when there were so many more convenient options available on other airlines.

And we’re not just talking about convenient options being available on other airlines, but rather CHEAP convenient options. Mexico City fares are pretty low. I wrote this on Friday. Here’s what Southwest wanted for travel the next day:

It’s no better elsewhere. Just remember how much trouble airlines have had flying to Mexico City from Los Angeles. Alaska and United pulled out. American cut back one flight. Fares in other markets are low as well. When I looked, I could get from New York to Mexico City the next day for just about $200 one way.

With limited demand from within the US, looking to people originating in Mexico could have helped, but good luck with that. Southwest still can only accept payment in US Dollars. Further, since Southwest requires booking direct, people in Mexico City would have to know to go to southwest.com to find options.

What are the chances that a large number of Mexicans are going to go to southwest.com and pay in dollars when there are so many other more convenient and cheap options available through simpler channels? Pretty slim.

For Southwest, this was the one market where a foreign point of sale really could have made a difference. Considering how much backlog the airline has on completing far more important IT projects, there was little chance that it would devote resources just to try and boost this one route.

Instead, it’s easier for Southwest to just walk away. If anything, this affirms what we already knew about Southwest. Unless it wants to actually change its model, the only international markets that make sense are those leisure spots that appeal to the US traveler. It’s a niche that helps make Southwest’s Rapid Rewards frequent flier program more valuable, but it’s a small niche. And Mexico City just didn’t fit in.

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25 Responses to Southwest Leaves Mexico City, Shows the Limitations of Its US-Focused Strategy

  1. Pedo says:

    Used Southwest to go ATL-HOU-Mexico City this past Oct. Full flights both ways and a breeze at the newly remodeled Hobby airport customs. Sad to see this option go as I will need to make the trip again soon and the fare was several hundred dollars cheaper than Delta.

  2. Eric Olesen says:

    Huh. All that money and time invested in Amadeus, and they still couldn’t make a foreign point of sale work?

    I know WN loves direct sales, but they have the right tool for MEX to have been successful. Sounds like they’re simply too stubborn to adopt their distribution model,

    • Andy says:

      Southwest’s direct sales model helps drive their customer loyalty. Many Southwest customers start their search at southwest.com, so they never even see other fares that may be lower, reducing attrition.

      • Eric Olesen says:

        Sure, WN can “reduce attrition” with a direct sales model, but that’s done at the expense of new customers finding their fares or booking with Southwest.

        WN of all carriers should have been able to find a way to balance out their domestic direct sales and manage a foreign point of sale. They chose not to, and are paying the price for it here.

        Maybe it wasn’t worth tweaking their model, but what it does say is that WN won’t be successful beyond international locations that cater to US point of sale.

  3. Flip the Dolphin says:

    I agree with your take on Southwest and Mexico City. However Alaska has had their trouble getting into that market as well does that speak to AS or the market in MEX?

    • CF says:

      Flip – Well, Alaska was already starting from a bad place since it wasn’t even flying it from its primary hubs. It tried LAX which is a oversaturated market with very low fares as well as SF which United and Aeromexico both fly twice a day. Lastly they tried San Diego which is a thin market. So I think its routes were already an uphill battle for the airline.

  4. A says:

    I’d be curious to know how many locals in Mexico City book flights on AA/DL/UA going to the US. My wager would be it’s well under 50% of pax on those flights leaving MEX and headed norte. That would be how I’d evaluate how much WN is leaving behind by having an antiquated booking system. That and they’re relatively new to Mexico so the locals probably don’t know their brand as they do the US legacies. How much as WN marketed the flights in the local market? And for that matter how much has it been marketed to Americans?

    To say the flight is failing only because of Mexican’s not flying the airline is a bit short sighted in my opinion. How many of the premium US business travelers going to MEX never altered their loyalty when WN entered the market? Also, if you’ve been flying direct from markets like Chicago or NYC or LA why would you want to add a connection in Houston? To me it seems like WN added capacity that wasn’t needed and from a city already served by UA at the airport on the other side of town. Rather than truly compete they are abandoning this adventure.

    • stogieguy7 says:

      And you’ve called out a big piece of the problem: the competition. The likes of Aeromexico, Volaris and Interjet fly from major cities all over the US direct to MEX. Why suffer a connection in HOU if can fly Volaris direct to MEX? That’s the case in Chicago and it’s the case in many other markets as well. Also, if you go to the Volaris website, you see a link to select your currency. Not having this will definitely dissuade any non-US customers.

      WN’s service to MEX would appear to amount to dipping a toe in the water. And that water is cold.

    • CF says:

      A – Don’t forget that Delta and Aeromexico have a joint venture so people don’t have to think about booking Delta. American now works with Interjet and United has a deal with Aeromar. Those are lesser agreements, but it helps to feed them. Also, I never said that the flight was failing solely because Mexicans wouldn’t take it. That’s simply one factor.

      • henry LAX says:

        Aeromar is a tiny airline with less than 20 turboprops. They absolutely aren’t making much of a difference in the bigger picture other than those who really need access to an airport not served directly from IAH.

        There were rumors / wishing thinking of Avianca eventually buying out Aeromar and making it “Avianca Mexico” but so far nothing came of it. They’re probably try to figure out how to salvage O6 before going for more than they can chew.

  5. MarylandDavid says:

    I too believe that this where the “little guy” model that WN likes to champion falls flat. Will they ever get on board with code sharing or a different mix of aircraft, for example? If not, they will always just be a domestic airline with some foreign leisure destinations mixed in. That model may have worked in year’s past, but now it feels to me like they are being squeezed on both ends. Why can’t they develop code sharing with like-minded airlines (Condor, WOW, Ryan Air, etc.)? And if not, then fly 767s too. Would it really be so hard to have two different types of aircraft in the fleet?

    The Mexico City adventure really highlights WN’s limitations.

    • richard says:

      Southwest won’t partner with other LCC as they are not of the same culture. Southwest’s whole gig is that they are all inclusive, flexible, and super friendly and fun. Simple Ops gives them a cost edge and the unique charm gives the revenue edge. That’s a totally different business model to Ryanair and Wow for certain, even Condor and Norwegian are into selling add ons a fair bit.

      • MarylandDavid says:

        That assumes what has worked in the past will always work. Part of their appeal was also LOW fares, which is no longer the case.

    • Nathaniel says:

      It takes more than just some 767s to make a European flight work. Staffing would be the biggest problem as you suck up a larger crew for multiple days for just one flight. I just don’t see Southwest wanting to do that.

  6. Meghan Skornia says:

    I have flown that Hobby to Mexico City flight dozens of times. Its never smooth, and a mechanical issue can cause passengers to get stuck for a few days. Ended up switching to Volaris or Aeromexico for that same reason.

  7. Christophe says:

    It’s a shame, I used twice the SNA service and much preferred it over landing at LAX. I think SWA is a viable option to travel from MEX to the US, but as you pointed out, the badly needed a MX POS.

  8. Anthony says:

    Wow, this is a remarkable surprise… I would’ve thought the largest city in North America
    would be a tremendous leisure destination. But as you point out, SWA isn’t the only carrier
    that hasn’t been able to make it work.

    • henry LAX says:

      there’s also a huge difference between peripheral trimming, which is what UA and AA did, and what WN did, which is wave the white flag higher than FL350.

      if WN is happy with their business model, sure be my guest. But if they wanna start entering other similar types of business-heavier destinations, it’ll be deja vu all over if they refuse to make the necessary structural changes to make it more foreign friendly.

      i mean this is the airline that keeps reminding us how they’re absolute king on intra-cali flying with a rabidly loyal fan base aand doesn’t have the guts to announce any LA Basin – Hawaii service.

  9. DesertGhost says:

    While Southwest’s strategy is limited, it knows what it is as a company. That’s why it’s been consistently profitable while other airlines have gone through multiple bankruptcies or have gone out of business. There’s something to be said for not trying to be what one isn’t, and instead, focusing on what one does best.

  10. Michael Jones says:

    Travel agents. Mexico City and the entire country for that matter still depend on travel agents for air travel. Mexicans trust their travel agent, who likely has served their family for generations. They do not trust banks…theirs or anyone elses and for good reason. Peso devaluations have destroyed many a family’s wealth. It is doubtful WN knows this or if they did, that they involved travel agents in their marketing and sales campaigns. There is lots of business to be had at MEX but not with WN’s model plus lack of connections or options business travelers seek out. It will be interesting to see if any other US low cost carrier ventures south of the border.

  11. ChiGuy1979 says:

    I somewhat understand the appeal of Southwest but this is a prime reason why I prefer to spend dollars and accrue points with their competitors. The domestic network is good but not great at getting people to most larger cities. The international destinations, however, are pretty pathetic. Almost every single non-US place the fly is overrun with ratty all-inclusive resorts and waddling sunburned southerners and midwesterners. Of course Mexico City wouldn’t be a slam dunk! That would be like them launching flights from Hobby to Toronto… sure, there’s some appeal for the leisure traveler in the summer but I doubt they would enjoy today’s 3F/-16C degree weather. Moreover, at some point, it only makes sense to tap into an international consumer base instead of only flying Ma and Pa Kettle to their sunny resort. The UA/AA/DL could learn a thing or two about customer friendliness from Southwest but I’ll put up the hassles, take advantage of the often cheaper fares, and enjoy knowing that I can go somewhere more exotic and exciting than anywhere WN flights.

  12. Eric says:

    It seems like a lot of U.S. based airlines struggle with Mexico City. American ended service from Chicago after serving the route for decades, JetBlue’s fares from New York to Mexico City get be purchased for under $200 (June purchase date). It looks like Southwest happened to be the weakest in a ver weak market.

  13. Hi there,
    Good read! I found your site on Nomadic Matt and the name caught my attention! I am not an aviation guru but I am cranky flier lol. I have the worst luck and happened to be at MCO yesterday checking in while the man charged security. Anyhow, on SW hoping you might have some insight on this one. Pricing seems to have doubled in the last two years. It’s now consistently cheaper for me to fly into O’Hare on United vs. SW to Midway and often half price! I’ve seen this across the board. I used to be a loyal SW fan but I am now back on the legacy carriers. Any insight on what caused this? While they have fantastic customer service, a great and a great track record how can continue this ‘low-cost model” when it’s not low cost? I could be way off base but it feels like they are flirting with changing their model and if they are, then they will need to offer legacy amenities and join some of the networks. PS, I think I read somewhere that they were only able to compete so cheap through ~2016 due to pre-paid fuel that they strategically locked pricing in for but I can’t find anything concrete. Thanks, Nikki

    • CF says:

      Brit – Well, the airlines all generally price based on what the market will bear. I’m not sure if Southwest fares are higher in this market in general or if you are just traveling on more expensive days, but it isn’t a surprise to see Southwest continue to increase fares in markets where it can.

      • Very true but I think they are out pricing themselves in some cases or the legacy carriers are underpricing to gain share. You might be right about the days because the Chicago/FL route I fly is for business. Thanks for replying :) Nikki

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