The Cranky Flier Interview: Southwest’s Andrew Watterson Talks MAX, Newark’s Fall, and More

Late August means it’s time for the International Aviation Forecast Summit, better known as the Boyd conference. For the third year in a row, I sat down with Southwest Chief Revenue Officer and EVP Andrew Watterson.

We talked at length about the 737 MAX, dug into the airline’s pullout from Newark, and finished up with a look at the reasons behind the decision to become much easier to deal with for corporate clients. I think you’ll agree it was an interesting conversation.

Below you’ll find our 18 minute discussion.

If you’re wondering about the Seth Kaplan article I referenced in the podcast, here it is.

I have plenty more from Boyd, but it’ll take me some time to get it all together. In the meantime, go ahead and leave your comments for your favorite airport code nicknames. If you heard the podcast, you know Andrew will be watching….

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36 Responses to The Cranky Flier Interview: Southwest’s Andrew Watterson Talks MAX, Newark’s Fall, and More

  1. MoCo Aviator says:

    Haven’t listed to the interview yet, but will definitely do so.

    I’ve heard some people refer to BWI as “Bee-Wee.” Those people are monsters.

  2. Matt D says:

    Dallas Ft Worthless
    Laxative
    Bashville
    Sewerk
    Shitcago
    Sacra-tomato
    San Hosed

  3. Jeannine Roman says:

    Love Southwest, I’m a long-time customer. However, I will NEVER fly the MAX8/9. I will go out of my way, both financially and time-wise to avoid this plane. My concern is how many as yet to be discovered faults lie unknown within this plane.

    • Borntofly says:

      Better avoid airbus as well… there is way more programming errors than the MAX.

      • Thomas H. Martin says:

        And engine problems on the NEO with both the PW and GE engines!

      • Jeannine Roman says:

        Good to know.

        • Borntofly says:

          By the time, the Max is back flying it’ll be one of the safest airplanes ever… The scrutiny that it’ll go through prior to entering passenger service will be unmatched.

          • Jeannine Roman says:

            Do you, by any chance, work for Boeing or the FAA?

            • Borntofly says:

              Nope, neither… Sounds like your mind is made up. Good luck in your future travels.

          • Oliver says:

            With all due respect, that is exactly Boeing’s CEO’s claim/promise, Borntofly.

            https://www.businessinsider.com/boeing-ceo-vows-737-max-safest-planes-ever-fly-2019-4

            I am fairly certain it is nonsense. There are lots of airplanes out there with excellent safety records. There is no reason to believe that the MAX will be the safest ever. Given the shenanigans with the original certification, I simply have to wonder what else was missed. And I doubt that the entire certification has been redone.

            We are still also don’t know why Boeing ever thought that one sensor’s input was good enough. And the second flaw recently found by the FAA – why was that not found by Boeing QA?

  4. dfw88 says:

    Haven’t listened to the podcast, but my favorite nickname is when people call BNA “bananaville”

  5. Jon Snow says:

    Southwest will participate in Travelport and Amadeus… sometime late next year. Let’s not get ahead of ourselves, 1960s technology takes time to implement!

    • Thomas H. Martin says:

      Yes, and their failure to run “red-eye” flight will continue to hurt them, especially in the Hawaii market.

  6. MRY-SMF says:

    Please continue this annual tradition of interviewing Andrew Watterson!

  7. Tim Dunn says:

    I am not a fan of podcasts but this one was worth listening to.

    Quite simply, WN nailed the MAX grounding which was as close to 9/11 for them as 9/11 was for the legacy airlines. The fact that they reported earnings as solid as they did in the midst of flat to decreased capacity because they had so many aircraft unavailable to them is a testament to how well LUV is run.
    Lots of airlines have blamed the MAX for lots of their own management failures but WN and other pure 737 operators are really the only airlines that have a right to blame their woes on anyone – and yet WN has maintained its consistent top of the industry profitability.

    The MAX grounding has exposed a number of structural issues which WN faces and they simply were forced to address them. First is that they don’t do well in legacy carrier hubs, esp. in single airport cities – which is all of Delta’s interior U.S. hubs and many of American’s. WN spent an enormous amount of effort – as noted in the podcast – gaining access to some of the richest and most important markets and yet their success in many of them has been limited overall. It is also notable that they have yet to settle the Love Field access issue with Delta, which clearly invalidates their charge that Delta is trespassing since that should be a very low barrier to prove. I strongly suspect that DL’s continued presence at Love Field is a reminder from Atlanta that forcing airport access is a two-way street and the list of Delta’s next round of focus cities is squarely targeted at high-growth markets where WN is the largest carrier and where Delta will gain more space to grow. Airport access and growth will be an increasingly important issue for the US airline industry in the next few years as many of the busiest coastal airports have limited room for terminal expansion and absolutely no hope of new runways; WN is at a significant disadvantage in airport access and the fact that they are pulling out of or pulling down some of the major airports they grew over the past 5 years indicates the challenge they will have in arguing for the access they once got. Add in that the ultra low cost carriers now are the price leaders in the industry and also use aircraft that seat as many or more passengers as WN and that makes it even harder for WN to argue for greater airport access in the future.
    WN also has to address its inability to penetrate ethnic Latin America markets as well as markets where the point of sale does not favor WN’s strength markets. Their increased participation in GDSs is a start but they simply do not have a business model that works for a global airline – which is what WN started down the path of becoming w/ its expansion into MEX but has had to retreat from. The same reasons why WN didn’t work in EWR but LGA does (very well discussed in the podcast) are the same issues that they have to overcome in order to grow to Latin America where they should have enormous growth potential if they can fix their structural issues. Their growth to Hawaii was simply a result of those structural issues not being relevant in that market.

    The 3 legacy/global carriers are tougher competitors to WN than they have ever been. WN has to figure out how to push into the big 3’s markets if they are going to continue to grow. The fact that AS and HA have large parts of the Hawaii market makes it easy for WN to push their way into a market at the expense of smaller airlines instead of having to battle the big 3.

    Yes, CF, you have one of the best discussion forums in the industry. It draws a cross-section of people from the industry including consumers and you appropriately moderate it to make sure everyone’s voice gets heard. The fact that you often feature key industry leaders and essentially allow the public to interact w/ them is virtually unheard of anywhere else. Keep up the good work.

    • CF says:

      Tim – This is really the opposite of 9/11. During 9/11, you had too much capacity and demand dropped off a cliff. For the MAX, demand remains strong but capacity falls off a cliff. Having too little capacity has never killed an airline. Having too much has.

      • Tim Dunn says:

        I understand that, CF. My point is that the MAX grounding has been an existential crisis for WN on the order of 9/11 for the legacy airlines.

        I in no way diminish the loss of life and pain that was 9/11 and which is very different from the grounding of an aircraft.

        The MAX grounding has singularly impacted WN more than any other event in their history – that is the parallel w/ 9/11. 9/11 turned into opportunity for other airlines including WN but it was a financial disaster for the legacy carriers.

        Your point is valid that the strong environment has allowed WN to cull its markets to fly the ones that are the most successful – but that was to a great extent what the legacy carriers did post 9/11 – just in a low demand environment.

        and the primary point is that WN’s profitability has hardly been impacted by the MAX grounding even while other carriers have blamed financial underperformance on the MAX grounding

  8. SpiritFF says:

    Amazing that two airline guys don’t know the term “bee-wee” is more commonly identified with BWIA – British West Indies Airlines, not Baltimore/Washington International!

  9. DesertGhost says:

    Southwest’s exit from Newark is another example of an airline that follows the advice of former GE chairman Jack Welch, “If you don’t have a competitive advantage, don’t compete.” Southwest has done that better than anyone else for a long time. The company understands what it is, and just as importantly, what it isn’t.

    • Tim Dunn says:

      that is exactly right. Warren Buffett says a lot about company success and moats – which is no different than dominating markets -which is what WN does.

      Well run businesses do not compete in markets where they cannot make money. As much as some airline fans want to believe otherwise, there is no glory in flying someplace just because it is sexy – unless you are government owned.

      Interestingly, WN and DL – both at the top of the industry in profitability – have much lower percentages of market churn – new markets minus cancelled markets – than other airlines including American and United and of course the ULCCs. WN and DL are not trying to find the next big idea and throw airplanes into markets to test them out only to find that many of the markets don’t work as expected.

      As I noted above, part of the reason that WN is pulling out of EWR is because it gained access due to political forces – arguing that it should be given gate space because of the UA/CO merger and because WN sold itself as the best alternative to keep UA’s fares down in EWR.

      WN did succeed at doing that from a consumer level but they didn’t succeed as a business because the fares they were getting are not high enough to cover their costs.

      At DCA, where WN has grown to #2 in terms of passengers largely because of their political ability to sell themselves, they have done better than in other legacy carrier hub markets. It is now actually B6 – which also received a share of the DCA slots offered via divestitures – that is struggling to stay in key competitive DCA markets and has had to retreat to its strength markets.

      WN is first and foremost a marketing machine that flies airplanes but they do understand basic business principles very well. If they can’t make money, they exit markets. The fact that they like DL make as much money as they do says that there are plenty of markets on their network that are very profitable and where they, not their competitors, have the advantage.

  10. brentw says:

    Nice interview. Love podcast.

  11. Jeannine Roman says:

    Re Borntofly (love the pseudonym): How many of the computers on Airbus manufactured planes have had “programming errors” which took over flying the plane and sent it into the ground?

  12. Kilroy says:

    Always happy to hear Andrew Watterson speak. Worked with him briefly around 10 years ago, and he’s a great guy and a bit of a prankster at heart, never takes himself too seriously.

    Regarding airport nicknames based on their 3-letter codes, I think the Pensacola-Charlotte route (PNS-CLT; add vowels to those airport codes and/or say them aloud at your own risk!), flown by American, is one of the most hilarious routes (and two of the most hilarious airports) based on the codes. I’m sure some AA insiders have some good (albeit probably not family friendly) nicknames for that route.

    I refer to MHT (Manchester, NH) as “Mad Hatter”, but that’s a bit of a stretch and I think I’m the only one who calls it that. JFK I refer to as “Idlewild”, and ORD as “Orchard Field”. EWR I tend to think of as “sewer”, as that’s the nearest word to it that I know of, though I really don’t think it’s that bad of an airport.

    Other airports have fun codes without adding any additional letters. FAT (Fresno) is another good airport code. SUX (Sioux Gateway airport) is also worth mentioning, as are GRR (Grand Rapids) and PIE (St Pete/Clearwater).

    • Kilroy says:

      Also, I pronounce “MKE” as “Mike” in casual conversation, though obviously in more formal contexts there could be confusion with the ICAO phonetic pronunciation of the letter “M”.

    • Glen says:

      Another fun combination is Fukuoka-Singapore-Helsinki FUK-SIN-HEL…
      no further comment :|

  13. Simon says:

    Let’s Go Wild to reflect its origins as a leisure focused airport while LHR supposedly had the business travellers.

  14. A says:

    I wish the questions regarding the MAX weren’t so softball. No asking if WN might potentially look at other aircraft types/manufacturers. Nothing about the power that WN has to push (or not) Boeing into developing a clean sheet 737 replacement.

    I get that operationally the grounding has been a huge deal to Southwest but from what we know today it’s very hard to argue Boeing didn’t deliver a flawed aircraft. WN being the largest operator of said aircraft that the time of the grounding should be red hot mad at Boeing as their customers were directly at risk. Not that the EVP of revenue can answer the questions I might have but I think they deserved to be asked.

    • Alex says:

      What’s the point of asking questions you know he won’t be an answer? Sounds like a good way to antagonize an interviewee and waste your audience’s time.

  15. enplaned says:

    If you believe DOT O&D data, LGA is definitely more inbound dominated than EWR. That said, not every route out of EWR is outbound dominated – Houston-Newark is one route that seems dominated by Houston demand.

    WN operated EWR-HOU nonstops in the 2011-2016 timeframe, and eyeballing the data, it appears that more often than not, EWR-HOU fares were higher on WN than LGA-HOU fares during that time – maybe not hugely.

    Not surprisingly, UA dominates EWR-Houston, and during the time that WN was on EWR-HOU, UA had a huge fare premium. You’d think Southwest would have at least some ambition at getting some of that premium.

    Which brings us to frequency. WN had only 3x on HOU-EWR, which is pretty pathetic – UA seemed to have around 10x. You’d figure WN would have sufficient presence in Houston to support higher frequency service (though for sure it would take an investment) both by trying to goose the local market and by making HOU a nice place to connect into EWR from all the places to the west where Southwest dominates. That kind of thing is one strategy WN does not seem to have attempted with EWR.

    For sure WN has capacity at HOU to burn. 24 gates and only 160-some departures – it manages 195 departures off of 18 gates at DAL.

    It’s hardly a surprise, however, that EWR is not nearly as well favored as a way to NYC than LGA. Cost of a car to/from Manhattan is higher. Watterson mentioned the EWR train to Manhattan, as a true transport geek should, but think of the typical Texan – train? you mean that dangerous European idea? What do you take me for, pardner, a soshalist? And frankly, that NJ Transit schedule between NY Penn Station and the EWR station can be a bit iffy. It’s not like there’s a regular schedule every 15 minutes.

    • Tim Dunn says:

      It is worth noting that the point of sale balance is not really airport specific but rather related to the size and dynamics of each airline’s presence not just at the 3 NYC airports but at every hub airport.

      Continental had strong point of sale demand in its hubs but did poorly outside of them; UA still carries that trend in markets that are heavily served from former CO hubs – and that is part of why Kirby made the infamous statement about UA trying to get its natural share in non-hub markets. B6′ network is heavily skewed to hub/focus city point of sale just as WN’s is. the difference between LGA and EWR is that LGA Is a smaller airport and even Delta with just under 50% of the market has a smaller operation than UA at EWR so proportionately WN should do better.

      In contrast, AA and DL have much more balanced points of sale across the US other than the usual strength in their own hubs which means the other’s point of sale is opposite.

      Your point about Hobby gate space is noteworthy – but Love Field is in a much better position relative to travel demand in the Metroplex than Hobby is in Houston. and, of course, there is no real question about airport access at Hobby as there is at Love Field.

      • enplaned says:

        DAL’s convenience advantages, for Dallas itself, are overwhelming relative to DFW, for sure – though less so for other parts of the Metroplex. That said, DAL is a far, far easier airport to use once you are there.

        That said, as someone with Houston experience, I’d choose HOU every time I could relative to IAH. It’s also a far easier experience in every way once you are there, and, in my experience, at least as easy to get to as IAH. Of course, if you need to go, say, to The Woodlands, different story – it will be IAH all day long. But I think, on average, the edge has to go to HOU. Your mileage may vary.

        • Tim Dunn says:

          In the midst of all of this discussion, it is worth noting that the norm among the big 4 is NOT to serve every airport in a city. DAL is present at more airports in multi-airport cities because it does not want to allow any competitor to offer service that Delta can’t also offer to/from one of Delta’s interior U.S. hubs. DAL’s commitment to stay and grow at Love Field is rooted in the same principle that has it as the only airline that serves Midway, Hobby, Oakland as well as the larger airports in those cities/regions.
          WN always operates from a secondary airport which it can dominate if given a choice and in single airport cities, slugs it out w/ the legacy carrier at their hub. The EWR vs. LGA decision for WN came only because they gained access to both airports – both heavily driven by pressing for winning divestitures from other airline mergers or slot transfers – and they have had time to evaluate what works and what doesn’t. Unlike the Baltimore/DC, Chicago, or Bay Area, WN doesn’t have a large presence in any of the NYC airports – so it had to choose the best option in NYC. It makes more sense to grow larger at LGA than to have a weak presence in 2 airports. Many US metro areas including Houston and Dallas are so large that no airport can appeal to everyone which creates opportunity to offer a diverse and distinctive package of services in a region.
          Despite the size of the market, WN simply won’t be a major player at either EWR or LGA which makes NYC unique for WN among multi-airport metro areas in the US.

  16. Andrew Watterson says:

    Thanks Brett. I enjoyed the interview and the comments. There’s a time and place to debate the points made by the readers. And of course that place is Dorkfest this Saturday. I’m happy to answer these and other questions.

    See you Saturday,
    Andrew

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