It’s been awhile since I’ve posted an Across the Aisle interview, and I hope you’re prepared for a whole lot of words. I sat down with Dave Harvey, VP of Southwest Business right during the airline’s meltdown last month. We spoke for an hour, and after much effort, I was able to break it down into two posts. I trust this will keep you busy all week since I’m at a conference and won’t even have time to put up 3 Links this Friday.
In this post, we get into Southwest’s business roots, what companies want from the airline, and the importance of O’Hare… and even Jackson, MS… but really O’Hare.
This has been edited for clarity purposes, but please make sure that when you read it, you hear Dave talking with his trademark thick Texas twang.
Brett Snyder, Cranky Flier: Southwest and business travel is kind of a funny thing, because a lot of people think of Southwest as not being a business travel airline, but you’ve always been a business travel airline. You don’t start flying to Houston like 15 times a day or whatever it was for leisure travel, right?
Dave Harvey, VP, Southwest Business: When I started in 1999 and we served both Houston airports, we flew over 50 times a day from Dallas Love Field.
Cranky: And you don’t need that for leisure. So you’ve been a business airline. I think probably where the disconnect lies is more in the managed travel world. And so is that really what the the goal is right now? To expand the business base?
Dave: It really is, you’re right on. It’s really a return to our roots, that short-haul, high-frequency point-to-point network. When you think about the business traveler, they want on-time, they want reliable.
Cranky: They do (**cackling maniacally since this conversation took place in the middle of the October meltdown**)
Dave: They want the warmth, they want the hospitality that that Southwest brings. They want the low fares, because it stretches their budget a little bit farther, but it’s about the schedule. We grew up in the seventies and it was all about Texas; it was the end of that decade where we finally started getting outside of the state. The network gravitated south and west, you know, Phoenix, desert mountain, Cali. We’ve been in Cali a little over 40 years now, and if you think about all the intra-Cali traffic, we’re still 60-70%.
So, the further west you go, they definitely think of us more as a business carrier. It wasn’t until the mid ’90s ’til we actually got to the east coast; Florida, Baltimore. It wasn’t even ’til the aughts that we got up into some of the upper northeast business markets. And we don’t have quite the schedule strength and frequency in some of those east coast markets as well.
The fundamental point is the last 20 years, managed travel has gotten a lot more sophisticated. There’s a lot more mandate and policy at corporations with booking tools… what’s gonna get expensed, what’s not, how the expense flows works for mid office and back office? Travel management companies big and small are a big piece of the equation, so to get your fair share of that business the last 20 years, you had to really have a sales and services team that were geared for managed travel… which we haven’t had until the last couple years.
And then you had to think about your overall distribution and channel strategy, about how you shop, book, ticket, settle, and serve on the day or after the fact. We had not made those investments as a company until the last couple years so that’s really opening up the door for a whole new customer base that we can fully compete for.
Cranky: I think for those who aren’t familiar with what managed travel means, I should define that. It’s the companies that have contracts, agreements, policies to direct their travel spend…. And you also have as you get into larger companies, they have the duty of care. They need to know where you are, they need to be able to follow you, so if you’re just going rogue and doing your own thing, it’s harder to do. So is that really the thrust of what you’re focusing on here?
Dave: Yes. I think it’s fair to say because we haven’t had the sales team so you know a lot of these big accounts two years ago say “we hadn’t heard, no one’s called on us in years, where have you been?” Maybe Southwest is more of the spill business carrier because we haven’t displayed right in their program or they’ve had to do a punch out solution to book Southwest. You have to be fanatical, a fan of Southwest, to use us for business. By not having that in place, we could never truly deliver the low fares, the service, the hospitality, the things that the travelers love and rave about Southwest because we didn’t make it easy on the travel managers and the [Travel Management Companies] to work with Southwest.
Cranky: You’ve made a lot of progress even without the GDSs… standardizing SWABIZ and Southwest.com so that you can manage bookings back and forth, just making it easier to interact. I know you’ve done a lot of different things, but what are the main points that you’ve heard from these travel managers and corporate agents that you need to really focus on?
Dave: On sales calls over the last 10 years, the number one thing that typically comes up is “get me industry standard GDS.” Leave the brand aside — we know that Sabre clearly is the largest player here in the North American market — but because those travel managers and TMCs are not only dealing with Southwest Airlines as an air supplier, they’re working with all the other airlines, all the other hoteliers, all the ground transport… so doing one-off solutions for Southwest just adds time and adds friction.
“Get me on my platform of choice” and then following behind that, you hear things like “hey, you don’t actually take us to some pretty important markets.” That’s where COVID has been huge. “I got to get to the north side of Chicago, get me back into [Houston] Intercontinental.” We left Intercontinental in ’05 to consolidate at Hobby, and think about all the growth over that 15, 16 year period. “Get me right into Miami. Lauderdale’s great, but sometimes it’s uncertain what that traffic pattern is going to be down into Miami.”
So there’s network plays, clearly the channel plays, and the last is they just want a little bit more flexibility. So during COVID we’ve been able to pivot. You think of a wallet for the company and funds and unused tickets and how you reuse those things, the COVID pandemic forced our hand to kind of move more aggressively. And we’ve come up with some really creative solutions.
There are other things that we’ve been working on but those are some of the big ticket ones: playing into our flexibility, expanding the network, and getting them their channels of choice.
Cranky: I was definitely gonna ask about network because I love network. I’m guessing the addition of Steamboat Springs doesn’t matter so much, but you talk about an O’Hare, you talk about Intercontinental, these are companies that are going to these places right?
Dave: It’s both.
Cranky: These are origin companies?
Dave: Yeah, if you go to north side of Chicago, it’s chockablock… looking at Fortune 1000 companies in the United States, there’s over 80 of them in the greater Chicagoland area and they’re all downtown-north.
Cranky: Yeah, but you have such a minor presence compared to American and United. Is that really moving the needle?
Dave: It is, yeah. It’s already becoming one of our fastest startups in our history. We launched with 16 daily operations to five markets; we’re already up to 12 markets and 28 flights and we continue to expand. The first offering was a little bit more business-oriented, but we’ve seen so much local demand we’ve actually really started rounding it out with Florida, Cancun, a lot of the weekend stuff….
Your comment about the Colorado mountain towns, you’d be surprised. All these business travelers, a lot of them have the credit card, they racked up a lot of points in the Rapid Rewards program. In the last 12 months, it got a lot more attractive with a ton of Florida beaches, Savannah, Colorado mountain towns rounding out our California portfolio. Bellingham’s about to come online, Eugene, Oregon…
Cranky: Jackson Mississippi, oh wait,
Dave: I was about to say… *laughing*
Cranky: Maybe not the most attractive destination for the Rapid Rewards crowd but important to people in Jackson.
Dave: Tons of government and military and defense. And Colorado Springs, plus a lot of good leisure there too. Network planning, you know, whatever their ten-year plan was, they deployed it in about a 12 month period, but [the new cities] are all contributing to the network and driving more revenue than they are cost so we’ve been thrilled with the new adds.
Cranky: I’m curious more about some of these north side of Chicago companies. What are you hearing from them where they’re eager to work with you? They already have two massive airlines duking it out at O’Hare.
Dave: The fact that we have a history in the Chicago marketplace with Midway since ’85, there’s a built-in customer base and there’s people on the north side of Chicago that have been driving down to Midway for our product and our fares for decades. So now, if you’ve got that non-stop right there around the corner at O’Hare, you’re naturally picking up attraction to the travelers.
When you’re having that conversation with the travel manager, there are quite a few things that Southwest brings to the table that are differentiators from the other two brands that are there. Clearly, they get a lot of non-stop, point-to-point service having the the two hubs, but our all-Boeing 737 jets, our unrivaled flexibility….
If you put yourself in the shoes of the travel manager, they’re not only trying to keep their travelers happy, but they may be answering to somebody in supply chain, a CFO, Chief People Officer. They have a lot of bosses they’re trying to keep happy, and if they can go to those bosses and say, “hey, I just avoided X amount of bag fees, X amount of change fees. I have either a rebate on the back-end or a point-of-sale discount on the front end on these naturally low fares. I just saved my company x millions of dollars by shifting some share over to Southwest versus the other guys.” They look like a hero.
Cranky: On the managed travel side, do you have accounts that are saying “hey, great, now that you can get me and my wife to my chalet in Steamboat, we’re gonna sign the company up?”
Dave: You’re not hearing that necessarily as much directly from the travel managers, but you absolutely hear that from your road warriors and the travelers themselves.
Cranky: Yeah, but they’re not necessarily the ones making the decisions. Are you seeing them push on their travel managers to work with you guys?
Dave: Companies have all kinds of different personalities. Some will be lowest logical fare down to the penny. I don’t care if you have to connect versus a nonstop. And others, the travel program is really an extension of their HR or people plan and if these folks are willing to live a significant amount of their lives on the road trying to drive revenue or develop business, they’re going to give them a hundred to two hundred bucks swing on a one-way ticket. We’re going to give them more flexibility on their carrier of choice based on that brand affinity and the loyalty.
Cranky: Do you have any numbers that you can share about increasing penetration from a lot of the efforts over the last couple of years? Is there anything that you can point to that, well, you’re willing to point to?
Dave: …I think the macro level to answer your question, COVID threw us all upside down because the data isn’t where it needs to be over the last 18 months to really kind of make heads or tails. But we absolutely know we’re making huge strides down at the account level.
Cranky: So you’re working on faith a little bit just because the data is such a mess at this point but you’re seeing the right signs…. Are there certain geographies where you’ve seen better response? You talk about going into O’Hare and IAH and all that, that’s one thing, but if you’ve seen certain places that maybe O’Hare was the the key to them, like Kansas City…
Dave: That’s another great example. A company may have a lot of traffic out here in California where we sit today, but the fact that we don’t serve their headquarters in O’Hare, we’re not going to get our fair share of their California business because we literally can’t get people back to their mothership, So now by having O’Hare because they told us, “Get us GDS, get us O’Hare,” or whatever this big business market is, it just opens the door for a conversation. Our sales team has never been able to have a meaningful conversation about not only getting share in and out of the north side of Chicago, but now inherently picking up more volume across the Southwest Network.
Come back on Thursday for part two where we discuss operational meltdowns, vaccine mandates, and other completely non-controversial topics.
25 comments on “Across the Aisle From Southwest’s Business Travel Chief On the Airline’s Move to Lure More Business Travel”
“driving down to Midway for our product and our fares for decades”… I nearly spat my coffee onto my keyboard. I fail to see the product appeal of Southwest for a business traveler. Free bags don’t matter – I’m sure they get them at AA/UA/DL via credit card or frequent flier benefits. Flexibility doesn’t matter any more as virtually all major fares are flexible. What’s that leave for the product enhancements? No assigned boarding? No in-seat power or screens? No food for that long flight when you just rushed out a meeting and didn’t get a chance to eat? Oh – I know – the added “product” of limited drinks and no booze due to COVID. And especially in today’s environment – the fares aren’t any lower!!!
I give Southwest credit for a great marketing machine. But I completely fail to see the appeal. I live 20 mins from Midway and I will deal with the 60 minute trip to Ohare for almost any trip. Why? Greater frequency where I want to go, the opportunity to score an upgrade on a long flight, and points that actually take me to aspirational places I want to visit (not Jackson, MS). I once flew from MDW to ONT for a business conference and it was the most miserable flight of my life. 2 hours is my Southwest max.
“driving down to Midway for our product and our fares for decades”… I nearly spat my coffee onto my keyboard.” That’s because of the “corporate doublespeak” we are constantly being hit with on an hourly basis wherever we turn.
I love Southwest, but won’t fly them for business; leisure with my family, probably. I value my time in transit too much. First class (upgraded), lounges, assigned seats, vastly larger domestic network, and points to travel internationally on partner carriers are priorities for me. Plus, I often do not see any difference in fare between them and AA.
Nice try, Southwest. But no.
1) Your “flexibility” in fares is exorbitant. To get that flexibility you have to buy business select, which is more than full fare coach on other airlines.
2) No opportunity to upgrade.
3) No opportunity to get Main Cabin Extra/economy plus seats. Even if you are Position 1.
4) Limited ability to connect inter line
5) If you forget to check in its middle seat city
That’s just a start. Southwest is fine for leisure travel or for Dallas to Houston/LA to SF. Anything more and to a business traveler they are a very expensive version of Spirit.
“Anything more and to a business traveler they are a very expensive version of Spirit.”
That made me laugh. It’s true, but the statement is funny.
Me and my partner are the opposite and go out of our way for Southwest, and if she had a job where she had to travel for buissiness she would try and exclusively fly Southwest. My partner is a large-fat and Southwest is the only airline with an amazing customer of size policy, where if your hips exceed the width of the armrests, which her’s clearly do you can ask to “Use the Customer of Size Policy” at check-in and they block of a second seat for you free of charge and give you a special “Seat Reserved” card to put on the now empty seat next to you so other passengers and the flight attendants know that they can’t have someone sit in that empty seat. You also get to pre-board to make sure there are two seats together for you.
We do fly other airlines (on shorter flights in particuarly) when they are more convient or we are flying to places Southwest doesn’t fly to and on those flights we can concort ourselves together into regular coach seats with the armrest between us up (get us on a larger Embrare Regional Jet anytime, those are the best with their super wide seats, although we haven’t tried an A220 yet) and we luckily can manage without buying her a second seat (an unjust thing airlines make people do that is extremely discriminatory, all airlines should have Southwest’s customer of size policy). For us the difference between flying Southwest and other airlines means being productive and relaxed on Southwest while flying other airlines (in coach at least) is an Are-We-There-Yet? Discomfort (espcially since nearly all of the flights into our hometown airport in South Bend are on Bombardier CRJ-200s and 700s).
I didn’t realize this. Interesting. Someone needs two seats and presumably has the mass of two people, requiring more fuel for transport, and yet they get a second seat at no cost? Oh wait – everyone else on the plane is subsidizing.
ChicagoFlyer – This comment is fatpobic, body size is primarily caused my genetics (generally about 80% if you do a quick Google search for it), not diet or lifestyle choices. Nealy everyone in my partners family is of a similar size.
Cranky, I you had a report comment button, I would report this comment for being discriminatory.
I thought Southwest charged for the second seat, but then refunded it if the flight wasn’t 100% full. Is this a policy change?
What is this pipe dream? Southwest does not understand the business traveler at all.
No in-seat power
NO SEAT ASSIGNMENTS (this one is huge)
No ability to upgrade (more legroom, first class, etc)
No same day ticket flexibility (standby for all that the big 3 have re-introduced)
Cattle call boarding
Most road warriors don’t check bags
They are fine for the short 1-2 hour hop to go see Grandma, but terrible for the business traveler IMO
I’ve always like flying WN – for business or pleasure. The assumptions I see here regarding what a business traveler supposedly expects are skewed toward those travelers who have higher end positions and whose companies are willing to provide them with a larger travel budget. What many of you fail to appreciate is that for every one of the briefcase wielding, Park Avenue, types there are 20 other business travelers who fly maybe once per month and whose companies forbid purchasing a domestic first class fare. The vast majority of companies can be real penny pinchers when it comes to travel and the “average” business traveler has to deal with that. For them, WN is fantastic because of their flexible change policies and their humane seat pitch. It’s not hard to get A List, so there’s another plus.
Being based well north of Chicago, ORD is easy to get to and MDW is horrible. It’s not an exaggeration, the traffic sucks – especially the Stevenson Expy (I-55). It can take 20 minutes to do 5 miles. And, because of the spiral expressway system (all roads lead downtown), you end up going south, then backtracking northeast to get to MDW. Due to this, I gave up on WN and now have status with UA. I could fly WN from MKE, but the only time I did that was on the MKE-MSP route which WN idiotically dropped. The rest are Vegas, Denver, Florida and with limited nonstops that don’t work for business travel. Not sure there’s room at ORD for WN to build up, but it would be nice if they were a factor there.
The problem for a business traveler is that Southwest is actually very expensive. The idea that they are cheap is a long dead myth.
If you buy a ticket two weeks out they are fine. If you change it late it goes to a ridiculous level compared to the Big Three. If your corporate accounts don’t know this they are wasting the company’s money.
Their seat pitch is the same at the Big 3 by the way, and the flexible change policies are far more expensive too. Do some research.
My former company had an account with them and we booked via the SWABIZ website. There were significant discounts to the published fares. Also, I frequently hear how WN is “expensive”, but I don’t see it. They aren’t a LCC (something they were tagged with decades ago), but their fares are usually close to or match the Big 3. And that’s without charging for checked baggage.
If you have status with AA, DL, UA, or AS, then you’re better off flying them. But if you don’t have status, WN is more comfortable, has better service (than you’re going to get on the others), more legroom, and you’ll get a better seat unless you check in late. This snobbery fascinates me because its not like everyone flies first class on the others. You’ll get a better snack in economy on WN than on the other guys – FWIW.
I used to have a company as a client that would fly WN almost exclusively for corporate travel. Where they were based WN had many routes to most all the places they needed to go so it made sense. That’s what I see as key for most business travelers. Give me a non-stop flight. Yes, the perks on the legacy carriers are nice but I’ll give some of that up for time saved. Problem is that outside of a handful of cities WN just doesn’t have the route network. I scratch my head when I see them put so much effort on trying to win customers in a place like Chicago or Denver with well established legacy hubs. STL works pretty good for them after AA left town. Maybe stick with that plan. There are more under utilized airports out there.
WN’s network is a big reason I end up flying them for business and leisure. Living near Sacramento, if I want to go to SoCal, on other airlines I can only fly to LAX nonstop. I can fly Alaska to SAN. On WN, I can fly to BUR, LAX, ONT, LGB, PSP, SNA, and SAN. I put a lot of value on flying to the closest airport to my destination and on the smaller airports that are easy to get in and out of. Last weekend, I flew to BUR and went from my seat to rental car checkout in 15 min, including picking up a bag. I got to the airport 55 min early the next day during peak morning time and had time to get work done at the gate. Plus, I can compare prices across airports.
Not enough is mentioned about this intra California flying because that is predominantly business travel. Amazing to me that they run 60% of all intra California flights!!!
On short hauls like this, all the WN negatives fly out the window and the business traveler selects them for convenience, frequency and timing. I don’t care if you’re a junior partner or a CEO, if WN can get you from LA back to Walnut Creek earlier and easiest by having 8 flights a day to OAK, you’re taking one of those flights to save an hour or three.
During my stints in California, everybody had their global airline of choice (usually United, some American, I was an oddball with Delta but that’s probably a little different now) and also flew WN. Everybody.
Southwest has long done a masterful job of transforming its network every time major external events have changed the value of its network. 9/11 and covid both changed the value of short-haul flying and WN pivoted/is pivoting to take advantage of ways to grow its network. As their labor costs have grown along w/ their average aircraft size, they have shifted to much more of hub and spoke operation, using connecting passengers to help fill planes. WN has long had a fairly high percentage of business passengers but they predominantly carried those passengers on a point to point rather than connecting basis because they dominant their hub airports if not metro areas. Like Delta, hub dominance for Southwest translates into a fare advantage.
WN’s other airline hub adds (IAH, ORD and MIA) have all done very well and they will keep growing those cities as they have gates. WN is large enough that they get a halo effect in other airline hubs; they just have to know what they do well in those hubs and not try to be what they are not or cannot do well.
Their increased leisure city focus moves them very quickly into the position of being one of the top carriers in those cities just because they use all 737s compared to a mix of regional jets with other carriers. WN has a robust network so that they can move connecting passengers through whatever hubs / focus cities make the most sense.
I’ll be interested to read the second part of the interview; this part was well worth it.
And thanks for transcribing the interview.
To me, there are a couple of classifications of business travelers:
1. The small biz guy/gal who travels on their own dime who is price conscientious
2. The biz traveler (like me) who travels and expenses everything.
3. Corporate traveler whose travel is managed by a corporate travel dept.
I think SW appeals to #1
#2 is a huge piece of the business market that SW doesn’t really appeal to; and 3 is a probably half and half (Southwest and Full Service)
It depends on how Southwest responds, but they need to decide whether or not they can pivot into the #2 group. If so, like we’ve said, they’ll need to provide perks that we’ve mentioned above.
Seatback, how is Southwest helpful to price conscious business travelers? They are MORE expansive last minute, not less.
I remember Southwest’s advertising being directed toward the small business owner/traveler back in the 1980s. So this is nothing new. This country is driven by small business, and Southwest has catered to that traveler for as long as I can remember. Most small business owners understand that an airline’s main job is to provide reliable transportation, not gourmet meals or in-seat entertainment.
I think Southwest understands it is not going to be everything to everyone, but it understands consistency. I know exactly what I will get when I board WN. And let’s face it, for a flight time of less than 2.5 hrs, there is not that big a difference between most of the other carriers (in economy) and Southwest. Often times on other carriers, you will find yourself on a regional jet for the shorter flights. As an example, a route I travel for business, from San Francisco to Spokane, Southwest consistently offers a morning and evening nonstops out of OAK. My preferred carrier, Alaska, only offers a nonstop evening departure to GEG and a nonstop morning return to SFO. United varies in its level of service, but often times I have wound up on a CRJ200 – which is a miserable experience, even for the 2 hrs. For this midsize route, Southwest is the best option most of the time, even if I would prefer another carrier. Another thing Southwest does well is how they can dominate a region. Look at Southern CA, they are the number one carrier at BUR, SNA, LGB, ONT and all with a large operation at LAX. They even now serve PSP and dominate SAN too. They are happy to pick up spillover market share in Chicagoland with some service at ORD all while being the number one at MDW and having substantial service at MKE. All the service they add on the margins fuels their core operations. They are happy appealing to the middle 80% of travelers and letting other carriers chase the super high-end and super low-end.
I am in agreement with others saying that SW simply doesn’t understand business travelers needs. Prior to the pandemic, I flew UA for most of my business trips about 4-5 trips a year. Assigned seats, ability to upgrade to business class, lounge access, miles to redeem for true international overseas travel were all reasons that I flew UA and NOT SW. Because of all the miles I racked up and status gained on UA, I was able to upgrade to Business Class from SFO to SYD a few times. I would not have been able to do that with SW. For the leisure flyer, for vacationing, once in a while flying SW is fine. But the dollars that you spend on other airlines such as UA, DL, AA goes a lot farther than what you would get on SW for the reasons I mentioned above.
What a lot of the comments seem to be missing is that this discussion is primarily about the managed travel segment, not business travelers in general. This is a segment that Southwest doesn’t do well in, as they have tended to eschew GDSs and other channels managed travel tends to use, in favor of direct bookings, which adds extra work for a managed travel process.
If you have a choice in who you fly and how you book, then it’s fine if Southwest’s offerings don’t appeal to you. But that’s not what this is about. This is a segment where the company is dealing with the airline, not the passenger. The company may negotiate deals to drive their traffic to a particular airline. Southwest hasn’t been losing business in this segment because they don’t offer in-seat power or upgrade options or seat assignments. They’ve been losing business because they don’t fly to the right airport; the company isn’t going to make their employees drive to the other side of Chicago to get to Midway when they have perfectly good options from United and American from O’Hare. And they’ve been losing business because they made it more work to book with them since they don’t integrate as well with their corporate travel system (think systems like Concur and Egencia).
It seems like a big lift to lure business travelers from AA and UA at ORD. Like many who have commented, I don’t see the broad appeal of Southwest for the business traveler. The product is not cheaper than the other majors. One plus is the ability to fly on a jet vs. a regional from smaller markets/non hubs.
A lot of comments have said that Southwest doesn’t offer much to business travelers because all airlines have similar flexibility with tickets. That’s true at the moment, but it’s a new development since Covid. I imagine a lot of SW’s ability to appeal to the small business market will be driven by whether change fees reappear on the Big 3.