Across the Aisle from Southwest’s Head of Business Travel on Operational Meltdowns, Vaccine Mandates, and Less Controversial Issues

Across the Aisle Interviews, Southwest

And, we’re back. If you enjoyed part one, you’ll really enjoy part two. I saved the fun-filled controversial items for today, but keep in mind that Dave Harvey, VP of Southwest Business can only speak to these from the sales perspective. We combined that with a host of other more conventional topics to round out the discussion.

Brett Snyder, Cranky Flier: The network during the pandemic, it’s gotten broader, but it’s also gotten a little flatter. There’s less frequency, right? Have you heard anything from your accounts that are saying, “we really need these frequencies back,” or they just not at that point yet where they care?

Dave Harvey, VP, Southwest Business: No, we definitely are starting to hear it. Incrementally, we were on about a 5% month over month sequential ramp. When you go back all the way to Jan and Feb, we were down more than 90% compared to 2019 levels and then March we finally had a heartbeat, we kind of got off the mat. And you saw some nice acceleration all the way through July. With this latest wave, a little bit of a dip now, the good news is we flatlined. It wasn’t like other waves where things continued to drop off the cliff.

The exciting thing is now network planning, they’ve done a fabulous job throughout the pandemic on what I’ll call gap and compression. If you look at the frequency throughout the day — it may have been an intra-Texas market that had 14 flights a day and in the trough it went to three or four — they space those three or four as best they could throughout the day to give that pattern and give as much flexibility. So now as they’re bringing it back, we’re not to 12 or 14, but we are turning the corner; we’re back to seven or eight. And then with all the aircraft coming in 2022, if if the demand warrants it, they’ll be able to go back to pre-pandemic or equivalent to pre-pandemic frequencies next year.

Cranky: Have you seen any recent acceleration in business travel at all or is it still just fairly flat?

Dave: There were folks out there calling it a domestic business renaissance post Labor Day. The current wave had other plans for us, so I would say nothing like the significant bump, the hockey stick. I will say there’s a lot of focus and energy coming off the holidays in January. We spend a ton of time with travel managers — we actually just hosted a bunch of our influential travel managers for a big event a couple weeks ago in San Antonio — and we heard that loud and clear for January. So I would just say we’re encouraged with some of the momentum coming off of Labor Day but nothing like if we had had this conversation 70 days ago.

Cranky: So the hope now is that the the return will resume after the holidays and between now and then it’s gonna be a little middling I guess?

Dave: Absolutely. It’s very choppy. What you’re hearing a lot of travel managers say is because there’s so much uncertainty with international, especially long haul international, we’re sitting here on 18, better part of 24 months and we haven’t been able to do relationships. We haven’t been able to sell.

One of the drivers for the January comment is everyone’s going through their budgets right now and clearly a lot of budgets will be down. But they’re actually are industry sectors where they think budgets are going to be up in 2022 over 2019. They’ve got to get back out there seeing the whites of people’s eyes. If your competitor’s doing it and you’re still sitting behind the screen, the first time they win one of your customers will be the last time. That’s why there’s a lot of people kind of circling that week or two after the holiday, so we’ve heard that a lot.

Cranky: I tend to believe that too. I know Scott Kirby at United has been someone who has been shouting since that if you’re not out there, someone else will be. It needs to happen, so that’s kind of how you’re believing about the business travel recovery. Are you expecting to be back at 100% or above it relatively quick?

Dave: Everybody’s looking into the crystal ball. I think 2022, that’s too aggressive to say it’s back. Maybe there’s a month or two the back half of the year where you’re at a run rate equivalent, but a lot of folks are measuring this by calendar year, and it’s still going to be a few years before you get back to the calendar year 2019 demand levels. Definitely as you get into the spring of 2023… and I am making a little bit more of a domestic comment versus international. Of course, whatever you think about domestic, I think you almost add at least a year if not 18 months on the back end of that for some of the long-haul international which is less relevant for us.

Cranky: We do have to to talk about the operation. You mentioned it earlier; the importance of on-time reliability. You guys had a… I don’t know if you’d call it a meltdown in June, but it was not a good time. And now we’re in the middle, hopefully coming out, of an even worse one right now that has, I think, shaken some faith that’s out there. You can’t control the operation, but what are you hearing from the corporates and what are their concerns? How do you alleviate those?

Dave: Yeah, at the highest level for the business traveler, time is what matters most. Depending on what survey data you’re looking at, it’s usually the schedule followed by loyalty then price where on the leisure side of the equation it’s usually price, schedule, then loyalty. So it’s critically important that you run an on-time operation that is reliable, that you can trust, and is safe. That’s priority one.

Cranky: Are you hearing from your big corporates right now? I’m sure they’re yelling.

Dave: Yeah. Because this happened — and it’s very unfortunate — just take Sunday, of the thousand flights that were impacted, we impacted a lot of customers, unfortunately. The rest of the network that ran, actually ran pretty clean. But then specifically the business customer, because it happened on a weekend, it was less impactful to the business segment. But clearly a lot of folks were impacted so we were absolutely having a lot of conversations, not only with travel managers but with specific travelers that are heavy business customers that may have been flying for leisure. We are going above and beyond to help them, make sure that they’re well taken care of. And that they understand what happened and what we’re doing going forward. So you’ve got to take these items and learn from them and get stronger and get better.

Cranky: Yes it was on the weekend, but everyone’s watching the news and so even if it doesn’t directly impact them, they still have this in the back of their minds that… can I can I trust this? Is this gonna be okay? And I think the first communication I saw from Southwest was from Southwest Business.

Dave: It was. There was an email that went out yesterday. At 5am we got a letter out…. It was the highest open rate we’ve ever seen really. Nine in ten emails were opened.

Cranky: You should put that subject on all your emails.

Dave: **laughing** It’s amazing how much feedback we got all over the spectrum, but there was a little bit of a sense of “thank you for owning it, getting out there, taking your lumps. We appreciate that.” We cannot rest on our laurels, we’ve got a good brand and some equity with customers, and we may have dipped into that bank significantly with the two incidents that you’re referring to back in the summer and then over the weekend, but I think trying to be as transparent and communicative and proactive has definitely helped here in the first day or two.

Cranky: I guess this couldn’t have been done a couple years ago because you’ve been building up a team, right? A couple years ago, they would have just been on their own.

Dave: Literally, just even the capability to communicate like we did yesterday morning didn’t exist a year ago.

Cranky: Email?!

Dave: Well, broad scale, a level of personalization… to be able to do a lot of these things. And actually you you mentioning email, it sounds so basic. All we did was get a letter out, but because we hadn’t invested in the channels and our backbone… our customer relationship management tool was very manual and a lot of hand-holding by account managers. If I’m an account manager and I’m managing 50 accounts… Just over a year ago that’s 50 individual transactions where now they can streamline and do a lot of their correspondence and it’s all customized behind the scenes to the specific travel manager or to the account.

Cranky: All right, so you’ve got the network in a good place, you need more frequency, you’re seeing the benefits of all these new cities starting to come, you’ve built out your infrastructure, you’re in the GDSs, even Sabre now, so what’s what are the next priorities? Where do you need to go from there?

Dave: There’s a few big things that we’re looking at. One is around [travel] data, and the transfer and sharing of data, to just take that off the plate of the travel manager so we can look at industry data and have meaningful conversations about their travel patterns and how Southwest can best service those.

Cranky: You’re not doing much of that now?

Dave: There are a few industry solutions, PRISM being the largest. There’s another, ARC is coming to market with a product that United is kind of leading the charge on, so we continue to explore. It’s an investment of money and resources and just time to implement, so we’ve got a roadmap and you’ve got to weave these things in.

Another big priority for us is a self-service travel portal. Most of our competitors already have a self-service portal for the travel managers and the TMCs where today all of the correspondence [with us] still has to go back and forth between your account manager and you as the client or the the customer. In a future world, assuming we greenlight and keep going down this path, a lot of what I’ll call blocking and tackling, running reports, duty of care, managing some of your waivers and favors, that’ll be at your fingertips.

Cranky: I’ll throw this one at you, the grenade at the end here. Have you heard anything from corporates about a vaccine mandate and does that matter to them?

Dave: In general, they’re all going through the exact same thing for their employees. There’s really the two paths. There’s the OSHA path and then the government contract path. Clearly we’re government contractors, that was the new news a week ago Monday that we’re following through on the mandate by December 8th [Ed note: this has since been extended by the feds to January 4]. In general most of the travel managers and travelers have at least gotten on a plane the last 18 months, so even before the mandate, they’re like “we get it. It’s safe to travel. You guys are doing great compliance on the masks, the HEPA filters.” So now this vaccine mandate does make sense to them where they say that’s just one more thing from a peace of mind standpoint where I know if I travel after December 8th, anybody that I touch on the front line, I can look at them and I know they’re vaccinated. Nobody has pushed back on us, and they generally support it saying that’s going to be better for my travel experience.

I hope you enjoyed our talk. I’ll be back on Monday with a regular episode of Skeds of air Lines as usual.

12 comments on “Across the Aisle from Southwest’s Head of Business Travel on Operational Meltdowns, Vaccine Mandates, and Less Controversial Issues

  1. I think your first question got right at it. Specifically, the return of frequency. And the reply was that SWA expects TONS of 737-7MAX aircraft next year. Realizing that “next year” begins in just 52 days, where does Southwest stand with the -7MAX? Has the FAA even approved it yet? Does it have a “transport category” classification or an “experimental category” classification? Given the -8MAX fiasco, I don’t think the FAA will allow itself to be rushed into approval, assuming it has not yet given approval. And even if they have/get the approval, can Boeing produce anywhere from 60-114 (numbers I’ve read) aircraft for SWA in one year? Can their supply chain even manage that? If Southwest publishes another 4,000-flights-a-day schedule and they don’t have the ships and the people to fly it, I predict we will see a continuation of their 2021 operational problems into 2022. They must execute, period.

    1. SWA hasn’t even had a new hire pilot class yet. They have lost over 800 pilots the last 2 years. They are having a hard time getting flight instructors that want to work for them… So, I’m doubtful they can restore their network let alone grow it…

  2. Great interview.
    Another factor that needs to be considered is that Southwest now has a fuel cost advantage relative to most of the industry because of its hedging. They accepted fuel cost premiums due to bad hedges over the past couple years but managed to be profitable. Now, they are reaping the benefits of fuel hedging – just as Delta is with its refinery strategy.
    Anyone that has followed the industry for decades knows the advantage WN gained post 9/11 as the big 3 had to stop hedging due to their financial condition, and all later decided to no longer hedge.
    Southwest could easily be moving into another phase of cost advantage which will tremendously propel their ability to grow and regrow if fuel costs remain elevated into 2022 as they are expected to be.

  3. I will add one comment here about cleanliness on the planes.

    We are way past a year and a half into this. If people are not flying now, you aren’t going to reach them by telling them how safe it is. HEPA filters, masks, wiping down seats, handing out wipes… None of that is going to matter to someone who is still scared of the virus.

    They are not going to come get on your plane now. They just aren’t… And these airlines need to figure out that they should cater to people who don’t mind getting out now. In a way, companies that talk about how clean we are actually put off other people who don’t want to hear about that stuff anymore.

    Let me put it a different way. The people who are nervous about flying, you aren’t going to get them anyway. The ones who are not… Telling them how clean the plane is is not going to matter a whit.

    1. John G wrote… “We are way past a year and a half into this. If people are not flying now, you aren’t going to reach them by telling them how safe it is. HEPA filters, masks, wiping down seats, handing out wipes… None of that is going to matter to someone who is still scared of the virus.

      They are not going to come get on your plane now. They just aren’t… And these airlines need to figure out that they should cater to people who don’t mind getting out now. In a way, companies that talk about how clean we are actually put off other people who don’t want to hear about that stuff anymore.”

      The reason being that if you have to say things like this, the assumption by the public is… it’s all marketing buzzwords. Remember the phrase ” we take X seriously” & that’s a direct signal of lying to the consumer.

    2. Agreed.

      I’d even go so far as to compare it to people who were scared of flying after 9/11 due to terrorism scares, in terms of being a similar marketing playbook for the industry as they overcome the public’s hesitance to fly.

      Initially the airlines/industry play up the safeguards against [insert latest threat here] in their marketing, but after while, that gets to be old and ineffective. At a certain point, the marketing focus on “countering the threats” becomes a waste, and it’s enough to merely have visible and audible reminders on the planes themselves, such as sanitizing wipes handed out by FAs as pax enter the plane and reminders over the airport & plane PA systems not to congregate near the lavs, “see something, say something”, wear masks, etc etc.

      1. “At a certain point, the marketing focus on “countering the threats” becomes a waste, and it’s enough to merely have visible and audible reminders on the planes themselves, such as sanitizing wipes handed out by FAs as pax enter the plane and reminders over the airport & plane PA systems not to congregate near the lavs, “see something, say something”, wear masks, etc etc.”

        Granted you are correct, but constantly repeating said messages over & over will themselves become ineffective as they get tuned out by the public as background noise. Just imagine being at an airport for 2-hours or more& every 5-minutes hearing the same message repeated about masks, social distancing& on & on. The public will just ignore it & do what they want to do.

    3. Not true in my case. I haven’t set foot on a plane (or outside my home province, British Columbia) since the pandemic began. Currently on only my second vacation since the pandemic began, a four-day driving weekend trip within the province. Vaccine mandates will help a lot, although further rollout of vaccines (especially among kids) will help more. A big part of our lack of travel is the fact that our 5-11-year-old kid is required to avoid large crowds (including school) for 14 days after leaving Canada until fully vaccinated. Whether I agree with the details of that policy is immaterial; it’s enough to make us not travel. (Often, we drive across the border and fly out of Spokane or Wenatchee, so our flights are domestic US.)

      We are now returning to restaurants more in large part because vaccination is now required for those 12+. We’ll be much more enthusiastic about travel in general to destinations where vaccination is widely required (not just on airplanes themselves, which I agree are relatively safe, but in all the other crowded places you go as part of travel). We want that multiplication of two small probabilities: the small probability that the vaccinated person next to us will contract COVID times the small probability that we will contract COVID if exposed and either have bad symptoms or pass it on to someone else.

  4. I see Tim’s gloating again. The “Perfect Airline” (and grudgingly, Southwest in this instance) apparently can do no wrong. By the way, I’m not suggesting that Delta shouldn’t have purchased the refinery. It was an interesting move, to say the least, and I’ll leave it at that, since I’m not 100% sure of all the details.

    But … to move on, and on a somewhat related business travel note – American has announced the creation of what it touts as a business-friendly program called “Main Select” which is apparently going to be rolled out nationwide. “Main Select” will result in the retirement of American’s “Shuttle” branding – which, in my opinion, is all that’s really being retired. The whole “Shuttle” concept has become more and more of an anachronism since 9/11/2001.

    In reading the press release, it sounds like JetBlue’s “Blue Extra” is a similar concept, but I’m not certain about that since I’m not a regular JetBlue customer.

    Another interesting note, which has drawn more than a few comments on various blogs, is the discontinuance of American’s service between Boston and LaGuardia. JetBlue will operate that segment exclusively. I also think it’s important to note that the Northeast Corridor is one of the places where Amtrak is a serious competitor in the travel marketplace. I wonder if DOT will consider Amtrak as a competitor in this market as its lawsuit progresses. Then, of course, there’s the “Perfect Airline” which also competes in that space. If I remember the original shuttle correctly, it was a dedicated all-coach service, which is in JetBlue’s wheelhouse.

    I’m guessing this will be mentioned in the continuing Monday morning Soap Opera “Scheds of Airlines.” I’m looking forward to the comments.

    1. highlighting facts, pleasant to hear or not, is not gloating.
      Delta lost money on the refinery during the pandemic and Southwest lost money on hedges both due to low fuel prices.
      Fuel strategy is about containing costs for the long term. DL and WN both were willing to lose a certain amount of money on fuel over the past few years but still lead the industry in profitabililty. Now, in the midst of a recovery from covid which is being accompanied by high fuel prices, a fuel price advantage at DL and WN will make a difference.
      If you have followed the airline industry for any length of time, you know that WN entered the DEN market when it had a major fuel cost advantage – and UA has been trying to get WN off of its back ever since.

      As for the NE Shuttles, Delta has been the revenue leader on both segments from LGA for years – which they built on from the Pan Am Shuttle.
      Delta got rid of the on-demand extra sections and dedicated aircraft to simplify operations and reduce costs; the demand is just not what it used to be.
      The Shuttles are largely Ejet sized markets these days but AA needs all of its Ejets from its hubs. AA does feed traffic to its DCA hub more than the other direction so it is hoping to be able to gain a benefit from the B6 connection.

      DOT data shows that E175s operated FOR AA, DL and UA cost less to operate than the E190 for B6.

      Whether you consider that all gloating or not doesn’t change that these are facts.

      None of which changes that WN does not do well in business-oriented shuttle markets; even their original high frequency intra-Texas network has fewer flights with many more connections.

    2. Actually, you make the point for me. The airlines have been talking up how clean and safe the planes are for a year now. Yet you haven’t gotten on one.

      That message did not change your mind.

      Ergo, why keep repeating it? Those who don’t feel comfortable flying aren’t going to fly no matter how much the airline talks up safety.

      So they need to focus on those of us who aren’t concerned and are willing to step onto a plane.

      Basically, market to people who might actually want to use your product, instead of marketing to people who won’t.

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Cranky Flier