Thanks to Southwest’s elimination of its differentiators, both United CEO Scott Kirby and Delta President Glen Hauenstein said last week that in competitive markets, Southwest’s customers are up for grabs. Scott took things further in his chat at the JP Morgan Industrials Conference as he explained what should happen next.
I think the far bigger thing… it’s the slaying of a sacred cow. It’s one of the two big things that get Southwest back to industry-leading margin, that and stop flying places that lose money. Those who should be willing to slay one, maybe want to slay two, I don’t know.
Southwest wants to lean on its people as being the big difference, but it’s really going to be about price and schedule since it has no other tangible advantages. So maybe that second sacred cow is on the table. In a price-and-schedule world, I decided to take a swing at some Cirium data to try to think about the airline’s network.
For the legacy carriers, the key has always been about dominating your markets. Yes, there are smaller competitive markets, but being #1 in a big city matters. It’s a version of the vaunted S-curve at work.
So what if we thought about Southwest’s network from that perspective? I’m assuming, importantly, that the airline still only has 737s and hasn’t branched out, and it hasn’t considered major changes to its product beyond what’s already been announced. If those things change, well, that changes the equation entirely.
I started by looking at July 2025 seats for every market Southwest served, and I do mean “market” and not “airport.” In other words, it’s Chicago, not Midway. Anywhere you see a city name with multiple airports, it’s meant to include the metro area because that’s what really matters.
Then, I started cutting markets out that didn’t matter. I threw out international and San Juan flying since those are just spokes for travelers from the lower 48, at least they are in the Southwest network. And long-haul isn’t a helpful comparison. I did the same for the ski markets in Montrose and Steamboat Springs. It’s possible some of those should go and some should stay, but they should only stay in support of the market at the other end of the route.
There was the issue of Hawaiʻi, but I decided to shelve it and ignore. That too is not a huge part of the business, but it is more than just a destination with all that interisland flying. It’s a distraction from the key task at hand, so let’s just pretend it doesn’t exist.
With that, I could focus on the main parts of the network, and I came up with this map that will need more explanation:
Map was created using Doughton Data Solutions service. doughtondata.com
Let’s start with the size of the dots. Those are based entirely on how many seats Southwest has departing from the city during that month:
- Biggest (e.g. Las Vegas): > 500,000 seats (~100 daily departures or more)
- Big (e.g. Sacramento): 250,000 to 499,999 seats (~50-99 daily departures)
- Smaller (e.g. Reno): 100,000 to 249,999 seats (~20-49 daily departures)
- Smallest (e.g. Lubbock): < 100,000 seats (~20 daily departures or less)
That’s the easy part, but what about the colors? I decided to look at a couple of metrics. First, anything in gray is a market where Southwest is not #1. We’ll talk more about those later.
For the other three colors, I looked at a combination of seat share vs the #2 airline as well as the number of destinations that Southwest serves from that city.
- Red: Strong on both metrics
- Blue: Strong on at least one of the metrics
- Yellow: Not strong on either metric
So what does this tell us? Well, nobody should be surprised that the strongest markets are those in the southern half of the country.
The Strengths
There are five markets that are both big and where Southwest has a significant schedule advantage over the rest:
- Austin
- Las Vegas
- Nashville
- Orlando
- St Louis
These are all good markets for the airline, though to me it’s Austin and Nashville that are the real long-term opportunities for future growth and dominance. Las Vegas falls in the same boat, but that’s more as an origin since most other airlines treat Vegas as a destination. It’s still a big city, and Southwest is the airline that caters to people there. That’s similar to Orlando, but I think of Orlando as a tougher market competitively. Then there’s St Louis.
St Louis may not be a huge growth market, but there may be some opportunity, especially if the airline tries to route connections through there more than Midway as it continues to build hubs. (I know, I know, I sound like AA management after buying TWA.) Also, this is the kind of market that’s the backbone of what makes Southwest work. It is a good-sized city that Southwest quickly moved to dominate when the old hub carrier left. Kansas City, though a little smaller, falls into that same bucket, and there are many other cities in red, big and small, from there to the south and west that Southwest will want to rely on.
But there are other important nodes in the network that aren’t so clear cut:
Baltimore/Washington
You’ll note that Baltimore/Washington is a big market where Southwest is #1, but the advantage is not as strong. BWI is dominated by Southwest, and it is the best way for the airline to serve the Northeast US and beyond with partnering opportunities. It’s no surprise that BWI is where the first interline partnership with Icelandair started off. While United and American are big and important players at Dulles and National respectively, BWI serves a separate but overlapping catchment. This should remain the focus point for the entire Northeast US.
The LA Basin
In LA, Southwest is far from #1 at LAX where the others are, but it dominates all of the secondary airports (Burbank, Long Beach, Ontario, and Orange County). It has enormous utility, and it has been reducing its reliance on LAX to focus further on secondary airports. This is a good strategy that will continue at least until Southwest has a better product, but LAX probably will be an increasingly unimportant part of the network compared to the secondaries.
Phoenix and the Valley of the Sun
I said I’d talk about the gray dots later, and now is that time. Despite being behind American in Phoenix, I still see that market as a winner for Southwest. American has neglected it until relatively recently and from a utility perspective, American has minimal long-haul at the airport. In other words, Southwest can be more competitive than in a place like DFW. There is also room to grow here as Southwest continues to fill out its relatively new concourse. Yes, it’s very close to Las Vegas, but the two can work in tandem as useful hubs in addition to the local traffic.
Steady Markets
While the markets listed above seem like good growth opportunities (if Southwest can get the gates), there are plenty that play an important role but may not be primed for growth. These are the markets that are gray dots. There is another airline in each city, but they tend to use a different airport.
Dallas Metroplex
There is no growth opportunity at Love Field, but Southwest will undoubtedly maintain its presence at its home airport. The question is whether it grows into other airports. I can see something like McKinney to the northeast of town, but I have a hard time thinking DFW is going to work when American flies to so many more destinations with so much more frequency.
Greater Houston
Southwest does have a nice position at Hobby airport, but it’s not going to ever beat United as the #1 in the city. Hobby and IAH are pretty far from each other, however, so Southwest isn’t leaving. I just don’t see where much growth is likely from there unless Southwest makes a concerted effort to go into non-leisure foreign markets. That doesn’t seem like the lowest-hanging fruit.
Chicagoland
There is no clear answer here. Yes, Southwest dominates Midway, but it continues to be dwarfed by United in Chicago overall. American may have fewer seats than Southwest, but it has more flights to more destinations. The move into O’Hare didn’t work, but the airline is in a strong position in Milwaukee to the north. That being said, if American scales back, all bets are off.
The Big Question Marks
While the ones above seem like relatively clear options, there are some that make me wonder if a more drastic decision should be made.
Denver
Southwest loved Denver when United wasn’t paying attention to local traffic and Frontier went ULCC. But now, United cares. It is growing quickly there, trying to win back the market, and Southwest with its single fleet type can’t have the same utility. With Frontier offering a product closer or even exceeding Southwest’s, it gets even tougher to reach the price-sensitive crowd. Denver is a huge station in the Southwest network, but it really only matters for connectivity into the Pac NW where the airline remains weak anyway.
The SF Bay Area
Southwest is big in Oakland and San Jose, but those markets are not what they once were, especially Oakland. SFO continues to be the leader of the pack, and United has been building its lead and making life more difficult for others. Instead, Southwest has been focusing its efforts on Sacramento which has been a much better and less competitive market that I think has good growth prospects. Does the Bay Area matter? Yes, but it’s fair to ask whether the operation is bigger than it should be.
San Diego
This may come as a surprise. After all, Southwest is #1 in the market, and new gates are coming online that will enable further growth. But this is also a market that Alaska covets. In fact, it’s the one important competitive market that the two airlines share. This does not mean Southwest should leave, but depending upon what Alaska does, Southwest may want to think about how big this station should be. Similar to the Bay Area, there is an argument to be made for focusing on short-haul where it does best.
The Slot Controlled Airports
The Northeast US is a real question mark. Should Southwest have operations as large as it has at LaGuardia and National? Or is it possible that it’s the slots that just make them think differently. (This is a problem for every airline.) There is likely too much service from Southwest in the Northeast across the board. This is an area most ripe for cutbacks.
What Does This Mean?
This is just a high level consideration of the network and undoubtedly those with internal data can do far better. But nobody should take this as gospel, it’s just opening a conversation. The question is now more about who has the stomach to make big changes now that the business model has changed.
Will people be willing to shrink or even pull the airline out of markets that don’t make sense any longer? Further, will Southwest consider new aircraft types that might enable different types of flying? Will Southwest have further product changes that would impact this? Would Southwest be willing to cede geography or is that a sign of weakness that can’t be tolerated? There are no simple answers here or the changes would have been made already.
