News yesterday that Southwest Airlines is going to enter the international travel market by keeping the Mexican and Carribean routes they picked up in their purchase of AirTran. They’re even talking about building an international terminal at Houston’s Hobby Airport, where they say they can add 25 daily flights.
This move is a major departure from Southwest’s traditional approach of great discipline and focused markets. While they’ve been drifting from this strategy for some time, the question is whether it’s a good idea or not.
Basili Alukos, an airline analyst at Morningstar provides the same first impression I had, “Flying into more congested markets, now trying to go overseas … it seems like they're becoming a legacy carrier,"
Has Southwest jumped the shark?
I don’t think this move is stupid on Southwest’s part, but I do think it’s a statement that Southwest’s traditional growth model is no longer viable for them.
It is my hope that Southwest can maintain the internal culture they’ve developed, and in an industry as bereft of value as the airline industry is, that may be enough to keep their customers loyal. However, the radical difference between Southwest and other airlines is disappearing and I expect their overall performance will degrade.
Because Southwest is a public company, I understand their need to find new areas of revenue growth. From a profitability standpoint, I think they would be better off to stay smaller and special.