A suggestion for Mr Gary Kelly

[ELP_WN_Psgr]

You know, it is really hard to fault much of anything Gary Kelly has done since taking over the helm at Southwest.

It's pretty bad when the analysts start to criticize the reasons you are making profits since they can't criticize anything else.

Some of the other posters on here know me and they should have known it was only a matter of time before I floated this idea again. Of course, brilliant ideas never go completely out of style.

Take the Texas Intrastate and the Dallas routes to Wright Amendment allowed destinations (OKC, TUL, LIT, MSY, ABQ).

Those routes make good money. The yields are great. Business is decent although the frequency of flights coupled with the downturn in short haul traffic...the load factors are not everything they could be.

June 18th marks Southwest's 35th anniversary.

The worst thing Bob Crandall ever did to the industry was advance purchase cheapie fares in an effort to try and match the fares charged by Southwest (and others). I wonder if he expected Southwest to poke him in the eye with $19 fun fares as a response.

At any rate, having multiple fares for the same flight and a potpourri of various fare codes and ticketing rules does nothing but complicate the distribution process.

Wouldn't it be nice to simplify things?

That is why I am advocating Southwest try something in the TX Intrastate and WA eligible markets this summer to commemorate the 35th anniversary.

I'm suggesting a return to the two tier fare structure.

I often worry that raising the fare a little here and there on short hauls risks nickeling and diming passengers to a point where they hop in their cars and go. Fortunately construction on I-35 and gasoline close to 3 bucks a gallon has kept that from happening. Still, the hassle of security in the post 9-11 period has put some folks on the highway.

A word of warning - once you've put them on the highway, it's hell getting them back.

Southwest needs to leave the full fare daytime price alone. They don't even need to junk the 21-day advance purchase tickets and such. Just capacity control the heck out of them. Make those evening and weekend flights that much more desirable. It allows you to get more productivity out of your night shift people and you can fly your planes a few extra hours each day.

Then....after 7 o'clock PM at night on weekdays and at all times on Saturday and Sunday.....chop the heck out of your walk up fare.

Make it fully refundable. Or maybe not. I can make a good argument either way.

See if price can stimulate these markets that have become somewhat stagnant in recent years.

You know.....it used to be that the flights were hourly and on Friday and Sunday night everything between Dallas and Houston would be full until the 11:30 pm flight.

People used to decide Friday morning to run out to the airport that evening and try to get on something to Harlingen or Corpus.

People in Midland....well, people in Midland would try to decide whether they were going to try and escape that particular garden spot via car or via plane. (There was never much discussion about a NEED to get away from Midland/Odessa for the weekend.

My thinking is this: These flights probably have a softer-than-normal load factor during non business times as it is. There's no reason not to jazz them up a bit by making the tickets fairly painless to buy.

If you use the consumer price index, the ticket that was $15 in 1975 is now worth $52.70.

So let's call it $49 evening and weekend walk up get away fare or something like that. To celebrate the anniversary.

If it does what I think it might.....it might introduce a trend to airlines charging prices which are rational and can reasonably be predicted to cover the costs of providing the airplane seat.

Under any circumstances it will make the business of fare rules, refundable vs non refundable, stand by much simpler. Every seat on the plane to Little Rock is $49. Would you like one?

The longer routes...like DAL-HRL or DAL-ELP....were $25 for the cheap seats in those halcyon days.

So make those $75 or $80 now.

Here's another bonus that a lot of folks don't know.

People want to go to Houston Friday night and come back Tuesday afternoon.

Folks might not want to pay full walk up unrestricted business day fare in each direction. But they can almost always be persuaded to buy a full fare one way if they get a cheap seat in the opposite direction.

Southwest is always looking for ways to cut costs. Simplifying the fare rules and how the process works is one way to do just that.

You might even get away with making the tickets non-refundable...but transferable and good for a year. "Nope.....you bought the ticket....we can;t refund it, but it is good for a year for full face value. You can even use it for travel of another family member or friend."

Alas, I doubt anyone will take my sage advice. I've often been accused of being too much the radical theorist when it comes to pricing.

 

[JS]

You really are stuck in the past, aren't you?

The two tier fare structure went away with the advent of high bypass turbofan jet engines. Or maybe Southwest should buy some 737-200's? How about a DC-8 or 707? Just kidding.

Having refundable and non-refundable tickets is done for a reason. It's to make money. The margins in the airline business, even for Southwest, are not sufficient to let people buy $49 refundable fares. Heck, even JetBlue won't give you a refund on a full fare $299 ticket, despite all their other customer-friendly policies like a $25 change fee and free snacks.

I don't quite understand your argument against Southwest's "nickel-and-diming". Very few people analyze the set of fares to see what is going on; usually they just see what the lowest fare available is and then say yay or nay. Nickel-and-diming means adding extra charges on top of the base fare, something that Southwest certainly does not do (other than required charges such as PFC's, segment taxes, and the asinine security fee).

Not only that, but on the one hand you suggest simplification while simultaneously suggesting that the walk-up fare be reduced based on day/time. That's MORE complicated, not less.

Furthermore, offering extra-low fares with severe capacity controls is the same nonsense the legacies do. Why should Southwest join in the screwfest, especially in its captive DAL markets?

The reason the load factors are low out of DAL is not because of the fare structure. It's because Southwest generally has lower load factors and doesn't mind (they still make money, after all), and this is primarily a result of a single fleet type. Southwest doesn't have any RJ's they can use during off-peak hours and they don't need to. The opportunity cost of carrying around empty seats on off-peak flights is more than made up by the savings in a single fleet type.

You might even get away with making the tickets non-refundable...but transferable and good for a year. "Nope.....you bought the ticket....we can;t refund it, but it is good for a year for full face value. You can even use it for travel of another family member or friend."

I think this is what Southwest does anyway but I'm not sure. If not, similar to the above, a pseudo-refundable ticket between non-refundable and refundable is MORE complicated. Not even the legacies are dumb enough to play with the refundability selections. Just two (yes or no) is enough. As a point of comparison, US Airways tried to make non-refundable tickets extra-non-refundable and it backfired big time despite the morons in FFOCUS that refuse to fly another airline despite how much US screws them over.

 

[ELP_WN_Psgr]

You really are stuck in the past, aren't you?

You say that like it's something bad.

Not all of the old things are bad things.

I am trying to think like the consumer (which is easy since I am the ticket buying public) and try to figure out the easiest way to convince me to contibute more of my discretionary income to the people with the god awful blue and orange 737s.

I know that in Q3 1998 Dallas to Houston was a 5317 psgr per day market and Southwest had a market share of 67.2 percent.

By Q3 2005 the market had contracted to 4173 psgrs per day and Southwest's market share had dropped to 66.1% - no doubt the result of it discontinuing IAH service.

At any rate.....allowing the yield management professionals of this world to continue to cause markets to become stagnant is not in the company's best interests.

Sometimes a radical change to what used to work is a very viable solution.

And having read your comments about ticket refundability --- what the hell. Make the tickets fully refundable. Just like any other walk up ticket.

The goal in the airline industry....other than to make sure you collect more money than you spend....ought to be to devise clever ways to induce potential customers to come on out to the airport and give you some cash.

A cheap walk up off peak ticket might just be an idea whose time and has returned. What better way to celebrate the 35th anniversary.

Had fuel not gotten so bad, they could have sold the tickets for $35. But it did.

A really good way would be to price backwards. Figure out what $100 round trip including all taxes and fees leaves you, and charge that amount for the base fare. The leg tax and security tax and all that keeps everyone guessing. If you could head out to the airport and throw down 5 20 dollar bills or a couple of 50s and go round trip for the weekend, people would.

 

[JS]

A really good way would be to price backwards. Figure out what $100 round trip including all taxes and fees leaves you, and charge that amount for the base fare. The leg tax and security tax and all that keeps everyone guessing. If you could head out to the airport and throw down 5 20 dollar bills or a couple of 50s and go round trip for the weekend, people would.

That's not allowed. Airlines are required to separate the base fare from the add-on taxes. Otherwise I'm sure Southwest would already be doing this in every market.

I wouldn't doubt that a cheap walk-up off-peak ticket would bring in more people. The question is -- would it increase revenue? There are people who need to fly from Dallas to Houston at the last minute and it happens to be Saturday. They would pay $49 instead of $109.

With the increases in computer power since the 1970's, airlines don't need to define "peak" and "off-peak" by the day and time of the flight anymore. They know what is peak and off-peak by looking at history and the current loads.

The income statement doesn't care whether someone paid $49 for an "off-peak" (meaning low demand) flight on Friday morning or an "off-peak" flight on Saturday evening. It's the same $49. The probability of a Friday morning flight having lots of spare seats is small, but if it happens, the yield management computers will be happy to sell someone a cheaper ticket (although that requires some advance purchase).

Eliminating the advance purchase requirement is a great tool in some markets, but I seriously doubt it would work in markets where Southwest has a large market share. Lots of people in the 66% Dallas/Houston Southwest market share are already prepared to pay $109 for a walk-up ticket, so charging them less will add some more passengers but likely at a net loss of revenue.

When JetBlue started service with their cheap transcon fares (cheap, relatively speaking at the time), the competition did the same, selling walk-up tickets at a loss relative to the past as opposed to not selling walk-up tickets at all, which is even worse. The Dallas market does not have any new entrants, so Southwest would be cannibalizing itself by drastically cutting walk-up fares.

I actually do like your idea of a promotion to get people to take walk-up discretionary trips, but given the feasibility of driving to Houston and the idiocy of the TSA, I just don't think it will work in the Dallas short haul market. Going from ISP or BWI to Florida for the weekend is a better idea, although markets like that don't have a problem filling seats. It is the walk-up short-haul market where people have discovered that driving isn't so bad after all. Besides, you likely have to drive anyway to reach Love Field and Hobby Airport, so all you're doing is saving the I-45 part of it which is the easiest part of the drive.

While we're on the subject of suggesting some changes, here is a radical one for you -- assuming the short-haul market never recovers, and since Southwest will evenutally run out of big cities to fly to, Southwest should consider adding the Dash-8 Q400 to its fleet. It's quieter than a jet, it's fuel efficient (very important these days and probably forever), it can actually carry luggage (unlike RJ's), it's half the size of a 737, putting to rest the question of seat assignments, at least on that type (no middle seats), and being half a 737, it would solve the problem of half-empty flights as well as the infeasibility of flying to smaller markets.

Also, let's say the Wright Amendment is never overturned. Southwest could fly the Q400 from DAL to LRD, CLL, SHV, and ABI, cutting Eagle's market to pieces. Lots of people drive to those places not only because they are within driving distance of Dallas, but because you have to deal with American Eagle and their Barbie Jets at DFW. Just a thought.

 

[whlinder]

Airlines are required to separate the base fare from the add-on taxes. Otherwise I'm sure Southwest would already be doing this in every market.

MAXjet advertises promo fares inclusive of taxes and fees and everything.

 

[ngneer]

Unless something has changed, prices for airline tickets quoted on Travelocity include everything.

If you want to stimulate demand for off-peak flights, how about giving an extra Rapid Rewards credit for a full-fare off-peak flight instead of charging a different price? Just a thought I'm throwing out there...

 

[formeraa]

Bob Crandall was extremely smart. He realized that, if he didn't match the $19 fare in some way, he would soon be out of business. Thus, the need for YIELD MANAGEMENT and multiple fares catering to different types of people. Bob was nothing short of a genius. Even Southwest has a many fares on each route (have you looked at a WN fare listing lately?).

Futhermore, WN has apparently adopted a YIELD MANAGEMENT system in the past few months. Have you looked at summer availability? Many routes on many days had no low fare seats available on the day that Aug/Sep schedules were released. It sounds like WN is adopting the tight yield management of the legacy airlines -- and the pricing structure, too. DING fares are just another (perhaps more user friendly) version of Priceline-type, last minute cheap fares that the other carriers use.

WN is finally implementing what Bob Crandall invented over 20 years ago!

 

[KCFlyer]

Bob Crandall was extremely smart. He realized that, if he didn't match the $19 fare in some way, he would soon be out of business. Thus, the need for YIELD MANAGEMENT and multiple fares catering to different types of people. Bob was nothing short of a genius. Even Southwest has a many fares on each route (have you looked at a WN fare listing lately?).

Crandall was indeed a genius, but even he recognized that a handful of different fares would be better than a gazillion different levels. Look at his "value pricing" idea from the early 1990's...drastically reduced unrestricted fares and slightly higher, but fewer levels of advance purchase fares. That's almost "Southwest-like". Of course, Northwest broke ranks with the idea and offered a super duper "travel on a Tuesday in Lent and we'll pay you to fly" fare sale, and Crandall's ego got the better of him and value pricing was toast. Too bad, because IMHO, had it been allowed to work, I think every airline would have found themselves in a lot better financial shape than they are these days.

Futhermore, WN has apparently adopted a YIELD MANAGEMENT system in the past few months. Have you looked at summer availability? Many routes on many days had no low fare seats available on the day that Aug/Sep schedules were released. It sounds like WN is adopting the tight yield management of the legacy airlines -- and the pricing structure, too. DING fares are just another (perhaps more user friendly) version of Priceline-type, last minute cheap fares that the other carriers use.

Southwest has had a fantastic REVENUE MANAGEMENT group for the past several years. They have apparently done a remarkable job considering the profitablity of the airline for these past years. They also don't seem to bow to any pressure to go after market share...if the allotted seats are sold at the giveaway fare, they don't offer more of that fare to fill up the plane. Sure, they've got "ding" fares...I think though that the dinger doesn't ding until the flight projects to operate at a profit. Others seem to ding like crazy to put butts in seats.

WN is finally implementing what Bob Crandall invented over 20 years ago!

Again, Crandall, despite his "Fang" reputation, will go down as one of the best airline CEO's in history. But as I point out with value pricing, even he could see the need to modify some things. I'd say that Southwest is implementing what Crandall would be doing today.