MIAMI — When Dallas based Southwest Airlines merged with Atlanta based AirTran Airways in May of 2011, it marked the beginning of a remarkable evolution at the venerable low cost carrier. For years, Southwest had been a domestic carrier only, eschewing both its own international services and code share partnerships with international partners, because its reservations system could not handle international purchases and tickets, and because the cost of upgrading the reservation system to do so was prohibitive.
But once the airline merged with AirTran, seven new international destinations (Mexico City, Cabo, Cancun, Punta Cana, Nassau, Montego Bay, and Aruba) came online, forcing Southwest had to upgrade its processes to handle international flights. In fact, the seven international AirTran destinations as well as San Juan in Puerto Rico were Southwest’s first significant overwater destinations subject to regulations such ETOPS. Some of its flights may have flown over water, but always close enough to the land that the standard aircraft and crew certifications would suffice.
Puerto Rico in particular has been a key lynchpin in this process as the first former AirTran station to get converted to Southwest management and operations, a switchover that occurred on April 14, 2013. For Southwest, Puerto Rico has served as a test (almost a guinea pig of sorts) in the process of updating Southwest’s procedures and technology to handle overwater and international markets. Although the island is technically US soil, as an overseas territory, it is still subject to slightly different regulations than destinations within the US.
Meanwhile, on the customer facing side, Puerto Rico is Southwest’s first market where the primary customer language is Spanish. In order to better understand the conversion process and Southwest’s operation in San Juan, I spent a few hours with Southwest’s local station manager Robert Robles and Southwest spokesperson Dan Landson during a recent trip to the city.
For Southwest, San Juan is one of its smaller stations, with between nine and eleven flights per day, depending on the season and day of week. On the particular day that I visited, Southwest had nine departures spread across five cities; Fort Lauderdale, Orlando, Atlanta, Baltimore-Washington, and Chicago Midway. Of these nine departures, two were early morning departures by aircraft that overnighted in the city with the remaining seven spread between 12:00 pm and 6:30 pm.
Meanwhile, with regards to arrivals, seven flights arrive within that block of time, with two later arrivals overnighting at the airport.
San Juan Airport was recently privatized, and the new owners Aerostar, have embarked on a significant capital improvement project. Concourses B and C were redeveloped from their present state of aged decay into a modern facility. As part of this process, the airport has migrated all of the airlines that had previously resided on the B concourse (10 gates) over to the C and D concourses (most of them to C), which forced the existing C carriers to give up a few of their gates. For example, Southwest had previously controlled gate C-28, but ceded the gate to United when the latter moved over. Regardless, Southwest’s current operation spreads over gates C-25, C-27, and C-29, which are located at the far end of the C concourse.
Robles has been with Southwest since the conversion, and with AirTran for six years before that. Prior to that he was involved with the airline industry on Puerto Rico at various airports for eleven years before that with TWA and Continental Airlines. So the conversion process was not as difficult for him. Even so, it represented a significant challenge for the four Southwest employees in San Juan (Robles plus three other supervisors).
The four have to manage a team of almost 200 sub-contracted check-in, gate, and ramp employees (shared with other carriers). As far as the operating procedures at the airport on the airline side, the changeover was not particularly hectic, despite Southwest’s 35 minute turns are a lot quicker than AirTran’s schedules.
As far as regulatory changes, and differences in operating procedure, Robles says that because Southwest spent such a long time training them in whatever differences arose, and in ensuring 100% regulatory compliance, that aspect of the changeover was extremely smooth. And that’s probably the benefit of Southwest’s approach to the merger with AirTran, which I’ve (jokingly) referred to at times as the slowest merger since the reunification of Germany: all of the time spent has ensured a smooth (eventual) transfer.
For the employees at the check in counters and at the gate, the transition to Southwest’s more antiquated reservations platform didn’t cause many major headaches (thanks again to all the time that was spent preparing for the changeover), but employees will have to be retrained yet again in 2014 when Southwest implements its new reservations system being developed by Amadeus via the Altea reservations platform. The major airport related transition has been with the boarding process, which was difficult initially for both the gate agents and the local customers to adjust to. Robles mentioned that Latin American customers are attuned to the guaranteed seating process, and migrating them over to the Southwest open seating approach took some getting used to. In particular, late arriving families who hadn’t heard of Southwest’s boarding processes can cause delays as they require passengers who have already boarded to voluntarily reseat themselves, an occasionally lengthy process.
In fact this has been the most significant challenge according to Robles; educating customers on Southwest Airlines and the shift over from AirTran. Part of the process has been reaching out to travel agents and familiarizing them with Southwest’s booking process and the changes that that entails (like much of Latin America, Puerto Ricans still book a large share of their travel through travel agents).
Southwest has also focused on customer education by reaching out to the local community with targeted advertising. Getting them on board with “Bags Fly Free” required the undoing of an embedded behavior – most US airlines serving Puerto Rico have checked baggage fees (AirTran did as well), though the largest one, JetBlue, does not. However, this was not necessarily a difficult process, as customers were more than happy to stop paying for checked baggage – especially important given the propensity to bring massive amounts of luggage on trips for Latin American consumers. These education efforts took many forms, but amongst the most effective was certainly the month-long booth the company placed in Plaza Las Americas, which is the largest shopping mall in the Caribbean, with an agent stationed full time to answer questions and build awareness for the brand.
After we discussed the operational conversion, we moved into a brief discussion of the performance of the station. With the recent cancellation of long-time AirTran stations Branson and Key West, it’s especially interesting to judge the relative performance of ex-AirTran stations in the post-merger Southwest network. According to Robles, load factors have strengthened by about 10 percentage points since the changeover (the average is somewhere in the range of 90%), which he attributes to the additional feed from Southwest’s network.
The traditional AirTran hub of Atlanta is still an important destination for connections across the country, and indeed it is the only destination to be served year round with Southwest’s larger Boeing 737-800 equipment (though this past summer, the entire operation was run with 737-800s). With regards to connectivity, Robles has empirically observed that connectivity with O&D from Texas and California tends to flow across the Florida hubs of Orlando and Fort Lauderdale while connections to the Northeast and Midwest tend to flow over Baltimore Washington and Atlanta. Chicago Midway, it can be surmised, is primarily an O&D destination.
Beyond the destination specific stuff, we spent a bit of time discussing the seasonality of demand. San Juan, like most Carribbean destinations, is strongest in the winter when travelers descend en-masse from the Northeast to escape the bitterly cold weather. However, there is a strong counter cyclical flow of visitors of Puerto Rican origin during the summer when demand patterns shift to favor VFR (visiting family & relatives) traffic. Robles believes that this counter cyclical flow has actually been strengthened by the changeover because of Southwest’s nationwide brand presence (versus AirTran’s concentration on the Eastern seaboard).
Looking forward for the station, both Landson and Robles stated that while San Juan is one of Southwest’s smaller stations, it is a stable one with incremental opportunities for growth. To that end, in June 2014, the carrier will inaugurate Saturday-only services to its hub at Houston Hobby, its sixth destination served from San Juan. However, while there may be opportunities to connect San Juan with more Southwest strongholds in the US, don’t expect to see the carrier using San Juan as a base for intra-Caribbean flying anytime soon. As Landson puts it, there are much “higher priority” markets for Southwest to enter in the near term (read: Washington Reagan and New York La Guardia).
We also went down onto the ramp, and aside from some interesting plane spotting, there were a couple of other fun notes which you can read about further below.
San Juan ultimately serves as an interesting (and successful) test case for Southwest as it looks to move forward into a full international portfolio of destinations. The lessons learnt with regards to taking it slow in retraining employees and meeting regulations has already been implemented, with the next set of international changeovers not set to take place until early to mid-2014 (on the way to full integration of the two carriers by the end of 2014).
On the customer side, Southwest will perhaps have to deal with some angst as consumers switch from the rigid boarding process employed by most carriers in the region (indeed Latin America has one of the most segmented airport experiences in the world;), and will have to ensure that it communicates properly with Spanish speaking customers in the other nations it serves and spreads information about substantial changes like “Bags Fly Free”.
That being said, the process will be smoothened by the fact that Aerostar also manages several other privatized airports throughout the Caribbean, which allows Southwest to create consistent changeover processes across destinations (though there Is the potential for danger on the cost side when negotiation with a monopolistic airport operator). And San Juan will remain an important station as the largest one in the Caribbean (and thus the troubleshooting base for minor issues at Southwest’s international destinations).
Other Random Notes
There were a few other cool snippets of information I picked up during my visit, and I thought I’d stick them on the end here. They aren’t really San Juan centric, but are certainly good bits of info nonetheless.
- The decision to pull out of Key West, Branson, and Jackson (MS) was actually made before the carrier knew that slots would be available at Washington Reagan and New York La Guardia. Which is to say that the aircraft pulled out of these cities may eventually be used to grow Reagan or La Guardia, but that was not a deliberate process.
- Southwest has a very interesting approach to philanthropy. At each one of its stations, Southwest has a local team known as a Giving Board. This Giving Board decides how Southwest can best serve each local community, and is given significant leeway in determining Southwest’s local charity donations. In San Juan for example, the board (in this case actually one employee originating in Chicago since San Juan doesn’t have a formal board) supports Make A Wish and Ronald McDonald (nationwide Southwest partners) but also has supported local organizations such as a philharmonic orchestra that wanted to travel to the mainland to perform. And at stations in the Continental US, the giving boards undergo the same process. This approach is an interesting insight into Southwest’s corporate culture. Despite the business model’s evolution to that of a network carrier with a hub-and-spoke model, Southwest still retains at its heart the de-centralized, point-to-point inspired corporate culture the airline was founded upon.
- I’ve always found it hard to reconcile Southwest’s famed peanuts with the ever-increasing awareness of the dangers of peanut allergy. Well, Southwest deals with the problem by requiring customers with a peanut allergy to approach Southwest before the flight and inform the airline of his or her allergy. If they do so, Southwest will in fact notify the flight crew and will not serve peanuts at all on that passenger’s flight(s), opting for the other snacks that have been boarded. At the same time, Southwest doesn’t give a reason for the lack of peanuts, they just simply say that peanuts will not be served on the flight.