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Southwest Takes Off Internationally – Part 3

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Southwest Takes Off Internationally – Part 3

Southwest Takes Off Internationally – Part 3
October 05
08:04 2015

MIAMI— In slightly over a week, Southwest Airlines will formally pull the curtain off its new international terminal in Houston, launching eight new routes beyond the country from the airport. The facility will greatly broaden Southwest’s international footprint, immediately linking many destinations south of the border with the largest domestic carrier’s expansive national route network.

But the new facility in Houston means more than just a few extra lines on Southwest’s route map. Opening its doors to international traffic in Houston signifies a broader shift for the airline. With the domestic air market relatively saturated for Southwest, the airline wants to try its hand in foreign skies, looking to destinations outside the United States to shoulder most future growth.

Primarily, three airports in total will see most of the effects of Southwest’s push abroad in the coming years. In this series, we examine the three locations Southwest designated as international gateways: Houston-Hobby Airport (HOU) (Part 1), Fort Lauderdale-Hollywood International Airport (FLL) (Part 2), and now, Baltimore-Washington International Airport (BWI). With the former two investigated previously, we’re bolting for Baltimore, turning our attention north to wrap up the series. Also known as Thurgood Marshall Airport, Baltimore is one of the airline’s largest operational cities and a key cog in Southwest’s network.

Perhaps best associated with its local crab cuisine, Baltimore will play a central role as Southwest builds steam internationally. However, it will remain more dormant early on until the airline places more destinations on its map and acquires the proper infrastructure to manage large-scale international flying from the facility.

Baltimore-Washington

Southwest’s Baltimore ticket counters streaming with celebratory decorations as it launched the first trickling of international service from the airport on July 1

Southwest turned to one of its domestic powerhouses to bear some of its newfound traffic abroad, selecting Baltimore as one of three international gateways. The party is actually already underway in Baltimore, with Southwest having introduced an international trickling from the airport on July 1.

As of April 2015, Baltimore-Washington handled 218 daily departures, placing it as the second busiest in the airline’s system. Clearly, such a high operational volume yields benefits for Southwest as it tries to connect customers conveniently.

In addition to over 200 flights per day, Baltimore features 61 cities with nonstop service, trailing only Chicago-Midway Airport (MDW) for Southwest. This leaves Baltimore with open arms as a viable connection point for many of Southwest’s passengers – especially those originating from the Northeast. Although its name might suggest otherwise, Southwest maintains a fairly robust presence in the Northeast region, and Baltimore will effectively capture this audience. So as with Houston and Fort Lauderdale, Baltimore at least partially caters to a particular audience of interest for Southwest.

BWI-Route-Map

Baltimore also lies in a position well suited to funnel more Caribbean-leaning traffic, though it may drive some to Mexico eventually as well. According to the Baltimore Sun, Southwest already operates several close-by “near-international” routes from Baltimore, some of which it picked up during the AirTran acquisition. The pre-existing exposure to the market from the days of AirTran gives Southwest the security of knowing Baltimore can in fact support international flights and a more firm idea of what to expect moving forward.

Southwest’s dominant position at the airport likely played a role as well. According to Department of Transportation (DOT) data, Southwest owns a commanding 71% market share at the facility, a figure that falls below its presence at Houston Hobby but is still high. While Southwest adheres most strongly to the point-to-point model, which generally lends itself less to accumulating a large market share at any given airport, it clearly still prefers facilities where it controls most of the traffic.

Also similarly to its other international gateways, Baltimore’s relatively low cost-per-enplaned passenger (CPE) offers it an advantage. DWU Consulting pegs Baltimore’s CPE at $9.82, lower than both of its immediate counterparts in the area (Washington-Reagan and Washington-Dulles), and far below other notable airports in the Northeast. For some perspective, New York LaGuardia’s CPE nearly doubles that of Baltimore, and the Big Apple’s “third world airport” represents the most economical option in the New York metropolitan area too. While not the cheapest facility in an absolute sense, Baltimore will definitely help Southwest keep a lid on its costs, especially as it incurs some extras inherent to international flying in other departments.

But of the three, Baltimore seems like the odd man out in many ways. For one, considering Southwest plans to engage with exclusively southward international traffic for the time being, choosing a more northern airport would appear somewhat peculiar. Though Baltimore does link with many of Southwest’s other destinations, it isolates those beginning their journeys far outside of the region, although of course having Houston and Fort Lauderdale as players mitigates this impact.

And while Baltimore hardly represents a highly congested hub airport, it isn’t exactly a secondary airport like the other two either. Both the more heavy volume of traffic as well as fighting northeastern airspace congestion imposes operational challenges for Southwest, borne out by the on-time statistics. DOT data show that while Southwest recorded about a 79% on-time percentage over the past year system-wide, only 73% of flights arrived within fifteen minutes of schedule at Baltimore. Southwest boasts an impressively efficient operation overall, but Baltimore at best represents an operationally-mediocre facility, falling below the system-wide averages.

BWI-On-Time-Data

Additionally, unlike Houston and Fort Lauderdale, no concrete plans currently exist to construct an internationally-specialized terminal in Baltimore. Southwest’s international moves do have the airport closely considering expansion, however. CEO Gary Kelly envisions Baltimore as a “focal point” in the airline’s network. With Southwest weighing as many as 50 new international markets in the coming years, the airline might prefer to route much of those additions through its stronghold in Baltimore.

WN-On-Time-Data-300x181

More speculatively, the airline might have a different breed of international traffic in mind long-term from Baltimore. Kelly hasn’t shied away from the notion of eventually landing in Canada, though he cautions that such an expansion remains in the “idea stage” for the moment. But if Southwest does have aims in going north of the border, Baltimore would make perfect sense as a waypoint for connecting traffic. As the airline begins to take deliveries of its Boeing 737-MAX aircraft in 2017, Southwest might pursue some more adventurous routes aided by its superior fuel efficiency and longer range.

Outside of those routes already underway, Southwest’s international intentions in Baltimore might appear least clear of the three at the moment. But as Southwest wades more and more heavily into the international market, expect Baltimore to attract some more LUV from the airline.

Closing Remarks

Southwest’s international kickoff of sorts is right around the corner, with the airline scheduled to debut its new international terminal in Houston on October 15. But the eight new routes from Hobby mark only the beginning of Southwest’s broader game plan, which will unfold slowly over a period of years.

For all of the talk about collusion between major airline players, Southwest has made no secret of its plans to grow quite aggressively over the next several years. It’s not hard to imagine that international expansion might fuel many of the ambitious figures thrown out by Southwest executives.

Many interpret the idea of Southwest’s Heart-themed jets venturing beyond the border as a sign of the company deviating from its tradition and aligning itself more with the approach of its legacy competitors. This could not be further from the truth. As we’ve hopefully revealed in this series, Southwest’s international expansion largely reflects the airline’s traditional operating model, even with slight strategic tints. The carrier surely wants to grow, and the carrier surely wants to attract more passengers and a greater breadth of passengers from its days of origin, but it’s doing so in a fundamentally consistent way with its roots.

We should interpret the international blitz as more of an evolution for Southwest Airlines, rather than a radical shift in strategy.

Many folks might remember Southwest’s old advertising slogan, “you’re now free to move about the country.” It’s probably for the best the airline no longer uses that line, because its marketing team might have to broaden that approach.

Southwest’s customers, indeed, are now free to move beyond the country.

 

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About Author

Alex McIntyre

Alex McIntyre

Texan. Airways Business Analyst. Emory University student, and lifelong AvGeek. Favorite airport and aircraft are: Dallas/Fort Worth International Airport and the Boeing 787. Passionate about all things commercial in the airline business, including route networks and hub operations. I love the window seat.

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