Southwest sticks with continuous hub/point-to-point as core business strategy

American Airlines plans to shift from continuous hubbing at three of its major cities–an operational process where flights flow throughout the day–to return to traditional peak-and-valley hubbing. But Southwest Airlines, despite many significant changes to its business model over the years, will stick with continuous hubbing which has been at the core of its business model since the airline was founded in 1971.

After attending the American Leadership Council Wednesday in Dallas, we went across town on Thursday to talk with Gary Kelly, CEO of Southwest Airlines. One of the first things we asked him was about the American shift, which we wrote about yesterday.

Kelly prefers to call Southwest’s operations point-to-point rather than continuous hubbing, but it amounts to the same thing: disembark passengers and embark passengers as soon as the arriving ones are off and send the plane back out as quickly as possible. Turn times are short (more about this later), and aircraft and personnel utilization are high. Employee cross-utilization is important to this, and nothing illustrated this as much as our own return flight–on American–after we finished at Southwest.

Our American flight took a +20 minute delay because aircraft cleaners weren’t at our gate at Dallas-Ft. Worth International Airport to begin preparing the cabin during the turn-time. At Southwest, flight attendants begin the cleaning process. (We took an additional 20 minute delay on the AA flight while the tire pressure was checked on the nose wheels, something we wondered why couldn’t have been done during the original delay.) At Seattle, American’s contract ground service was in the cabin cleaning up before passengers in the rear had deplaned.

Re-hubbing American Airlines will enhance revenue capture and connections, officials said. At Southwest, Kelly sees load factors exceeding 82% along with an increase in connecting passengers during the past 10 years and no need to change this core element of the carrier’s business model.

“We haven’t seriously studied what a radical change to routing airplanes would do,” Kelly says. While there have been some elements in Southwest’s business model that changed, resulting in longer turn times, these have generated market share shift and enhanced revenue, continuing Southwest’s multi-decades long streak of profitability while every legacy carrier in the US has gone through bankruptcy at least once and several have disappeared all together.

One of these shifting elements is really no change at all, but a contrarian move to continue to fly two checked bags free while other airlines charge for each checked bag under most circumstances. The free bags result in more bags on connecting flights, which in turn requires a bit more ground time. Turn times have crept up to an average of 30 minutes for the Boeing 737-700 fleet, which carried 143 passengers. Addition of the larger, 175 passenger Boeing 737-800 requires 45 minutes turn-time (American scheduled one hour for the same airplane).

Southwest has been adjusting the schedule, attempting to maximize efficiency, but in the process blew up its on-time performance. Once usually #1 in on-time statistics, today Southwest is usually dead last. Kelly acknowledged Southwest schedule itself too tightly. New schedule adjustments will be coming to create a mix of efficiency and on-time performance.

  • We’ll have more from our interview with Gary Kelly next week.

11 Comments on “Southwest sticks with continuous hub/point-to-point as core business strategy

  1. I think of continous hubbing as requiring a hub focus, which itself means a minimum number of schedules per day from an airport and a certain permanence. Looking at the Wikipedia stats for Southwest, Chicago, Las Vegas and Baltimore may qualify, but the others seem too small to me. So, I’d suggest that Southwest operate a hybrid system, with these 3 maybe continuous hub, and the rest too small to consider beyond ‘point-to-point’. Just my opinion 😉

    Over in Europe, Ryanair would be the same, having a handful of sites (eg Stansted) that clearly have the traffic to be considered a hub, but many more that don’t.

    Am surprised to read that Southwest have fallen so far in the on-time league table.

    • I fly Southwest a lot, and can say with certainty that their ontime performance has taken a big hit, especially in the last year. I’ve found lately as a general rule: the later in the day, the longer the delay. 6am flights are nearly always on time. Everything else? Good luck.

  2. Southwest doesn’t have large fleets of RJs, so they have less connections to deal with, I would guess.

  3. The semantics of hub, de hub are misleading.

    Does S.W. actually have a hub or its it point to point? Better to call a spade a spade. If it’s a point to point call it that and not mess it up with a hub and spoke variation phrase (its called hiding by splitting hairs to confuse the issue).

    If you have a busy center (DFW?) and its not a hub and spoke , i.e. regular traffic flow where it is operating continuous then it really is point to point and my impression is that S.W. is basically exactly that, point ot point with some crossing into a common location but not the sort of hub and spoke thing.

    There have always been central meccas for the airlines. N.W. had Minneapolis, Deltas Atlanta that served as a headquarters, maintenance centers as well as where a lot of flights originated from as that’s where they started their original operation (or moved to in S.W caser of DFW due to the rule at the time and Love Field being their Meccas but DFW a better location) and it’s a natural progression. Its not any kind of a hub by the definition though some did turn them into true Hubs and spokes and mini hubs.

    My take is S.W. makes poin to point work but you have to manage it. American can’t make it work and the modern solution to having real managers and decentralized is to luff it all off and make it so you don’t have to work at it. It then allows you to blame everyone else but the top management when it doesn’t work (being actually held accountable means your bonuses and golden parachutes are in jeproedy )

    I also see in there while S.W. employees are well paid, they get a lot more out of them as they are not sitting on their duffs while a specialist is called in. Don’t get me wrong, it may be appropriate to have people get some down time but its also legitimate to ask can they do a bit more here (cabin cleaning) getting the ball rolling and make it work better for everyone. You do have to recognize that it’s the people that make it work and be willing to let them in on the rewards not screw them down to as little as you can possibly get away with (the ideal being that they are on food stamps, welfare and government medical )

    Seeing as how S.W. has returned profits consistently we can see which one actually works better, but then you have to work at it.

  4. The two free checked bags on Southwest are surely a way to attract more passengers by not annoying them with a surcharge.

  5. What is the source of the 45 minute turn for the 738s versus the 30 minutes for the 737s?

Leave a Reply

Your email address will not be published.