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.