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  • Ten Takeaways From Southwest's CEO
    Posted by Joe Anselmo 3:13 PM on Apr 04, 2012

    Southwest Airlines CEO Gary Kelly was the keynote speaker on Wednesday at Aviation Week’s MRO Americas conference in Dallas. Here are ten topics he discussed in his wide-ranging speech.

    MRO COSTS

    Kelly said an “escalation trend” in maintenance costs needs to be halted and called on MRO providers to do their part by improving efficiency and productivity. Southwest expects to reap savings as aging 737 classics are replaced by newer 737s that will require less maintenance. But Kelly noted the engines on Southwest’s fleet are “pretty mature” and require more maintenance than they used to.

    AIR TRAFFIC MODERNIZATION

    “I can’t find anyone who disagrees that needs to happen, and yet it doesn’t happen,” said Kelly, lamenting that implementation of the FAA’s NextGen air-traffic control system has taken far too long. “We need to step up our collective voices to make that happen.”

    FUEL PRICES

    Volatile and rising fuel costs remain Southwest’s number one challenge. Last month the carrier said it expects to report a rare net loss for the first quarter due to a $250 million in increase in jet fuel costs. Kelly noted that airline industry energy costs have risen six-fold since 2000. “Fuel is the main concern,” he said. “We have seen step changes that will help, but we have to continue to do more.”

    737 MAX

    Kelly said Boeing made the right decision to outfit its 737 jet with new engines rather than to hold off and bring an all-new narrowbody to market. “We need improvements now, and I just feel like there’s too much risk waiting 10 years,” he said. “I’m not an advocate for anything other than the 737MAX or the [Airbus] A320NEO. I think those are good decisions.” Southwest in December became the launch customer for the MAX with an order for 150 of the re-engined jets, which are scheduled to begin entering service in 2017. “I wish I had them three years ago,” Kelly said.

    CAPACITY GROWTH

    Southwest still plans to keep its capacity flat in 2012 and possibly 2013. Kelly believes economic growth in the U.S. will remain “sluggish” over the next two years. “We definitely want to grow this airline…but not until we are hitting our profit targets and have an outlook that really supports that,” he said.

    AIR TAXES

    Though airline service is taxed at a higher rate than alcohol or cigarettes, Kelly said the industry remains at risk of even more levies as lawmakers in Washington grapple with an unsustainable federal budget deficit. “We seem to have held off more taxes on aviation, but it was close – very close,” he said.

    ALTERNATIVE FUELS

    Kelly called on increased efforts to make the use of alternative fuels an economically viable option for airlines. “Today it’s not,” he said. “It’s just too costly.”

    DUAL-CLASS CABINS

    Southwest has no plans to introduce assigned seating or dual-class service on its flights to attract more business customers. “We already carry a lot of business customers, and we have an opportunity to attract more by serving markets that business customers want,” Kelly said. He noted that Southwest’s Business Select and Early Bird boarding features are tailored to appeal to such travelers. “I’m comfortable with the investment we’ve made for business customers.”

    RESERVATIONS AND AUTOMATION

    In the near-term, Southwest plans to utilize the international reservations system it inherited when it acquired AirTran. Ultimately, the carrier plans to introduce a brand new reservations system with new automation tools. Kelly was at Houston’s Hobby airport on Tuesday when tornadoes raged through Dallas, forcing the cancellation of scores of flights across eastern Texas. “There were very long lines at Hobby,” he noted. “It’s time for us to upgrade our capabilities.”

    WI-FI SERVICE

    Southwest now has wi-fi service installed on 210 jets and plans to outfit all of its Boeing 737-700s with wi-fi by the end of next year. The capability is already installed on the 737-800s the company is taking delivery of. “We’re nearing the point where we will be able to strongly market wi-fi,” Kelly said.

    Tags: tw99, mro12

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