Even SW knows it needs to step it up if it wants to be one of the major carriers.
Airlines Southwest Airlines Making Itself At Home In Houston
Erin Mulvaney On May 15, 2015
Source: Houston Chronicle
May 14--Southwest Airlines made it clear Wednesday that Houston will be pivotal in its continuing evolution from a low-cost, short-hop carrier to a major player with international flights, bigger planes and even bigger profits.
The airline held its annual shareholders meeting Wednesday in downtown Houston, marking the first time it has held the meeting outside its headquarters at Dallas Love Field. Southwest officials also announced the lineup of flights out of its $156 million international terminal at Hobby Airport, which will open Oct. 15. Destinations will be Mexico, Belize, Costa Rica and Jamaica.
The middle-aged airline has undergone some growing pains in recent years. Yet at the shareholder meeting, Southwest CEO Gary Kelly boasted that Southwest is now the largest airline in the U.S. based on domestic travelers and that the company's 2015 earnings so far are triple what they were at this time last year.
He said the airline "transformed" in 2014 with its first international flights after its 2011 merger with AirTran Airways, a new logo and advertising campaign, and continued to invest in its fleet and operations.
"We are celebrating Houston," Kelly said during the meeting at the Hyatt Regency Houston. "Houston was one of our original three cities and is very important to Southwest. We are hopeful Southwest is important to Houston. We bring much-needed competition, particularly internationally."
Hobby takes center stage
At the center of Southwest's transformation moving forward will be the five-gate international terminal at Hobby Airport.
The Houston terminal will offer flights to Mexico City, Puerto Vallarta, Los Cabos and Cancun in Mexico; to San Jose, Costa Rica; and Belize City, Belize, starting Oct. 15. Flights to Montego Bay, Jamaica, and Liberia, Costa Rica, which were announced Wednesday, will begin Nov. 1. Service to Aruba began earlier this year.
Kelly said the flights will increase competition in Houston, noting that four of the eight new nonstop routes are served by just one airline. "There will be much-needed relief from some of the highest international fares in the country," he said.
With the disappearance of Houston's Continental Airlines, Southwest has emerged as the primary Texas-based airline operating in Houston, and it already dominates Hobby.
Its 280,000-square-foot international project will increase Hobby's physical footprint by more than 40 percent. The airline hopes the terminal will add more than 1.5 million travelers to the Houston airport each year. Southwest has already doubled its reach at Hobby over the last decade, expanding to 51 markets from 26, the Houston Airport System says. Last year, the airline's Hobby traffic rose 8 percent from the previous year.
Southwest's decision to build the terminal in Houston was logical because of the city's large base of travelers and its proximity to Latin America and because of legal restrictions on international travel out of Dallas Love Field, said Henry Harteveldt, airline analyst with San Francisco-based Atmosphere Research.
"Hobby is an ideal gateway," Harteveldt said. "I think they are starting small, but it will build up."
He predicts options for leisure travelers will improve. "I think this is certainly the beginning of Southwest's most serious commitment to international flying that we've seen," he said.
Yet the Dallas carrier is expanding in Houston at a time when Bush Intercontinental is adding many new flights to Latin America. This month, Spirit Airlines added flights to destinations in Mexico, Costa Rica, Honduras and El Salvador. Interjet announced this week that it would increase its service to Monterrey, Mexico, a nonstop service that launched last year. Also adding flights to Mexico and other destinations in Latin America at the end of 2014 were Aeromexico, VivaAerobus and United Airlines, which already serves 25 cities in Mexico from Houston.
'Very aggressive competitor'
United, which dominates Bush Intercontinental, and Southwest battled when the new international terminal was under consideration by the Houston City Council. United threatened to cut back operations if Southwest's terminal was approved.
"Southwest is a very aggressive competitor," said airline analyst Darryl Jenkins. "They will give United a run for their money."
Jenkins predicted the airline would compete on price initially but will raise its fares over time. Jenkins said the Houston flights mark a big change in operations for the airline and an evolution away from the model it began with its 1971 founding of connecting Dallas, Houston and San Antonio.
At the shareholders meeting, Kelly announced a 25 percent increase in the quarterly dividend and authorized a $1.5 billion share repurchase program. He said the balance sheet and liquidity remain strong with cash and short-term investments of about $3.2 billion. He also said the airline has designated orders from Boeing to purchase 737-800s, rather than the smaller 737-700s.
With its growth, the airline has experienced some turbulence. Its on-time performance has sometimes wavered, it flies out of large airports it once shunned, and its fares are not always the lowest.
Wednesday, it also had a labor dispute bubble up in public.
Dozens of baggage handlers, ramp workers and flight attendants picketed in front of the Hyatt Regency, wielding signs that read "People Over Profits," "It's Just a Machine Without a Heart" and "Bags Fly Free Because of Me." The Transport Workers Union of America Local 555, which represents 11,000 workers, says that while the airline experiences record profits consistently, negotiations have continued since 2011 for better wages, worker safety and health care benefits.
Kelly said that most workers are represented by unions, and Southwest management has settled contracts with most. He said 15 percent of Southwest's record profit went "straight to our employees."
Copyright 2015 - Houston Chronicle
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