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OPINION: It’s Time for Southwest to Enter the Regional Jet Market
Here comes the world’s more unpopular opinion: if Southwest wanted to enter the regional jet market, now is the time. The airline has seen rapid expansion over the last few years with the merger with AirTran and now that it is complete, some routes are starting to show their weaknesses. The use of regional jets could also see the entrance to new markets in the carrier’s future.
When Southwest merged with AirTran, the carrier removed the workhorse of the AirTran fleet, the Boeing 717, and AirTran’s smaller cities started to see a drop in load factor as the 117 seat 717s were replaced with Southwest’s all economy 137 seat Boeing 737-700s. Despite extensive marketing programs in these cities, the carrier has continued to struggle, and in the winter of 2015, announced that they would add and drop numerous routes to these cities, hoping to gain the attention of local customers. One of the largest cities to lose out is Akron-Canton Airport, which went from 10 flights a day on AirTran in 2011 to three a day, and from six cities served to one by this summer. Akron will lose service to Las Vegas, Orlando (which will go to Saturday only from daily), Chicago, Tampa, and Ft. Myers in April, leaving Atlanta as its lone daily nonstop city on Southwest.
AirTran managed to maintain a 70% load percentage at cities like Greenville-Spartanburg, Akron, Branson, Des Moines, and Grand Rapids on the Boeing 717. However, most of these cities have seen load percentages drop between 50-60% but the amount of passengers on the flights remains the same. Southwest is hoping that by offering new destinations as well as dirt cheap fares (under $100 round trip on some routes) that the new routes will improve the amount of passengers flying Southwest, however, a large regional jet could improve Southwest’s ability to maintain these routes.
While Southwest has leased out the 88 Boeing 717s from AirTran to Delta, the use of around a 100 seat plane, like a Bombardier C-Series, Embraer ERJ-175 or ERJ-190, allows the carrier to continue service while also creating new routes to previously vacant cities. While the cost of learning a new airplane, hiring new pilots, and increasing the maintenance cost would hurt the company’s profits, it also allows for a new way for the airline to experiment on routes that could potentially create a new services and gain new passengers. Distance from a Southwest served city is often what keeps people from choosing Southwest. Unless the flight is a really good deal, driving 2-3 hours to an airport for a cheaper flight is not a great option, especially for business travelers.
The passenger load factors could possibly improve at some seasonal routes too, possibly allowing Southwest to upgrade some serviced destinations from seasonal to year round, flying Boeing 737s in the peak season and an ERJ-190 regional jet in the offseason.
Other airlines have utilized the larger regional jets to start new routes. All US legacy carriers currently use the ERJ-170 or ERJ-175 in some part of their fleet, utilizing them to add more frequencies to a route or create new flights to new markets. Alaska Airlines recently took control of their first ERJ-175 operated by SkyWest, allowing them to expand their Portland, Oregon hub and start new Midwest service such as Oklahoma City-Seattle. Low cost airlines such as Frontier and JetBlue have used the ERJ-190 to expand routes, Frontier getting their ERJ-190s from Republic Airways and JetBlue owning their own jets. Frontier has since retired the jet while JetBlue continues to use the plane on their less popular routes when it is not profitable for an Airbus A320 to fly to the destination.
The airline world is always unpredictable, and although Southwest loves to continue to give you a cheap ticket with no baggage fees, the carrier now must also choose what to do next. If these smaller markets continue to struggle, should the carrier cut the city off completely or find an alternative jet that is not a Boeing 737 to fly to the smaller towns? The Embraer ERJ-190 and Bombardier C-Series allows more flexibility to Southwest’s scheduling with less seats available while also continuing to explore and exploit the smaller markets of North America.
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