(See sidebar: "Southwest Shifts Focus Amid Demand Concerns.")Southwest Airlines is continuing efforts to court corporate travel buyers with a modified fare structure, enhancements to its frequent flyer program, a new boarding process, further global distribution system participation and a more open stance toward corporate discounting.
In an interview with Business Travel News, CEO Gary Kelly said these and other initiatives should shift its mix of passengers toward the business traveler.
Most recently, Southwest this month unveiled three new fare columns—Business Select, Business and Wanna Get Away—that Kelly said helps make Southwest more "open to the possibility" of negotiating discounts with corporate buyers.
Kelly said Southwest would place up to a $30 premium on published Business Select fares, its highest tier, over full coach fares, which leaves a little more room to negotiate than fully discounted fare products.
"We had a hard policy in the past that we would not negotiate, and, given the tools that we now have available, it gives us more to offer to win a corporate account over," Kelly said. "Corporations should not assume we'll have a wholesale change in the way we approach our business, but if the volumes are there, we'll certainly be willing to talk about a variety of things."
The higher-priced Business Select fare brings more benefits to corporate travelers, as purchasers "will be among the first to board the aircraft," receive an additional Rapid Rewards credit and "even get a cocktail on the house," the carrier said. Southwest's next tier down—the Business fare—is a full-coach fare that does not require an advance purchase and includes "full refundability and full flexibility to change your flight," Kelly said. Meanwhile, the leisure-focused Wanna Get Away fares are nonrefundable fares and require an advance purchase.
Although Calyon Securities analyst Ray Neidl warned changes to Southwest's offerings "may alienate some of their loyal base of leisure travelers," UBS airline analyst Kevin Crissey this month said, "It'll take a while for Southwest to build a corporate travel base and will likely require discounts—something previously taboo."
Though discounting has been taboo for much of Southwest's history, several corporate buyers and consultants said in many markets Southwest's low-fare image does not always materialize.
In looking at clients' portfolios, Management Alternatives vice president John Heilner said there were "significant enough instances where Southwest did not offer the lowest fare. Southwest has done a great job of building their image over the years, saying, 'just shop with us, book with us and get the lowest fare.' In some test cases, they were not the lowest fare and travel managers had to put stern warnings out to employees to use the online tool."
TRX Travel Analytics vice president and general manager Scott Gillespie earlier this year analyzed general low-cost carrier versus legacy carrier fare structures with similar findings. "We analyzed 500,000 fares for this exercise. When you look at the comparison of low-cost carrier fares in the same markets as the network carriers, there often is not as much of a difference as common wisdom would have you believe. As long as the network carriers give you a discount, they should show up as the more attractive fare," he said.
Though corporate travel buyers have been keen to structure discounts with Southwest, Kelly said corporations "will be much more interested in easier access via distribution and more customized services" than in negotiated discounts.
Findings this fall from a UBS survey of 107 corporate travel buyers came to a similar conclusion, as 80 percent of respondents said GDS participation was a "very important" factor in increasing spend with Southwest.
In addition to its longstanding, though limited, participation in Sabre, Southwest in May signed a 10-year distribution agreement with Galileo to provide its published fares and inventory—not including exclusive Web fares. The agreement went live late last week. Kelly said the carrier also came to a similar content agreement with Worldspan last month, which should go into effect mid-year 2008. Kelly said he hopes Amadeus will follow its GDS competitors. "We are entering into our Galileo and Worldspan relationships with a cost model that we are very satisfied with," Kelly said. "As long as we can overcome that hurdle with Amadeus, I would expect we would be a member of that as well."
Other business traveler initiatives the carrier launched this month included a revamped gate area that eventually will include television monitors, power ports and new tables and seats across its airports. Southwest also said "goodbye to the perceived cattle call" boarding process with the introduction of boarding by groups designated on boarding passes.
The carrier also revamped its frequent flyer program, creating a new status level for the most frequent travelers, through which members logging 32 one-ways or 16 roundtrips during a year "will be automatically checked in for their flight in advance of departure and will most likely receive an 'A' boarding pass."
It also introduced a new loyalty offering, Freedom Award, which can be converted from two Standard Awards and is "free of seat restrictions except for a few blackout dates around major holidays."