Southwest Airlines for the first time in its history plans to reduce annual capacity this year, targeting a full-year decline in available seat miles of 4 percent, company executives said today as they detailed fourth-quarter losses, but an annual profit, in 2008.
Southwest said it plans to reduce available seat miles this quarter compared with the same period last year by 4.4 percent. A spokesperson following the earnings call confirmed, "It's fair to say 2009 is essentially the first year in our history that we do not plan to grow capacity."
CEO Gary Kelly during the carrier's fourth-quarter earnings call today said, "The economic environment has never been more uncertain, certainly in Southwest Airlines' history, and accordingly we have to adjust."
Kelly said the carrier's "fleet growth plans are suspended indefinitely," adding, "I definitely want Southwest Airlines to grow and I believe we will be able to grow, but that is a secondary objective in this kind of economic environment." The carrier last year worked aggressively to optimize flight schedules, while "pruning unproductive flights."
Southwest's immediate goal is to "protect our financial health, and we want to protect our profitability," Kelly said. "Our adjustments will be guided by those two overarching goals."
Though the carrier plans to halt its growth plans, Kelly said Southwest would continue to "expand our route map" as it reallocates flights to take advantage of "new opportunities that we think are quite exciting," including its planned launch this year at Minneapolis-St. Paul International Airport and its entrée to New York's LaGuardia Airport, pending an approved purchase of bankrupt ATA Airlines' assets (BTNonline, Dec. 8, 2008)
The industry is operating with 10 percent fewer seats this quarter, compared with the same period last year, according to an OAG examination of airline schedules last month.
As its legacy competitors last year began planning for double-digit domestic capacity reductions in the summer, Southwest maintained growth, though slowed its rate of capacity additions. Southwest last summer scaled back from 8 percent to 6 percent growth in 2008, and according to its annual report filed today, the carrier grew available seat miles by only 3.6 percent for the full year.
Several legacy carriers said they are prepared to take further capacity out of the system. American Airlines this week is targeting an additional 1 percentage point decline in capacity this year versus its predictions at the end of the third quarter.
"On a consolidated basis, AMR expects full-year capacity to decrease by nearly 7 percent in 2009 compared to 2008," the carrier's parent company noted in its earnings release this week.