Southwest Readies for United’s Shuttle : Southwest Airlines, with efficient, low-cost flights, dominates flights out of Burbank Airport. But United hopes its new shuttle will regain lost business.
At 11:40 a.m., Southwest Airlines’ Flight 1737 from Phoenix wheels up to a gate at Burbank Airport, 30 minutes behind schedule. Southwest normally sticks to a tight 20-minute time limit for a plane to remain at a gate between flights. But since this plane is late, Southwest crews are aiming for a herculean 10-minute turnaround.
As the plane taxis in, a dozen workers rush toward it, including some from other Southwest crews who are pitching in while their own gates are idle. One worker chocks the tires to keep the plane from rolling. Another cleans the lavatory. Another crew member pumps fuel, while two others pull up with carts bearing luggage and mail.
In five minutes, passengers are off the plane and the three flight attendants--along with the pilot and first officer--have picked up all the trash in the cabin and put seat belts back in position.
The 119 new passengers board the plane by stairs at the front and rear of the plane. Because there is no first class or assigned seating, passengers grab seats on a first-come basis. The doors are closed, the stairs yanked away and the plane rolls back from the gate, bound for Oakland. The time: 11:50 a.m.
“That’s a quick turn,” said Southwest operations agent Art Reyes. “I’ve done quicker. My fastest is eight minutes.”
This hurry-up work attitude is what many attribute for Dallas-based Southwest’s stunning success. It has been the only consistently profitable airline this decade. Since it debuted at Burbank in 1990, Southwest has knocked out competing airlines with its cheap, short-haul flights, and gained a two-thirds market share there. And statewide, Southwest commands half the intra-California air travel market.
But champions are bound to be challenged, and the latest test for Southwest comes from United Airlines, the nation’s largest airline. Last month, United--after selling 55% of the company to employees in exchange for $4.9 billion in wage and work-rule concessions--announced that its Shuttle by United service would offer cut-rate, short-haul flights from 14 Western cities beginning Oct. 1.
Burbank is one launching pad for United’s Shuttle. It will initially run 10 flights a day from Burbank to San Francisco for $49 one way in coach with advance purchase, and $104 for a walk-up coach fare. In November, another San Francisco flight will be added, plus seven daily departures to Oakland.
By comparison, Southwest’s fares on its 13 daily flights from Burbank to Oakland run from $49 for a one-way advance purchase ticket to $69 at the gate. Southwest also flies from Burbank to San Jose, Sacramento, Phoenix and Las Vegas.
In a business littered with dead airlines, last year Southwest earned $154 million on revenue of $2.3 billion. Meanwhile, United’s parent, UAL, lost $50 million on $14.5 billion in sales in 1993. The year before, it lost nearly $1 billion.
The key to Southwest’s success is efficiency: Its costs average a rock-bottom 7.2 cents per available seat mile--or how much it costs to fly one passenger one mile. United has said it is aiming for 7.4 cents per available seat mile on its shuttle, a far cry from the hefty 9.7 cents average on United flights currently.
Some airline observers bluntly dismiss United’s plan. United Shuttle has “not a chance in the world” against Southwest, said Gruntal & Co. analyst Steven Lewins in New York.
Lewins blasted United’s “macho desire to recover ground lost” in California. And he scoffed at the shuttle’s goal of 7.4 cents per available seat mile. “They might not make it to 8 cents,” he said. “They’ll get their nose bloodied, lose a lot of money and put their planes somewhere else.”
Nonetheless, United’s Shuttle is gunning for the heart of Southwest’s California franchise. In 1991, United’s market share at Burbank Airport was 25%. Now it has a 14% market share, while Southwest’s is 65%, according to Burbank Airport officials.
Five other airlines flying out of Burbank have market shares of just 2% to 6%, and some airlines such as USAir have quit flying out of Burbank altogether. Yet United’s goal is not to destroy Southwest, but to regain the California business United has lost to Southwest. “We feel there’s enough room for both competitors,” said United spokesman Tony Molinaro.
John Thomas, Southwest’s station manager at Burbank, wondered how the United Shuttle can rival Southwest’s efficiency and low costs when it plans to keep such features as assigned seating and first-class service. “I imagine sooner or later, someone’s going to come along and get it right. But we’ll just get stronger.”
Others are also skeptical. The United Shuttle is “unlikely” to achieve the efficiencies necessary to make it profitable, in part because of the strangeness of operating one airline with a different style, inside a larger, entrenched airline, said analyst Rose Anne Tortora at Donaldson, Lufkin & Jenrette Securities in New York. “It’s been tried before--an airline within an airline--unsuccessfully.”
Even Thomas Greer, Burbank Airport’s executive director, who welcomes new competition and the increased passenger traffic it could bring, is cautious. “I don’t want to be seen as a skeptic” about United’s chances, Greer said. “I am saying it is going to be a very difficult task.”
How does Southwest manage to operate so efficiently?
Besides no meals--just bags of peanuts and soft drinks--and no assigned seats, Southwest employs timesaving tricks such as reusable plastic boarding passes, bigger baggage carts and faster-moving conveyor belts for loading bags.
Southwest’s quick turnarounds are necessary for the airline to be so profitable, because the longer a plane is in the air, the more money it makes. Not surprisingly, Southwest’s planes log more hours in the air each day than the industry average.
Southwest also keeps costs low by using a fleet of only one kind of plane, Boeing 737s, and on average these planes are a relatively young seven years old. That reduces operating expenses by eliminating the need for extra equipment and training mechanics to handle other types of planes.
Workers at Southwest are paid about the same as those at other airlines, Southwest says. But its overall employee costs are kept low because it uses smaller crews on planes and at airports. Those crews simply work faster and more efficiently, Southwest says. And they give employees more flexibility than most other airlines to help out when planes are running behind schedule.
Always looking for new ways to streamline, Southwest is now testing a ticketless system like those used by hotels and car rental agencies. A customer would make a reservation, get a confirmation number and check in at the gate. It would replace the ticket system used by airlines that many regard as archaic and inefficient. And it would alleviate concerns over the recent dumping of Southwest from several reservation systems used by travel agents to book tickets--although Southwest says this has not hurt its business so far.
But Southwest employees say the real key to the airline’s success is the corporate culture, a blend of cheerful informality and hustle, that allows them to operate with crews half the size of some competing airlines. Workers pitch in where needed and enjoy rotating to different assignments--handling baggage one day, emptying lavatories the next. “We just kind of help each other,” said Jose Luis Aguilar, a Burbank ground crew worker. “If I saw the other guys were running behind, I would help out.”
That attitude extends even to Southwest’s pilots, who routinely help flight attendants clean the interior of the plane between flights. “We do that all the time,” said Capt. Larry Elliott. Asked if he picked up trash when he worked for other airlines, such as Frontier, Elliott laughed and shook his head. “At a lot of airlines, pilots don’t even see the flight attendants.”
Despite the rushed turnarounds, a sense of humor--inspired by Southwest Chairman Herb Kelleher--pervades the airline. When a few passengers straggled at the gate minutes before a Southwest flight departed from Burbank recently, the operations agent waved her arms and sang in an operatic voice, “Hurry up!”
United, on the other hand, is known for a starched-shirt formality, although some observers expect changes now that the workers control the company. United employs “a lot of hard-working, dedicated people,” said company spokesman Molinaro. Without the salary cuts and new work rules, “we couldn’t do the shuttle.” Indeed, last week United announced plans to hire or recall about 1,700 workers nationwide by year’s end, some of whom might staff the new shuttle.
Although the United Shuttle will not have meal service, seats will be assigned. But it plans to use a novel boarding process, in which passengers with window seats will board first, followed by other passengers. The method is being tested at some airports, including Burbank, and United hopes it will speed boarding by keeping aisles clear.
Other United Shuttle techniques will include loading enough ice and snacks on a plane in the morning to last all day. Pilots and flight attendants will also stay with a plane all day, instead of changing planes as other United crews often do.
The shuttle will have “dedicated” groups of employees at gates and ramps who will work together continuously, thus improving efficiency, Molinaro said. Another United spokesman, John Kiker, said the shuttle will probably have more flexible work rules and will cross-train workers the way Southwest does--although that still has to be ironed out.
Molinaro added that Burbank Airport is likely to be an early success because many of the shuttle methods are already in place. United’s Burbank general manager John Spach said that many planes at the airport are already being turned around in 16 to 25 minutes.
United also believes that many customers will favor the shuttle because they can earn mileage on United’s frequent-flier program, which can be used toward long-haul and overseas flights, while Southwest’s frequent fliers can only earn free tickets for shorter flights.
Analysts warn, however, that Southwest won’t sit still in face of the new competition. Linda Rutherford, a Southwest spokeswoman, declined to say if Southwest is considering fare cuts or other responses. But she did say that it is studying long-haul routes in United-dominated markets with “weak service and high prices.”
Such a counterstrike could prove costly to United, said analyst Lewin, given that Southwest “is giving United a pasting” in markets where they now compete.