Southwest: Examining revenue alternatives

Discussion in 'Southwest Airlines | Rapid Rewards (w/ AirTran)' started by mikeef, Oct 19, 2012.  |  Print Topic

  1. mikeef
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    mikeef Silver Member

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    For those who didn't have the joy of listening to LUV's quarterly conference call yesterday, I caught a few interesting tidbits from Gary regarding revenue. Sounds like they're examining more ancillary revenue opportunities. This is the first time they've been so blatant about it in a call. I bring this up as food for thought:

    After mentioning that LUV was below plan last Q but better in revenue, Gary said, "And then fourthly, is the introduction of a new, at least the first phase of a new revenue management system. But I
    would say that in addition to those four planned activities, we are also evaluating opportunities for additional revenue drivers in 2013."

    Not directly tied to new ancillary revenue, but worth watching, was what CFO Tammy Romo said: "Before I move to our cost performance, I want to quickly cover the revenue contribution from some of our initiatives. Business Select revenues were approximately $21 million. We've recognized $50 million in incremental passenger revenues from our Rapid Rewards program. And as Gary mentioned, we're just very pleased with the Rapid Rewards program. We continue to produce increased membership, increased partner point sales and increased trips flown by members and that's at a higher premium."

    In regard to a question about fares, "I think my net argument to you is we've got to manage our total
    revenues period from whatever array of techniques that we use and it's just a different airline today than it was 10 or 20 years ago."

    In response to a question about the new revenue drivers, Gary said, "I knew if I teased you that would ask that. And no, I don't feel comfortable sharing our thinking because they're not committed initiatives yet. But I did want to admit what I think is the obvious, which is we are off plan, we do have some concerns about the economy and higher fuel prices and I don't think we want to just continue on
    with business as usual. So, we will be looking for ways to augment our current strategies which I'm very enthused about already. But we're looking for ways to augment those and have not made any decisions yet admittedly. But it would with a thought towards something that could impact 2013, that's on the revenue front." I've never heard Gary be this blunt before.

    In response to a media question about eliminating bags fly free, Gary said: "Well, for now, of course not. I don't think we would ever say no to anything, whether it's assigned seats or charging for bags, but we'll be looking for any and all good ideas to see what we can do to augment our current strategies." What's odd is that the question didn't ask about assigned seats.

    In response to another question about where the fees would come from (RR, partners, etc.), Gary said: "I think at this point we're simply on a mission to see if we can come up with some ideas that we
    like that we think will be effective that will enhance the brand, and it's just premature to share any more than that."

    Overall, there were a lot more comments about increases in ancillary revenues than I had ever heard on a call before.

    Mike
     
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  2. cordray2643
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    cordray2643 Silver Member

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    So true, so true.
     
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