Bob Jordan, Southwest President and CEO, speaks to Graham Newton about the major shifts in the airline’s strategy.
What do you hope your strategy will achieve for the airline in the near term?
It’s certainly been an exciting year. But in many respects our fundamental strengths are no different from what they’ve always been. We have a strong network from so many places, our operations are as efficient as they’ve ever been, which means our costs are being managed well, and, in my mind, we have the best people and service in the business.
But we can’t deny there has been enormous pressure on our financial performance. We used to lead the industry in of profitability, and we want to regain that position. That means we can’t ignore revenue streams of which other carriers are taking advantage, like bag fees.
We must adapt to the needs of the modern customer and that is behind the decision to develop assigned seating. Every customer has a different reason for flying and we need to offer services that reflect those reasons. We need to give the customer choice.
Over time, Southwest grew to be the largest domestic airline in the United States. We are now starting the next phase of our journey. Our partnership with Icelandair is part of this. It allows travelers to book connecting flights between our domestic network and Icelandair’s European routes. We have started with Baltimore, Denver, and Nashville but have plans to expand.
We are exploring other geographies, other partnerships. For us and our customers, it’s exciting to think about different geographies and potential partners.
With your reliance on the Boeing 737, do the supply chain issues concern you?
It’s a fallacy that we have more risk just because we have one aircraft type—the Boeing 737. Actually, I am optimistic about Boeing. I was with them recently and there was real improvement on the factory floor and in the relationship between leadership and the floor.
There is some buffer there and I’m confident Boeing will be able to supply the aircraft we have on order.
Where can US aviation regulations be improved? And do you expect the new istration to be more business-friendly?
I have had some constructive conversations with US Transportation Secretary, Sean Duffy. And I’m happy with the nomination of Bryan Bedford as the of the Federal Aviation istration (FAA).
There is a critical need to modernize US airspace and the commitment to do so is there. You can’t have a busy airspace system operating with floppy disks and software from 20–30 years ago. Airlines can’t grow with that level of infrastructure in place. So, I’m really pleased that the new istration is committed to fixing that and that the funding is there to make it happen.
Regarding the approach of the Department of Transportation, I think everybody wants to do right by the customer. We certainly do. But regulations can be good for the customer and good for business. There is no need for a hostile relationship. Collaborative efforts can make a difference.
The US Inflation Reduction Act created positive incentives for sustainable aviation fuel (SAF). How important is this for aviation’s sustainability efforts?
Airlines have made some significant commitments to buy SAF. But when we look at the bigger picture, it’s clear that it will take subsidies to get to the level of SAF that we need.
Producers need assurance that there will be a market for SAF, otherwise they will understandably be reluctant to commit capital. The issue isn’t convincing the airlines to use SAF. The uptake shows that airlines want to buy SAF.
But there is an issue with the price. It is three times more expensive than conventional fuel. So, there needs to be some kind of subsidy or incentive that encourages airlines to maintain the commitment they are showing.
Aside from SAF, where else is Southwest making sustainability gains?
Sustainability is absolutely critical to the future of Southwest and the future of the industry.
But we must that aviation already has a long history of environmental initiatives. For decades now, we have improved engines, we have developed better airframes, we have optimized our operations.
Southwest is moving to an all-Boeing 737 MAX fleet, which will mark an enormous increase in fuel efficiency and so reduce emissions. We’re also putting in new technologies around how we route aircraft on the ground and utilizing artificial intelligence (AI) to gate aircraft more efficiently.
And if we modernize airspace as mentioned above, then that will also bring huge savings in time, money, and emissions.
Where will you find the balance between the potential of new technologies, such as AI, and the “Southwest people” effect?
We are just scratching the surface on AI. We are using it to mine data and in customer transactions. For example, we can automate a lot of work in call centers. Using AI, it will be possible to interpret the customer need and give an appropriate response.
We also have an initiative called Gate AI, which will help us to optimize operations. If we have crew or a significant number of engers transiting from one flight to another, then it will make sure those aircraft are parked near each other, that the timings work and so on.
And there will also be a lot of back-office work that can be automated and made easier or more efficient. That will free up our people to better serve the customer. So, it’s not either / or. Implementing more technology is a people-centric strategy.
There is no doubt that modernization is vital. We will see it in everything from the customer-facing app to operations. Everything that is needed to turn an aircraft will become faster and paperless. Predicative maintenance will mean less downtime for the aircraft. There is development everywhere. It is a continual journey. It is not about being at the front or following fast behind. It is about continually moving forward…
