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A Southwest Solution?
Opinion · October 18, 2002

The books just closed on another miserable quarter for the airline industry. American Airlines led the flock with a loss of $924 million, followed by United Airlines, which is $889 million in the red. Delta Air Lines hemorrhaged $326 million, while Northwest Airlines and Continental Airlines bled $46 million and $37 million, respectively.

The only standout? No-frills Southwest Airlines, which posted a profit of $74.9 million.

"Why can't the other airlines take a hint from Southwest?" wonders Wanda Spataro, a Monterey, Calif., consultant and frequent traveler.

Well, why not?

The fix - call it the "Southwest solution" - seems a good idea on the surface. After all, Southwest can claim a perfect 30-year record of profitability.

The major airlines, by comparison, are destitute. US Airways has already filed for bankruptcy protection, and the large airlines a few weeks ago hit up Congress for another bailout package that includes billions of dollars in tax breaks and subsidies. All told, the U.S. airline industry is expected to lose at least $7.7 billion during 2002.

Copying Southwest's business philosophy - a set of values that emphasize more efficient routes, less debt and a clear sense of purpose - could work.

But emulate its business model? No way.

Business travelers wouldn't tolerate the cutbacks in service. Imagine if every airline did away with boarding passes, in-flight meals and entertainment and coveted business-class sections. The formula simply wouldn't work for longer trips, such as transatlantic flights. Even on transcontinental flights, it's a stretch.

That's why Dave Liesse, like many frequent fliers, favors the failing full-service carriers even now. "If I wanted to fly Southwest, I would," says the Chicago software-quality manager.

In a recent survey by Orlando travel consulting firm YP&B, 78 percent of business travelers cited amenities such as high-quality food and beverages as being "very important" to them. About two-thirds of the road warriors polled also said pre-boarding privileges - another hallmark of full-service airlines - were desirable.

Practical issues also keep the big carriers from mimicking the Southwest business model.

The big airlines could follow their no-frills rivals by serving secondary airports, switching to just one type of aircraft or even introducing casual-wear uniforms for flight attendants. "But there are intangibles that they can't copy," says Southwest spokeswoman Linda Rutherford. "You can't copy the corporate culture; you can't copy the people. You can't just flip a switch and say, 'We're going to be more like Southwest.' "

That hasn't stopped some other airlines from trying. US Airways, United and Continental all copied Southwest by creating low-cost airline spinoffs. All of them failed.

They're still trying. Delta Airlines is about to launch a new low-fare carrier, reportedly using Boeing 737s, the same model flown by Southwest. Although its plans remain sketchy, Delta is said to be making an effort to address the corporate-culture issue as it tries to create a more efficient airline. Good luck.

So what's the solution? Like Southwest, the failing airlines should return to the business niches that made them successful in the first place.

"There's something to be said for getting back to your roots, at least philosophically," says Richard Butler, a professor of economics at Trinity University in San Antonio. "The airlines need to figure out who they are. Unless you know what your mission is, how can you achieve it?"

For example, US Airways traces its lineage back to several regional carriers, including Piedmont Airlines and Allegheny Airlines. But it is among the carriers that lost their way; it had to retreat from a disastrous West Coast expansion in the late 1980s. Pruning its routes and moving toward regional jets that serve shorter-haul destinations more efficiently might be a solution.

Northwest Airlines used to have a clear sense of purpose, like Southwest. It should consider becoming like the old Northwest Orient Airlines, a smaller carrier known for its strong, and profitable, long-haul route structure to the Far East.

American Airlines' move toward so-called "rolling hubs" - spreading out its daily flights to reduce peaks and valleys in scheduling - is a good start toward reclaiming its historical mission, according to Richard Gritta, an airline expert and professor of finance at the University of Portland in Oregon. "American should also reduce the number of aircraft types, like the old American Airlines," he says. "That's the key to reducing costs."

Continental also was an airline that once knew its market and customers well. Now, it could help itself by reducing its debt, which has soared in recent years, and by retreating from some of its uncompetitive East Coast routes.

United Airlines is one of the most high-profile examples of an airline losing its focus and then finding it again. From 1970 to 1988, United acquired the Westin and Hilton hotel chains and the Hertz car rental company in an effort to become a travel conglomerate called Allegis. When the diversification fizzled, United pulled back and prospered in the decade that followed. But it's on the verge of bankruptcy now, perhaps because it has lost its way again, having turned into an airline that has grown too big and too debt-ridden to turn a profit in an unsteady economy. United needs to downsize - if not its size, then at least its operating expenses and debt.

If these airlines refuse to change, it could kill them. Eastern Airlines' westward expansion was at least partially to blame for its demise, according to Bob van der Linden, the curator of air transportation at the Smithsonian National Air and Space Museum. Pan Am's diversification into the hotel industry in the late 1960s was similarly disastrous for that airline.

There's some evidence that airlines are beginning to learn this lesson. US Airways, amid its efforts to restructure, is already asking critical questions, such as "What are we?" and "Who is our customer?"

But a real "Southwest solution" requires even more introspection, including finding the answers to questions such as "How did we end up like this?" and "What made us successful in the first place?"

Christopher Elliott is a travel commentator based in Key Largo, Fla. All e-mailed questions may be edited, condensed or republished at the site's discretion.