Enilria - OPINION: Should Southwest Get 787s?

PATRONS ONLY

As we inch toward Southwest Airlines Media Day on Thursday and Southwest inches toward decisions on almost anything (what happened to first class?), I thought I would lay out my opinions on whether Southwest should order 787s.

They shouldn't get 787s, and they particularly should not be in a hurry to get 787s via Norse. Why? Because they are not in a hurry to do any of the things that they need to make them work. Sure, they can get pilot rates and overnight hotels figured out and crew rest and all of that sized up, seemingly easily, but none of those are serious problems. AND they will likely pay through the nose on all of them because you don't order the planes and then ask for good pilot terms.

They don't have the feed needed to make it work at scale

There may be a handful of options that they can make work with a 787 as is, but they desperately need competitive feed, and they don't have it. Without the ability to have a regional feed network they are probably at a 20% disadvantage to the big U.S. carriers in terms of traffic generation relative to yield. Add to that their hubs are generally in secondary cities like Nashville (BNA) and Baltimore (BWI) that need feed much more than a place like Newark (EWR).

THEN, while they have accumulated a few interline agreements, they are not in a major alliance which means limited feed on the other end which is probably another 10-15% hurt on average as the big carriers focus a lot of their long-haul capacity on alliance hubs where they can get commonly 50% connecting traffic onward. Without the onward connections or regional feed on the U.S. side they will be at a massive disadvantage to the point where absent a handful of markets I think they would lose tons of money.

No existing premium product

They have no first class. They would surely add it if they acquire 787s, but they have no existing expectations for what that would be and chances are that even if it were industry-leading (highly doubtful) they would likely sell it for far less than Delta or foreign carriers because they have no reputation for such a product and not really any long-haul corporate customers to pay for such a product.

They don't have ANY code share

Presently, they have ZERO code share. Absent Allegiant I think they are the only significant U.S. carrier without it. Even Frontier has a Volaris code share. It's true that from a pilot contract point of view, the 787s flying long-haul do unlock code share, but can they even do it technically? Unknown, but probably not because of the next one.

They still can't sell foreign currencies

This year marks 100 years since Pan Am started international flights and accepting foreign currencies for the purchase of tickets. In another 100 years Southwest might also be able to.

"BUT they fixed that" you say. They did not fix it. They hid the problem. They internally can still not handle currency fluctuations in their passenger revenue accounting system, so they are paying 3rd parties to do it rather than just upgrade to Pan Am's 1927 revenue accounting system which I'm assuming involved dice and an abacus. That level of calculation is beyond them.

Because they cannot handle it, they sell international only via 3rd parties like Expedia and Hahn Air who absorb the currency risk for a significant fee. We don't know what Hahn Air is charging Southwest, but they typically charge a fee of 3 to 7% to handle currency risk and provide secondary ticketing. Southwest doesn't even fly to Canada, and they are going to fly to Germany? Bwahahahahahahahaha

They have been notoriously bad with foreign languages, even Spanish

Southwest has only had a Spanish language website for about 10 years despite being born in a highly Spanish-speaking area and also only added a fairly scant foreign language flight attendant capability (Spanish only) when they merged with AirTran. Only about 1.25% of Southwest flight attendants are qualified for Language of Destination/Origin (LODO) and many flights that could have them are commonly not staffed, with Cuba, Costa Rica, and Puerto Rico the main priorities. Expecting the carrier to spool up a significant foreign language program quickly is doubtful, much like the rest of this is.

They failed miserably when they tried a foreign market, heavy on foreign point of sale

Once upon a time Southwest tried Mexico City (MEX) from 2014 to 2019. Load factors were frequently reported under 30% because of Southwest's struggles with foreign languages, foreign currency sales, and lack of code share. When Southwest bailed out of MEX they adopted a strategy of only flying into markets where the vast majority of the traffic was Americans.

A lot has changed over the years, but a lot of these core problems still exist and at best have just been papered over by some sticky cardboard. Hey, at least they can fly red-eyes now. They no longer would need to dredge up an island in the middle of the Atlantic to land at 4am for the Herb alarm to go off.

BUT, the math looks to me like they would be at a 40% revenue disadvantage to the large carriers and I don't see some massive savings they would get somewhere. Certainly the pilots are going to take them for everything, despite getting widebodies the pipe dream of nearly every Southwest senior pilot.

With any normal airline it would clearly kill this whole thing until they have their ducks in order, but the airline is so organizationally broken you only have to look as far as the MEX debacle to see a model of what COULD happen. There they knew they didn't have the pieces in place and they knew the middle management would keep the projects to launch it spinning for eons, so they dropped a nuke and just started MEX and told staff to make it work.

THEY DID NOT MAKE IT WORK

Will they try this again? That was small potatoes compared to this. They didn't need to order any planes. Southwest just needed to wipe the MEX egg off their faces after it failed. This has the potential to be more akin to the mess of Allegiant getting 757s to fly ETOPS flights to Hawaii that was a similarly ill-conceived gambit.

I wish Southwest luck, but they have no track record of being able to put this together, but much like Delta's moronic Riyadh (RUH) plan I'm in for the popcorn. So, I beg of the folks in Dallas to announce this so we can watch the hair-pulling panic that ensues. Maybe I'd short the stock as well and make some money.