Eventually some flights were available in 2020 with increased safety precautions, but relatively few people felt they were taking the risk. So it came as no surprise when the International Air Transport Association confirmed that 2020 was the worst year on record for the industry.
Demand quickly picked up once vaccines became available in 2021, but it wasn’t easy to navigate (or fly smoothly) from there, as luggage kept getting lost and flying became more expensive than ever, with ticket prices up 25%, due to factors ranging from inflation to shortages of workers to the skyrocketing price of fuel.
But in its recent earnings call, Southwest (LUV) – Get the report of the company Southwest Airlines announced a change that should delight customers, while also signaling that there is still a lot of work to be done.
What change has Southwest made?
One of the biggest headaches for travelers (and to be fair, airlines) is that flight cancellations have become much more frequent, especially this summer. Hundreds of flights were canceled over the 4th of July weekend, for example.
No airline understands this headache better than Southwest, which canceled over 1,000 flights last October.
The reasons for these cancellations vary. Sometimes it’s just a bad weather, an eternal problem.
But the main factors these days are rising fuel prices, covid case rates, air traffic control issues, and a shortage of staff. In particular, the airline industry is struggling to find enough pilots. This is because many pilots retired or took leave during the pandemic, while many of the pilots who did not start are experiencing record levels of fatigue.
When flights are canceled, customers are legally entitled to a refund. But many customers choose to take credit for a future flight instead.
The problem is that there is often a time limit within which you can use that credit, which doesn’t always work with people’s schedules. It is also the case that people’s travel plans change for all kinds of reasons and they may not be able to use that travel credit within the year.
But in the second quarter earnings call, Southwest’s Andrew Watterson, executive vice president and chief commercial officer, announced that travel credits will no longer expire.
“We are also removing the expiration date on all currently valid and unexpired flight credits, including travel credits issued when customers changed their trip at the start of the pandemic and would expire next September,” he said.
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“We are known for offering industry-leading flexibility across the board, and customers tell us it’s one of the key differentiators of our brand. Repeat purchases by engaged customers are a cornerstone of our business model and our success. Our research and customer feedback tells us that flexibility has become even more important to customers over the past couple of years. “
Southwest is looking for more pilots
Elsewhere during the investor call, CEO Bob Jordan said that in the second quarter “operating revenues increased by 13.9% compared to the second quarter of 2019, reaching an all-time quarterly record of $ 6.7 billion.” , adding “It’s just an incredible turnaround from last year, not to mention just a quarter ago.
He attributed the boost to a continuing increase in demand, which appears to be on the rise even as aircraft fuel prices and labor shortages have meant that the aircraft supply has not been able to keep up, thus increasing costs. of the air ticket.
Jordan struck an upbeat note for investors, while acknowledging that the airline industry is still far from out of harm’s way.
“I admit there is a lot of noise out there right now. It seems that we all know someone who has this latest line of covid, the inflationary pressures are real and they are worried about a potential recession, “she said.
“Consumer and business sentiment is declining and there are data that could indicate the first signs of a slowdown. But so far, demand remains strong and we have not seen any material impact on our business. ”
Jordan indicated that “we currently expect to be profitable for the third and fourth quarters and for the full year of 2022”. He also said the in-flight experience is picking up, as the company reached “pre-pandemic staffing levels in May 2022, which is just a huge milestone.”
The main focus for the company at the moment is to secure enough drivers, which was a struggle. With more than 640 pilots retiring during the pandemic, there are fewer pilots available to help train new recruits.
Southwest plans to hire 10,000 new employees this year. Chief Operating Officer Mike Van de Ven said the company’s first step last year was to “rebuild and reboot our hiring machine” and since last year they have already hired 7,000 employees.
“About 75% of these hires were in our airport operations and about 20% were in flight crews. We will continue to hire, “she said.
Additionally, Van de Ven said the company plans to “build a cushion and buffer for staff in the aviation environment we all find ourselves in,” to reduce the number of flight cancellations.
“We are still suffering from covid diseases and a higher level of inactive employees. Our disease rates are still high in some of our work groups ”.