How One Discount Airline Flies Safely - and Profitably
At a time when low-cost airlines are coming under scrutiny in the wake of a ValueJet crash near Miami, attention is also turning to Southwest Airlines as an example of a safe and profitable no-frills carrier.
After 25 years in the business, the Dallas-based airline hasn't had a single plane crash or fatality. In fact, a recent report on low-cost carriers released by the Federal Aviation Administration (FAA) had to exclude Southwest from its statistical sample because the airline's low accident rate skewed data for the rest of the cut-rate carriers.
On the surface, there is little to distinguish Southwest - the biggest in the group of no-frills carriers - from its rivals. It flies the same jets, and many of the same routes, as others in the business. And like others, including ValueJet, Southwest contracts out much of its maintenance.
"I don't like to say they are 'just lucky,' " says Stuart Matthews, president of the Flight Safety Foundation based in Alexandria, Va., a nonprofit-industry sponsored group that studies airline safety. "They are obviously doing things right."
While several other major carriers are doing things right as well, analysts say there are lessons to be learned in how Southwest operates at a time when upstart airlines are proliferating and public concern mounts over air safety.
Central to Southwest's success, industry-watchers say, is its close-knit corporate culture, operation in less-congested markets, and slow expansion. "At Southwest, they have enough maturity, and they are of a size where the more experienced people can show the newer people how things are done," Mr. Matthews says.
By comparison, he contends that some of the new, low-cost airlines have grow so fast that they have been forced to hire people without much experience.
Southwest has become one of the most profitable companies in the industry, posting revenues last year of $2.8 billion. Founded in 1971 as a low-cost carrier that flew solely within Texas, it carved out a niche by offering no-frills flights with quick-turnaround schedules and open seating.
This has been key to its profitability. Because the airline flies into less-congested airports and does not give out seat assignments, the planes spend less time on the ground. As a result, Southwest has consistently been at the top of federal rankings in on-time performance, baggage handling, and customer satisfaction.
Today, the company is the nation's fifth-largest carrier, flying to 48 cities.
In addition, to reduced maintenance, training, and inventory costs, the company uses a uniform fleet of Boeing 737s, which helps hold down maintenance bills.
Analysts say Atlanta-based ValuJet copied many of Southwest's strategies. Of the 51 planes in the ValuJet fleet, 48 were DC-9s. But ValuJet's planes were much older than Southwest's: The average age of Southwest's planes is 8.3 years. ValuJet's planes is 26.4 years.
Michael Pangia, an attorney in Washington, D.C., who was formerly the chief litigator for the FAA, also credits the company's culture and leadership for its good track record. "Morale always seems to be high at Southwest," he says.
"I think it has a lot to do with head management," says Mr. Pangia, referring to Southwest's chief executive officer, Herb Kelleher. Known for his hands-on style, Mr. Kelleher often works alongside other company employees, loading baggage and doing other chores.
The company's employee-friendly reputation draws lots of job hunters. Last year, the airline estimated it would receive 97,000 applications for employment. Instead, more than 130,000 people applied for just 4,200 positions.
Arnold Barnett, a statistics professor at the Massachusetts Institute of Technology in Cambridge, Mass., who specializes in aviation safety, acknowledges that Southwest's culture may help it maintain safe operations. But he points out that other airlines, like Continental and Delta, which have gone through much internal turmoil in recent years, have also maintained excellent safety records. "We should avoid treating this as a miracle that distinguishes Southwest from other major jet carriers," he says.
Mr. Barnett adds that the rate of fatal accidents among major carriers is one per 7.5 million flights. "Southwest, a smaller airline, has only completed 5 million flights," he says. "Based on the industry average, it wouldn't necessarily be expected to have had a crash yet.''