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Southwest Will Cut Capacity, but Less Than Expected


Southwest CEO Gary Kelly told the AP that Southwest will trim capacity by 4 to 5 percent in the first quarter of next year, down from projections of a 5 to 6 percent cut. Southwest has generally resisted capacity cuts in the hopes that cuts at other airlines would send passengers flocking its way, but that doesn't seem to be happening. Following a strong October, Southwest saw November load factors drop by 6.1 percent year over year, and the number of paying passengers plummet by 10.7 percent.

Kelly also said Southwest will receive 13 new planes next year, but will retire three and "manage" the remaining 10 (whatever that means) rather than add them to the fleet. This means the growth-happy airline will probably remain at about its current size throughout 2009, and any new routes (like, say, from LaGuardia) will likely come at the expense of service elsewhere.

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This news may not seem terribly significant on the surface, but Southwest, with its strong financial position and historically proactive business model, serves as a good barometer for the airline industry. Basically, if Southwest is worried (or not), we should pay attention. And so, the takeaway here is that while Southwest's decisions don't suggest panic in the boardroom, the airline is clearly adopting a conservative stance for the foreseeable future. Not a bad model to follow, if you ask me.

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