Southwest expected to weather turbulence

Airline enjoys strong customer loyalty, analysts say

April 09, 2011|Michael Dresser and Lorraine Mirabella, The Baltimore Sun

Southwest Airlines built its brand with a wink and a smile, bringing its customers a winning combination of low fares and high spirits.

But the last week or so has brought a challenge in which price chopping and good-humored flight crews wouldn't cut it. After a section of the fuselage of one of its Boeing 737-300 airlines gave way April 1, tearing a hole in the roof while it flew more than 30,000 feet above Arizona, the airline faced the test of responding to a deadly serious crisis that could have shaken the confidence of its hitherto-loyal customer base.

For Maryland, the stakes are considerable. The performance of Baltimore-Washington International Thurgood Marshall Airport — at least in the short term — is closely bound with that of its dominant carrier, which accounts for more than 53 percent of the airport's arrivals and departures. With 187 daily departures this month, it is the only airline at BWI with its own pier.

And BWI's symbiotic relationship with Southwest should only intensify, because the airline is soon expected to merge with the airport's No. 2 carrier, AirTran. And the airport's customers also have good reason to be concerned with the fortunes of Southwest. For nonstop flights to quite a few other cities, Southwest is the only option. Its low-cost fare structure has helped make BWI one of the nation's cheaper big airports to fly from.

The fuselage rupture was the kind of incident that, if clumsily handled, could have done serious damage to an airline's reputation. But Southwest's response — from the flight crew's emergency landing to the decision to ground much of Southwest's fleet to the way it communicated with the airline's various constituencies — won praise from industry observers.

BWI had to cope with a flurry of cancellations, but officials there said the impact was no more significant than that of a typical snowfall.

"I don't see any loss of confidence. I see the fact they acted so quickly to ground the fleet," said Michael W. Derchin, an airline industry analyst with CRT Capital Group LLC in Stamford, Conn. "I don't see them losing any customers."

George Miteff of Annapolis, who was flying Southwest to New Orleans on Friday with his wife and two children, said he's always concerned by reports of near-catastrophes.

"But there's probably more to be concerned about traveling on the Beltway," he said. "I would hope these were isolated incidents."

Acted quickly

Robert W. Mann, president of the industry analysis firm R.W. Mann & Company, said Southwest also acted quickly after the incident to ground many flights and inspect the aircraft most similar to the one with the fuselage failure. Most airlines, he said, have tended to wait for government instruction to take such actions.

"In retrospect, that was the correct step," said Mann, who added that Southwest's response might be adopted as an industry "best practice" in similar future events.

Mann said it also benefited Southwest that Boeing was "uncharacteristically candid" in admitting it was surprised by how quickly the affected joint had developed metal fatigue. By the time Southwest announced it had found five more jetliners with subsurface cracks, much of the news media's attention had shifted to the manufacturer.

Mann said it also helped that the National Transportation Safety Board quickly announced a conclusion that Southwest's inspection record with the damaged plane showed no failures or omissions. Meanwhile, by the time the Federal Aviation Administration ordered hundreds of Boeing 737-300s grounded for inspection, Southwest had almost completed the work.

But that alone wouldn't be enough to shield an airline's reputation had company officials not reacted quickly and delivered their message well, Mann said.

"It helps when the facts are in your favor, but you still have to manage the crisis," he said.

At a news conference Friday, Southwest CEO Gene Kelly expressed satisfaction with the company's crisis performance.

"It was our decision to ground the fleet, our decision to do inspections," he said. "I'm very proud of that."

Loyal customers

It didn't hurt Southwest that the airline came into the crisis with a strong public image and a loyal customer base, bolstered by its resistance to imposing fees and its emphasis on customer service.

"People who travel Southwest are price-sensitive, and they like the service," said Steve Wilder, an analyst with Capstone Investments in Milwaukee. "If [the fuselage incident] has any impact at all, it'll be forgotten in a week."

Richard Aboulafia, an airline analyst with the Teal Group Corp. in Fairfax, Va., noted that Southwest can still boast that it has never lost a passenger in a fatal crash. (Its record does bear the blemish, however, of one its planes skidding though a fence at Chicago's Midway Airport after a flight from Baltimore in 2005 and killing a boy in a car.)

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