How Southwest keeps turning a profit
The company is masterful at fuel hedging. It also has other strategies designed to keep costs down and keep operations simple.
Slate lists many reasons why Southwest has done so well, and most fall under a general strategy of keeping it simple. One type of plane. No seat assignments. No fees for checked luggage. No complicated hub-and-spoke system.
I was surprised that the list didn't include fuel hedging, which Southwest has been more aggressive about than any other airline. The following video has much more information about Southwest's fuel strategy.
Post continues below.
Here's more from Slate about how Southwest has stayed profitable:
One jet. Southwest only uses the 737 from Boeing (BA). Its mechanics are intimately familiar with that plane alone, and that makes operations very efficient. It carries extra parts for just one plane. It can easily park planes. If a plane needs to be swapped out, the process is fairly easy.
No seat assignments. This makes boarding very efficient and smooth. People already know where they want to sit, and they can look at their boarding number to gauge where they're headed. Anyone in the A group gets a window seat. The C group is another story.
No luggage-check fees. This policy has won Southwest enormous customer loyalty and goodwill at a time when other airlines nickle-and-dime passengers to death. And Southwest wastes no opportunity to remind fliers of this freedom. But Southwest has another motive here as well: People will check more luggage when they aren't charged, and that makes boarding easier and faster.
No hub-and-spoke system. Southwest has done away with the strategy of designing flights around several major airports. That hub system means many planes are just sitting around waiting to get through the bottleneck. "We only make money off our planes when they're in the air," Chris Wahlenmaier, vice president of the airline's ground operations, told Slate.
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