Marching Into Battle: Southwest’s latest expansion targets are markets where it can expect a fight

It’s rightly called an LCC. But it’s also an HRC: a high-revenue carrier. Southwest long ago gained fame by inventing lowcost air travel, but its success today is just as importantly tied to the revenue power it exercises, not from having the best product, the most comprehensive loyalty plan nor the most ancillary services but from offering the best network for legions of domestic business travelers. It does, after all, carry more passengers within the U.S. than any other airline.

The question now is what’s next for Southwest’s network. With a new reservation system in place and new B737-MAXs on the way, can the network get even stronger?

First a few facts: In 2016, Southwest’s five busiest airports by passengers carried, according to the U.S. DOT’s Bureau of Transportation Statistics, were Chicago, Las Vegas, Denver, Baltimore and Phoenix. It’s from cities like these that Southwest offers an array of high-frequency routes to cities across the country, and from cities like these that it generates substantial amounts of connecting traffic. As for individual routes, its busiest include Dallas-Houston, Oakland-Los Angeles, Phoenix-Las Vegas and leisure-heavy Baltimore-Fort Lauderdale.

After a few years of virtually no growth following its acquisition of AirTran in 2010, Southwest amped things up in 2015, expanding ASM capacity 7%, its fastest rate of organic growth since 2007. Much of the new capacity took advantage of unique opportunities, most importantly the regulatory opening of Dallas Love Field to nonstop flights anywhere in the U.S. and slots that became available at Washington Reagan and New York LaGuardia. Another notable growth focus was Denver, along with Mexico and the Caribbean. On the other hand, Southwest downsized its postmerger footprint in Atlanta while cutting flights to weigh-station airports like Albuquerque, Tulsa and El Paso no longer required to serve as gateways into and out of Dallas.

There was more Dallas and Denver growth to exploit in 2016, as well as some new opportunities in cities like Oakland, St. Louis and Portland. As a result, ASMs last year grew almost as fast as in 2015—6%, to be exact. To be sure, some of this growth came not from operating more flights—departures rose less than 4% last year—but from upgauging to larger B737800s and densifying planes with additional seats…

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