Southwest Airlines CEO Sees Post-Election Boost in Demand

  • ‘There’s definitely a lift in spirit,’ Gary Kelly says
  • Trump’s statements on trade give low-cost carrier pause

Southwest CEO Kelly: Top Priority Is Air Traffic Control

Demand for plane tickets at Southwest Airlines Co. has climbed since Election Day, the carrier’s chief executive said, adding that he’s encouraged by President-elect Donald Trump’s stated plans to unwind regulations, cut corporate taxes and build infrastructure.

“There’s definitely a lift in spirit,” Gary Kelly said in an interview at Bloomberg’s headquarters in New York on Thursday, citing the stock market’s rally in the last month. “I don’t know that we can explain it, but we’ve seen a lift in our booking activity since the election.”

The Standard & Poor’s 500 Index climbed 4.8 percent from Election Day through Wednesday, when Southwest closed at a record. The average portion of seats sold per plane, known as load factor, reached 85.1 percent last month on the Dallas-based discount carrier, up from 83.3 percent a year earlier

“We had a record load factor for November,” he said. “It’s not that it was remarkably better, but it was better and we had a really strong month. And bookings for December look a little better. Does that translate into anything different? Not necessarily, except I think we are all feeling a little bit more spring in our step.”

‘Grossly Inefficient’

Trump’s statements about investing in infrastructure are especially welcome to an industry grappling with a “grossly inefficient” air-traffic-control system, with elements that date to the 1950s, said Kelly, 61. The CEO also is eager to be relieved of regulations that levy burdens on carriers for infrequent problems such as lengthy tarmac delays. He expressed concern, however, about the president-elect’s trade and immigration rhetoric.

“Our route system is very well suited to Mexico. Our customers want to go there, and it’s all lined up very well,” he said, calling the country Southwest’s “biggest opportunity” for international growth.

“We need to grow, but to grow our economy we need to grow our jobs,” he said. “To grow our jobs, we are going to need to grow the population.”

He said he didn’t share the criticism of Boeing Co.’s prices lobbed by Doug Parker, American Airlines Group Inc.’s CEO, after Trump assailed costs on the planemaker’s Air Force One program. Parker said Trump wasn’t the first person to complain about Boeing’s prices, while also saying his airline had a strong relationship with the Chicago-based manufacturer. Kelly praised Boeing.

“They make great airplanes extraordinarily well. We have intentionally chosen to be an all-Boeing customer,” Kelly said. “They’ve treated us real well. We’re a low-cost airline and they help -- they help a lot.”

Oil Prices

Kelly acknowledged that the boost to profit from low fuel costs is likely to ebb as oil prices rise. He thinks the effect of the Organization of Petroleum Exporting Countries’ decision last week to trim output will be limited, however. Crude oil is trading about $51 a barrel in New York.

“I don’t think its going to be over $60. There are those out there who think we’re headed to $70,” he said.

The airline still needs to find new sources of revenue and is looking toward sources such as cargo and booking flight-and-hotel packages, Kelly said. But it doesn’t intend to add fees to travelers for, say, extra leg room or checking bags, as rivals have done. Southwest also remains committed to having travelers pick their seats on board.

“We don’t have any plans to change our core customer experience, any plans to take advantage of those other features. Our customers aren’t telling us they want assigned seating,” he said.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE