Southwest Airlines has a benefit customers will love

The airline industry, along with the world as a whole, was grounded once covid hit in March 2020.

Eventually, some flights were available in 2020 with heightened safety precautions, but relatively few people were willing to take the risk. So it was no surprise when the International Air Transport Association confirmed that 2020 was the worst year on record for the industry.

Demand quickly rebounded once vaccines became available in 2021, but sailing (or smooth flying) from there has hardly been smooth, as the luggage continued to get lost and flying has become more expensive than ever, with ticket prices up 25%due to factors ranging from inflation to labor shortages to exorbitant fuel prices.

But in its recent earnings call, Southwest (LUV) – Get the Southwest Airlines report announced a change that should delight customers, while signaling that there is still work to be done.

What change did the southwest bring?

One of the biggest headaches for travelers (and to be honest, airlines) is that flight cancellations have become much more frequent, especially this summer. Hundreds of flights were canceled over the July 4 weekend, for example.

No airline understands this conundrum better than Southwest, which had to cancel more than 1,000 flights last October.

The reasons for these cancellations vary. Sometimes it’s just bad weather, an eternal problem.

But the main factors these days are rising fuel prices, covid case rates, air traffic control issues and staff shortages. In particular, the airline industry struggles to find enough pilots. This is because many pilots have retired or took a leave during the pandemic, while the many pilots who did not leave experiencing record levels of fatigue.

When flights are cancelled, customers are legally entitled to a refund. But many customers choose to take credit for a future flight instead.

The problem is that there is often a time limit for using this credit, which doesn’t always work with people’s schedules. It also happens that people’s travel plans change for all sorts of reasons and they may not be able to use that travel credit within the year.

But during the second-quarter earnings call, Andrew Watterson, executive vice president and chief commercial officer of Southwest, announced that the travel credits would no longer expire.

“We are also eliminating the expiration date for all currently valid and unexpired flight credits, including travel credits that were issued when customers changed their trip at the start of the pandemic and would have expired next September.” , did he declare.

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“We’re known for delivering industry-leading flexibility at every level, and customers tell us that’s one of our key brand differentiators. Repeat purchases by engaged customers are the cornerstone of our business model and our success. Our research and customer feedback tells us that flexibility has become even more important to customers over the past two years. »

Southwest is looking for more pilots

Elsewhere on the investor call, CEO Bob Jordan said that in the second quarter, “operating revenue increased 13.9% from the second quarter of 2019 to an all-time quarterly record of $6.7 billion,” adding “That’s just an incredible turnaround from last year, not to mention just a quarter ago.

He attributed the impetus to a continued rise in demand, which appears to be rising even as jet fuel prices and labor shortages have prevented the supply of planes from keeping up, driving up ticket costs. ‘plane.

Jordan gave investors an optimistic note, while acknowledging that the airline industry is far from out of the woods at the moment.

“I admit that there is a lot of noise at the moment. It seems we all know someone who has this last bit of covid, the inflationary pressures are real and they are worried about a possible recession,” he said.

“Consumer and business sentiment are down, and there are data points that may indicate early signs of a slowdown. But so far, demand remains strong and we haven’t seen an impact significant to our business.

Jordan indicated that “we currently expect to be profitable for the third and fourth quarters and for the full year of 2022”. He also said in-flight experience is up as the company reached “pre-pandemic staffing levels in May 2022, which is just a milestone.”

The company’s main focus at the moment is getting enough pilots, which has been difficult. With more than 640 pilots retiring during the pandemic, there are fewer pilots available to help train new recruits.

Southwest plans to hire 10,000 new employees this year. Chief operating officer Mike Van de Ven said the company’s first step last year was to “rebuild and restart our hiring machine”, and they have already hired 7,000 employees since the year last,

“About 75% of these hires were for our airport operations and about 20% were for flight crew. We will continue to hire,” he said.

Additionally, Van de Ven said the company plans to “create a staffing cushion and buffer in the aviation environment we all find ourselves in,” to reduce the number of flight cancellations.

“We are still impacted by covid illnesses and a higher level of inactive employees. Our sickness rates are still high in some of our work groups. »