Spread the love

If you ever wondered why airlines want to sell the middle seats on an aircraft, then check this out the article by Jay Singh in Simple Flying.

Over in the USA, Southwest Airlines uncapped its middle seats and made them available for sale, with in addition to having the science to support that flying can be safe even without capacity limits, the airline, which lost about $USD60 million in lost revenue due to blocking the middle seat from September through November, had a revenue boost of around $USD80 million as a result of uncapping the middle seat.

The article goes on to say that through to the end of November last year, Southwest Airlines was blocking middle seats for sale, leading to a $USD20 million penalty in September, around $USD30 million in October, and a $USD10 million penalty in November.

This was less than the amount Southwest had previously forecasted, with the policy of blocking seats ending on December 1 and on the airline’s fourth-quarter earnings call, the carrier announced it estimated a revenue boost of around $80 million and a whopping 12 point increase in the carrier’s load factor compared to November.

In October, the airline’s load factor came out at 54.6%, dropping to 47.8% in November amid a rise in cases and new warnings from government health officials., but in December, the airline’s load factor increased to a whopping 59.6% systemwide.

Turning a profit at a 60% load factor is incredibly difficult and that a 60% systemwide load factor meant some planes went out full, but most still had plenty of open seats, with capacity down 43.1% in December and 40.6% overall in the fourth quarter.

Operating revenues for the fourth quarter were down 64.9%, representing the difficult travel season through which Southwest Airlines operated, with the issue with the current environment is that much of the crisis is outside of Southwest’s control.

The airline cannot go out and offer low fares in the hope of filling up its planes and, while it has done that, customers generally tend to travel when there are fewer restrictions up in their origin and destinations. So, Southwest needs to hope for more tourist destinations to open up before low fares will truly stimulate demand.

The airline is hoping to reach cash break-even in 2021 and for that, it is vital that Southwest gets more business while also being able to command a little more control over price. However, all of this depends on the state of the pandemic.

The airline’s executives did not give a specific month or season when it believes travel will rebound, but it knows the first quarter of 2021 will continue to be difficult, with January and February are typically heavy business travel months.

The airline currently estimates a load factor in January of between 50% and 55%, which means that there will be some empty seats, though some flights will be going out full.

This will likely be split across geographies, with warm weather leisure destinations seeing more passengers jump on a flight than planes heading to destinations with travel restrictions in effect, such as New York or Massachusetts.

Nevertheless, on the flights going out full, Southwest is clearly reaping in the financial benefits. After incurring its first annual net loss since 1972, the airline hopes to turn things around in 2021.

Part of this includes the Boeing 737 MAX’s return to commercial operations, which should help the carrier keep its costs down and the carrier is also betting on a host of new routes and cities for the year.

An edited report from Simple Flying by John Alwyn-Jones