Thursday, December 1, 2022

Southwest says new fare will appeal to small and midsize businesses; expects profits in 2022

Southwest has announced a new fare product that will bridge the gap between its budget ‘Wanna Get Away’ fares and its ‘Anytime’ mid-tier product. 

The carrier plans to add the product around the middle of year, chief commercial officer Andrew Watterson said during Thursday’s Q4 earnings call. Watterson said the product will appeal to small- and medium-size businesses, but he and other Southwest executives shied away from providing further details. 

“It’s too early to give away exactly what the fare product looks like,” said the airlines new CEO, Bob Jordan.

Wanna Get Away fares include two free checked bags. There are no change fees and ticket holders who cancel travel get a flight credit that is good for 12 months. Southwest has no plans to reduce what Wanna Get Away offers.

The next category up, Anytime, offers those perks, plus refundability, free same-day flight changes and free same-day standby. Anytime flyers earn 10 Rapid Rewards points per dollar spent; Wanna Get Away flyers earn 6 points per dollar spent. 

The new fare category is expected to sit between these two categories in terms of price and perks. 

Strong holiday bookings helped more than double revenue to $5.05 billion in the fourth quarter from $2.01 billion a year earlier and drove the carrier to a $68 million profit, compared to a loss of $908 million during the same period the year before.

The airline turned a profit despite a $30 million impact from the Covid-19 omicron variant in December.  

Looking ahead, Southwest expects a losing first quarter due to the impact from omicron but projects a return to profitability beginning in March and through the remainder of the year. 

“While we made significant progress in 2021, the Omicron variant has delayed the demand improvement we were previously expecting in early 2022,” said Jordan, “With COVID-19 cases trending downward, the worst appears to be behind us, and we are optimistic about current bookings and revenue trends for March 2022.”

Southwest now expects to fly 4 per cent  less capacity in 2022 than it did in 2019, a downward adjustment from its earlier plan to be approximately flat with 2019.

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