Southwest Airlines had big growth plans for 2024 — and they hit a wall due to Boeing's problem delivering planes.
The airline has had to adjust its plans to increase capacity during a period when its costs have gone up. Southwest has new labor deals with multiple unions, most notably its pilots union.
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That's an accomplishment for the airline, but it also increases costs. All the company's unions got more money, but the pilots broke the bank. They will receive an immediate 29.15% increase and a hike of 4% each in 2025, 2026, and 2027.
Those numbers weren't unexpected, but they push up Southwest's (LUV) operating costs, which generally are passed on to passengers. Add in the Boeing delivery issues, and it's easy to see how flights might get more expensive.
The airline said that it wasn't expecting its capacity to grow in 2024.
"We also made rapid adjustments to capacity for both 2023 and 2024 and put in place significant network adjustments in response to changing demand patterns," Chief Executive Bob Jordan said during the airline's fourth-quarter-earnings call.
"These changes reduced our planned 2024 year-over-year capacity increase to roughly 6%, all of which is carryover from 2023 network restoration. So there will be no net new additional capacity in 2024 as we work to mature our route network."
That was true in late January when that statement was made. It may no longer be true as Southwest appears to have a new path to growth.
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Southwest Airlines set for new flights
If you can't get more planes, the only way to add capacity is to use your existing fleet more. Southwest's ability to do that had been limited because its union contracts did not allow red-eye flights.
A red eye is an overnight flight that lands the next morning. Southwest has been hinting at eventually offering overnight flights but had implied that the addition was years away.
Technology changes and its new labor deals may make red-eye flights a reality much sooner than that.
"If Southwest can get approval of the Flight Attendant Tentative Agreement by the 25th of this month when they roll forward their schedule all the way to March 2025, they will move forward with red-eyes this fall to combat the [Boeing] Max-related aircraft shortage," Enilria reported.
Southwest won't launch the program with the planned 50 red-eye round trips right away, but some could be part of its fall schedule.
Why red-eye flights help Southwest
Red-eye flights are sort of a necessary evil. They enable passengers to leave at night from the West Coast and arrive in time for a full day of work on the East Coast. They're also generally cheaper because being on a plane when you're normally sleeping is brutal.
"I’m not sure many people are clamoring for overnight flights. However, it would improve aircraft utilization, and more capacity also supports lower fares in the market," View From the Wing's Gary Leff wrote. "Some routes would become possible if currently viewed as more marginal. We might see red-eye Hawaii to the West Coast, allowing for morning connections eastward."
Southwest likely would have waited to implement red-eye flights on its original schedule if it had received the full order of planes it expected from Boeing (BA) . With that not happening, the company needs to be clever if it plans to grow.
During the earnings call, CEO Jordan said that no plans were final.
"We will be relentless in executing against our plans, and we will continue to make adjustments, including capacity adjustments if needed until we deliver those results," he added. "Adequate and consistent returns is how we have created decades of shareholder value, and it continues to be our key focus."
