Southwest Eyes Overseas Routes

May 6--After transforming airline travel in the United States with its cheap, no-frills service, Southwest Airlines might soon take its low-fare revolution across the border.

Gary Kelly, the airline's chief executive, said the airline will begin connecting to international flights later this year with its partner, ATA, and might eventually fly its own planes to foreign cities.

For travelers, the move will mean more competition and lower fares to cities in Mexico, Canada and the Caribbean. But it could be a risky strategy for Southwest, which has long followed a business model of focusing on short- and medium-haul flights, analysts say.

"Thirty-three-year-old business plans are not changed without significant considerations," Roger King, an analyst with CreditSights, an independent research firm, wrote in a recent report. "It was always assumed that foreign costs were too high for the Southwest game plan."

Kelly said Dallas-based Southwest will make its first foray abroad through its partnership with ATA. Under that deal, Southwest can sell flights to and from cities it doesn't serve, by connecting passengers to ATA flights.

ATA serves several markets Southwest does not, such as Hawaii, New York City and San Francisco. The airline also flies to Mexico, with service to Cancun and Guadalajara.

Through the ATA partnership, Southwest also is offering its first flights out of Dallas/Fort Worth Airport. ATA operates four flights a day between D/FW and Chicago's Midway Airport. From there, passengers can connect to a Southwest flight to many U.S. cities.

"We are building the capacity to book international itineraries," Kelly said in an interview.

That's a fairly complicated process, he said, because the airline has to get the U.S. Transportation Department to sign off on the routes.

"There is a long list of things we'll have to undertake," he said. It could take until 2009 to begin the shared international flights with ATA, he said.

But once those approvals are in place, Southwest would have the authority to begin its own international flights, he said.

"I assume we'll fly internationally some day," he said.

The airline won't be the first discount carrier to cross into foreign airspace. For example, Spirit Airlines, a low-fare carrier based in Fort Lauderdale, Fla., offers flights to Jamaica, the Dominican Republic, other Caribbean destinations and Mexico.

Most of those destinations are available on a connecting basis from D/FW, where Spirit operates a daily flight to Fort Lauderdale.

AirTran Airways has flights to the Bahamas, and JetBlue Airways flies there and to the Dominican Republic. And US Airways, which markets itself as a discount airline after its merger with America West, has extensive international routes to Latin America and Europe.

Still, the rush overseas doesn't necessarily mean it's the best move for Southwest, which has traditionally focused on high-demand routes where it can deploy numerous daily flights.

"Southwest isn't going to make any money with one or two flights to Cancun," said Henry Harteveldt, a travel analyst with Forrester Research. "Their business model is built on high-frequency operations between two points."

Kelly agrees.

"If you pick a point in the Caribbean that supports two daily departures for the U.S., it won't work for us," he said. "We want dozens of flights in the cities we serve."

Still, the airline has been massaging its business in recent years as it has worked to cope with fast growth, rising cost pressures and competition from upstart rivals like JetBlue.

It's moved into large airports it had previously forsaken, like Denver International and Washington Dulles.

King said international service is most likely part of a long-term strategy for Southwest. He described it as "advance planning for the ultimate saturation of short- and medium-haul markets."

There are "only so many bolt-on markets and frequency increases left," he said.

Kelly said it is too early to speculate whether international flights would operate from Dallas Love Field, the airline's home base, if the Wright Amendment is repealed. That federal law restricts flights from Love to Texas and eight nearby states, and Southwest is trying to get it repealed.

"We have not indicated whether international service out of Love is important to us at this point," Kelly said. "And we're not going to talk about that just yet."

Shares of Southwest (ticker: LUV) closed at $16.61 Friday, down 25 cents.


Trebor Banstetter, (817) 390-7064