Southwest Airlines CEO Talks About Fares, Fees And New Routes

There are 417 airplanes that will have that seating configuration. That's all of our 737-700 jets. There are eight AirTran 700s that are being converted to Southwest, so they'll have it. That leaves 33 that we will convert next year.

So far, it has gone very well. The customers seem to like it. We always look at the customer feedback about our seats, the old seats versus the new seats. As usual, you've got winners and losers.

We've got people who like the new ones better. We've got people who like the old ones better. But I think on balance, it's an improvement. It's a way for us to get six more revenue passengers on the aircraft and another technique for us to keep our fares down.

Las Vegas was one of the first cities to use the larger -800 series 737 jets. How does that change operations at McCarran?

I think it's wonderful from McCarran's perspective. The airport and Southwest are focused on local traffic, bringing people to Las Vegas, not using Las Vegas as a connecting point and utilizing scarce resources here as efficiently as possible.

So we have more seats per departure in Las Vegas than ever before. The airplane takes a little longer to turn at the gate so that has to be factored in, but the net effect is still a more efficient use of the gate. Our average turn time for an -800 is probably 10 minutes longer than a -700, and that's all the deplaning and boarding process for the most part.

As you would expect for an operator like us, it's a pretty material change, to go from 143 passengers to 175, with four flight attendants instead of three. So we've had some breaking in to do, but the on-time performance is very good and the load factors are higher than the system average. So for the scheduling of the aircraft, our guys are doing a great job.

How many -800s do you have now?

We had 34 at the end of the year, and I think we've added one or two. We'll get 20 this year, so we'll end this year with 54. We're firmly committed to 78 in 2014. We'll decide on the 79th delivery whether that will be a -700 or an -800.

What routes do you use those on from Las Vegas?

It's mostly the long routes to the East Coast. That's what it was designed for.

Has the use of the 737-800 planes created any unexpected operational problems?

Like any airplane, it has its limits and its drawbacks. Those are not hard issues to identify, and all of those factors were known.

It's a very cost-effective airplane as long as you have a solid load factor. It's much more profitable, much more cost-effective than the -700 in the right circumstances.

Occasionally with headwinds, with weather, it is a little bit more of a challenge. But we have those challenges with all of our airplanes.

Any reaction to the merger between US Airways and American Airlines?

As somebody on the sidelines, it's interesting to watch, and it has been long predicted that the industry would consolidate. So it's really not surprising to see this. US Airways has made no secret for years that they were interested in doing something like this.

We'll face vigorous competition whether it's one airline or two. We've already witnessed how airlines have successfully gone through bankruptcy and dramatically lowered their labor costs and made themselves more cost-competitive. They're still not at our cost levels, but they're certainly more cost-effective than they were, and some of them are turning out very handsome profits right now. There are a lot of labor cost increases that are occurring with our competitors because they were cut so low.

In any event, we're going to face a competitive landscape from the legacy perspective, and we're more than prepared for that.

How do you feel about restrained capacity? Do you think it will be adopted by the aviation industry?

I think it already has happened. It has been an imperative. Unfortunately -- and it's been especially true since 2006 -- the operating cost per unit has just gone straight up because of fuel prices. The industry was forced to react or go out of business.

It's basic: Get the occupancy rate up or get the fare up. So we're constantly pushing those two levers.

If you look at Southwest, our load factors today are significantly higher than they were a decade ago and even five years ago. We've been forced that way.