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VOL. 128 | NO. 31 | Thursday, February 14, 2013

Southwest Executive Hints at Airline’s Plan for Memphis

By MICHAEL WADDELL

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The Traffic Club of Memphis’ February luncheon on Tuesday, Feb. 12, featured Wally Devereaux, director of sales and marketing for the Cargo Management Group of Southwest Airlines.

Devereaux’s talk focused primarily on the cargo side of Southwest’s business, but he did drop a few hints of what to expect from the passenger side as 2013 unfolds. Devereaux said he could not comment on airfare questions because he did not know.

“But typically when Southwest Airlines enters into a market, you will see some fare relief,” he said.

With its recent AirTran Airways integration, Southwest is converting more and more of the AirTran stations into Southwest stations. Charlotte, N.C., and Rochester, N.Y., will convert on April 14, and Devereaux expects the same to happen here in Memphis later this year.

“Ultimately, the desire or the hope is to have Memphis converted over to Southwest Airlines aircraft by the end of the year,” Devereaux said.

Memphians can expect to see increased flight options thanks to connectivity between the Southwest and AirTran networks.

In early February, Air Tran announced one new nonstop to Baltimore, two nonstops to Chicago and one nonstop to Orlando.

“This will happen on Aug. 11, so at that point and time you will really have one-stop service to the vast majority of the Southwest Airlines network,” Devereaux said.

Southwest operates more than 3,200 flights per day, with another 600 flights each day from its new AirTran subsidiary, making the carrier the largest in terms of domestic passengers boarded annually in the U.S. The airline’s cargo side serves 73 cities nationwide, and overall the airline serves 97 cities for passenger and cargo traffic.

The Southwest and AirTran fleet consists of a total of 692 aircraft, with 550 of those belonging to Southwest (all Boeing 737s). The company recently took on 34 of the larger 737-800 series planes, and the airline plans to add 20 more this year followed by 24 in 2014.

With the Air Tran acquisition, Southwest acquired its 717 fleet, and Southwest now expects to sublease those aircraft to Delta Air Lines over the next three years.

“We are a launch customer for the 737 MAX series aircraft, which really is a re-engined version of the 737,” Devereaux said. “It will be more fuel efficient certainly, and that will be something that will definitely benefit us. That should take place in the 2017 timeframe.”

Passengers flying from Memphis can expect to enjoy comfortable aircraft with all leather seats, Wi-Fi connectivity with live TV, and bags flying for free.

On the cargo side, unlike some of its competitors Southwest does not transport hazardous materials, live warm-blooded animals or U.S. mail.

“We’re a high frequency, point-to-point carrier. We don’t run a traditional hub-and-spoke type operation at Southwest, which is a little on the unique side,” Devereaux said. “We have 3,200 flights per day and around 2,000 pounds of lift on a per flight basis, so it’s quite a bit of capacity that is available on a daily basis for us to use.”

Southwest works with some contract handlers and is interested in finding some here, but the majority of cargo is handled directly by Southwest employees.

“Ideally we would like to start a cargo facility here, and we are actively looking for a handler to set up a cargo facility here in Memphis,” Devereaux said. “We haven’t a tremendous amount of luck finding somebody to handle us so far.”

Combination carrier domestic freight traffic has fallen dramatically over the past decade, dropping 52.6 percent between 2000 and 2010, according to the U.S. Department of Transportation.

The events of 9/11 changed the rules for acceptance of freight from unknown shippers, the recession of 2008 and 2009 impacted volumes domestically, and fuel surcharges have risen considerably since being implemented in 2002.

The type of cargo handled has also changed in the past decade. Southwest formerly handled a large amount of bank work and that has nearly disappeared due to digital check imaging online, and processed film had previously been the airline’s top cargo commodity.

“Two of our top five customers when I started on the cargo side of the house were processed film shippers, and that just simply doesn’t exist anymore,” Devereaux said.

More recently the airline is seeing increased consumer confidence resulting in more demand for high-end electronics and a variety of other online goods.

“Since 2009, we’ve actually grown our air freight business each year, and, in fact, we had a record year last year in terms of revenue we produced at Southwest,” Devereaux said. “So we fully expect that this year we will continue to grow on a year-over-year basis.”

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