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 The growth opportunities are "very exciting for all of our employees
who want to do more," Kelly said in an interview.
Kelly said Southwest was paying "close attention" to cities such as
Memphis, Tennessee — a former Northwest Airlines hub and a market
where Delta Air Lines <DAL.N> reduced flights in last year — as well
as Cleveland, a Midwestern city that United Continental Holdings <UAL.N>
recently said it would drop as a hub.
Kelly, who began his career at Southwest as a controller more than
20 years ago and was named CEO in 2004, noted that when American
Airlines reduced operations in Nashville in the 1990s, Southwest
raised its daily departures in that market to about 80 from 18.
He also said that Southwest became the largest carrier in St. Louis,
Missouri, since American scaled back there following its acquisition
of Trans World Airlines.
"Memphis is a smaller community, it probably has smaller potential
than the two examples I provided there, but we're going to pay very
close attention to it," Kelly said in an interview in Atlanta.
"We're excited about being able to grow there and we'll do as much
as we can. Cleveland, I think, is the same way."
Southwest has new opportunities to add flights after recently
acquiring takeoff and landing rights at New York's LaGuardia and
Reagan National Airport near Washington, D.C., that American
Airlines Group <AAL.O> agreed to sell to settle a U.S. Justice
Department suit challenging its merger with US Airways, which was
completed in December.
The budget carrier also plans to start international service under
its own brand this year — initially to Aruba, the Bahamas and
Jamaica — as it completes the integration of AirTran and retires
that brand.
New nonstop flights from Southwest's base at Dallas Love Field are
due to start in October when U.S. flight restrictions there expire.
With the new access gained in New York, Southwest has outlined plans
to expand service between LaGuardia and Nashville, Houston Hobby,
Chicago (Midway), and Akron-Canton, Ohio.
Kelly declined to comment specifically on where Southwest planned to
add flights from Reagan National, but said that large- or
medium-sized cities the carrier already serves could be targets.
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As it faced rising labor costs, the Dallas-based Southwest added
seats to planes, raised baggage fees at its AirTran unit and curbed
flying to unprofitable markets to improve results. Southwest is also
retiring older Boeing 737 jets in its fleet to help reduce
maintenance costs.
Southwest is the only major U.S. airline that has not been
restructured in bankruptcy. Even so, Kelly said Southwest was still
a lower-cost carrier compared with major rivals though he conceded
that rising fuel prices have eaten into that cost advantage.
"We've had to raise our fares simply because fuel prices are so much
higher today in the billions of dollars a year compared to where
they used to be," Kelly said. "But we still have significant cost
advantages — even including that — relative to the legacy carriers."
He said the effect of Southwest's presence in a market is often
realized in airfare increases that don't materialize.
"The evidence in a market is harder to see at times because our
competitors have always matched our fares," Kelly said.
Southwest shares were down 1.35 percent to $21.14 in late afternoon
trading on the New York Stock Exchange.
(Reporting by Karen Jacobs; editing by G
Crosse)
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