We would like to first introduce our guest today, Rob Brown from Southwest Airlines. Everyone, let’s say a big hello to Rob!
“You’re welcome. I don’t get that kind of greeting at home.”
Thank you all. We’re here today at Southwest Airlines headquarters. Behind us is a very futuristic room of flight simulators as far as the eye can see, but it’s great to have us here today. We’re having a live session with the crew here—one of our roadshows at Travel Again—and Southwest graciously agreed to host and be a part of it. We appreciate that along with our sponsors, BLS and Omni Hotels. Again, thank you very much to Southwest. We’ll talk about Southwest culture in a little bit, but that culture comes through in every way, including how they hosted us here today. Welcome again, Rob.
“Thank you. We are always happy to host.”
Well, let’s get right into it. These are interesting times. We spent a good part of our program here this morning talking about the three initials that disrupted the industry in a way that no one would have ever thought: NDC. But I have to say, for Southwest, you’ve been on this journey long before maybe most of the industry did. We talked a bit about the spectrum of how, even though NDC is a standard and in theory is going to bring a better experience for customers, the business strategies around it are very different. What is Southwest’s perspective on NDC and how are you approaching the industry?
“Yeah, and again thank you, Mike, for allowing us to have this platform with you and to share some of our views. So, NDC is likely the three most confusing letters in the travel industry. I always like to say that we need to take the ‘N’ out because it’s no longer ‘New’—it’s been around for a little bit. But you mentioned that Southwest sort of started this a long time ago, and I would agree with that.
We’ve had an API in the marketplace since 2010, and it’s been a very effective part of our distribution strategy as well as our Southwest Business strategy. It’s enabled us to connect with customers and partners on a widespread process and allow us to put all of our fares and content in front of them depending on what corporate booking tool they are using. We definitely implement ‘Channel of Choice,’ and our API, which is called SPS (Southwest Partner Services), is a big part of that.
Our stance on NDC is going to be a lot different from what you’re seeing from a lot of our competitors. Essentially, what our competitors are doing is leveraging NDC in a way that they can continue to sort of retail a lot of their fares and ancillaries in a different way. Southwest is not interested necessarily in leveraging NDC in that way. We first want to leverage NDC to modernize our API. As I mentioned, it’s been around since 2010, so the specs that we use are OTA specs—it’s not NDC specs. We anticipate that as NDC continues to march towards standardization, this will be one of the primary ways that airlines connect to the end-user, whether it’s a corporate booking tool or the GDS.
Because it’s marching towards standardization, we want to make sure the API we have in the marketplace is standard. It still has some room to go in terms of meeting all of the standardization for all entities within the business travel space, but it is going in that direction. When we get to the point where we introduce NDC as part of our API strategy, it will not be to separate fares or create friction between channels. We will still be ‘Channel of Choice.’ We will leverage the NDC standardization to create a better experience for the partners that we’re working with—whether it is corporate booking tools and, eventually, maybe one day, GDSs. We haven’t decided that’s going to be an endpoint for us right now, but we currently connect to a bunch of corporate booking tools, some companies directly, and even directly to some TMCs. We want to make sure that first step of upgrading our API to NDC creates that better experience.”
So in your view, it’s an enabling technology. Your goal is not to try to differentiate or use a ‘carrot and stick’ approach; it’s really just a function of how to best connect with the providers you use?
“Exactly right. We’re not interested in creating friction. For many years, we were sort of the lead in terms of creating friction with our distribution strategy. In 2019, when we decided to enter into the GDSs in a new and standardized way across the industry, it was at that point where we decided we were no longer going to drive friction. We decided to march towards removing friction and creating a ‘Channel of Choice’ experience that enables everyone, regardless of how they book their business travel, to have the best booking and ticketing experience.”
Clearly, your role here is focused on the Southwest Business side of the equation. But on the personal side, I know Southwest has a relationship with Chase for the co-branded card. You recently announced that your content is available through the Chase travel portal. Do you see more of that coming in terms of more partners adopting those places where you put Southwest content? For instance, with Google Flights, you made the decision to show you exist but not have the direct booking capability. What goes into those decisions?
“Essentially, because of the long-standing relationship that we’ve had with Chase, it made sense that if we were going to add to the portfolio, we would go down the path of working with them in a different way to reach their unique customers. We entered into that agreement, and I think it’s too early to tell whether that’s something we’re going to expand on. It’s certainly proven to be a great partnership thus far. Just like everything else we’ve done with Chase, it’s resulted in goodness for them as well as goodness for Southwest Airlines, but it’s too early to tell how expansive we will go with that particular strategy.”
So, kind of test and learn, evaluate, and move methodically. This is more of a generic question, but we talked this morning about NDC outcomes like dynamic continuous pricing and more personalization. I understand why it could be great for airlines, but is it really going to create a better customer experience? For an infrequent traveler, is it just creating a more confusing experience?
“We certainly hope it doesn’t create any confusion. We are aiming towards creating the best customer experience that we can. Dynamic pricing certainly provides a lot of flexibility for the airline. Our Revenue Management team is excited about the opportunity of leveraging that level of technology and price offerings for customers. Again, hopefully creating a much better customer experience for them. We’re nowhere close, I would say, to doing anything from a dynamic pricing standpoint, but it’s definitely on our roadmap alongside what we’re thinking about from an NDC perspective. In some respects, those two things go hand in hand. It’s Step One, which is getting the NDC standards, and then Step 1A is exploring how we could leverage dynamic pricing.”
I’m going to read a couple of quotes I wrote down here. During the first quarter earnings call, there were some positive elements, but Southwest missed forecast expectations on a couple of things. Your CEO said, “While it’s disappointing to incur a first quarter loss…” (Now, to put that in perspective, the first quarter is traditionally the down quarter for airlines). But he also said, “We exited the quarter with healthy profits and margins in the month of March. We’re focused on controlling what we control.” But the point he worked in, which I’m sure you’ve heard about, is that you are evaluating options to enhance the customer experience, which he said includes onboard seating. Anything you want to tell us about one of these Southwest sacred cows—the famous lineup at the gate and the potential for an assigned seating experience?
“Well, I don’t know any inside secrets, so there won’t be breaking news today! But I will say this: when you think back to the quarterly announcements, no one loves to lose money. When you look at our overall performance, it was our sixth straight quarter of record operating revenues. So on one hand, you’ve got great news in terms of how much revenue we’re generating. The bad news is it wasn’t enough to offset some of the rising costs. That’s where it’s truly disappointing.
Once we look at our overall plan—our fleet with Boeing and other ways to optimize and enhance everything we’re doing from an employee standpoint—that’s where we’ll begin to turn the corner and get back on the profitable side. In terms of the customer experience onboard, we’ve been hyper-focused on improving that. Even going back to the first quarter of last year, we announced new overhead bins where bags can be put in ‘long ways’ so we can get more on board. We’re getting power in seats—I think we’ve got about 18 or 19 aircraft flying out there with power—as well as upgraded drinks and more entertainment options.
What many people may not know is that in the past, we’ve tested things like different boarding processes, including seat assignments. None of those things ever panned out at the time to drive what we were trying to drive—like a faster turn on the aircraft or a better customer experience. It’s just us continuing to listen to our customers, understanding what it would take to earn more business and give them that hospitality experience. We run that through the funnel to see if we can leverage it to gain new customers while meeting the needs of our current customers and our investors. We’ve always listened to our customers, and looking at the seating process is just part of that.”
From a personal perspective, I would say that aside from a little bit of a crowded boarding area, the culture of your company shows through. Consistently, the onboard experience is great; your people are clearly tuned into that culture. Wrapping up, for those who don’t know, Rob has been with Southwest over 30 years. What’s amazing is that’s not unusual here. People come here, work here, and have long careers. It speaks to why you continue to get recognition as a great place to work. Any advice for our audience about navigating chaos from a Southwest perspective?
“I will say that our people are easily our secret weapon. We are very intentional in the hiring process to ensure the personality of the potential employee matches the culture of Southwest Airlines. It’s not that we would go out and hire me to be a pilot—I need to have a certain skill set for that! But if I’ve got the right mindset and personality that matches the culture, the sky is the limit.
A lot of people don’t understand the connection between culture and profits. When you’ve got a team of 70,000 employees all on one accord, focused on the best interest of the customer and the employees they’re working alongside, it takes care of the profits and the Wall Street investors. They will run through a wall for you. They’ll work long hours and weekends to make sure the company and customers are having success. We shower them with how important they are and give them the autonomy to make the right decision in the moment for the customer.”
I started right out of college in the industry with a company called Rosenbluth Travel. My first boss used to say, “Without profit, there is no culture,” but I would also say it goes the other way: without culture, there is no profit. They go hand in hand.
Everyone, let’s give a round of applause and thank Rob for stopping by today. Rob Brown from Southwest Airlines, thank you for hosting and thanks for stopping by.
“Thank you, I really appreciate it.”