Southwest slows its growth plan, targets more than $1 billion in incremental revenue

Southwest Airlines is targeting more than $1 billion in incremental revenue over the next few years to overcome higher fuel costs and reach its financial targets. (6/28/2007)Outlining plans to improve the company’s profit growth, Southwest Airlines CEO Gary Kelly stated that the airline will slow its fourth quarter 2007 available seat mile growth and optimise its flight schedule. In addition, Southwest announced it now plans to grow its fleet in 2008 by 19 net aircraft, 15 fewer than was previously reported. Kelly said slowing capacity growth will allow the carrier time to implement and evaluate the effectiveness of several initiatives Southwest intends to launch in fourth quarter 2007. “Given the slowing US economy and fuel cost pressures, we are taking these steps to adjust our capacity growth rate, which will help to restore profit growth,” Kelly said. “If we find that conditions change, we will reevaluate our growth plans for future periods. In this economic environment, we simply need to take less risk and grow more slowly.” “For both fourth quarter 2007 and full year 2008, we currently plan to grow available seat miles (ASMs) year-over-year by approximately six percent, or about two percentage points less than previously reported. We also plan to implement a variety of revenue-enhancing initiatives by the end of 2007 that set the stage for continued profitability into the future,” he said. During fourth quarter 2007, Kelly said Southwest plans to: - Slow its available seat mile (ASM) growth to approximately six percent- Enhance its low-fare structure- Enhance its Rapid Rewards frequent flyer programme- Launch a new advertising campaign- Unveil a new boarding/seating methodThrough the elimination of 39 existing roundtrip flights from its current flight schedule, Kelly said Southwest today has added 46 new roundtrip flights in key growth market cities such as Denver and New Orleans. The company has a variety of options to reduce its fleet growth that it is exploring and currently intends to end 2008 with a total of 539 aircraft.

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