Southwest experiences headwinds in Mexican markets during 2018

Although Southwest Airlines is relative newcomer to international expansion, Mexico is a key market for the airline, and recently airline executive concluded Mexican routes were “off trend” for 2018.


Summary:

  • The Southwest Airlines operation has been built on the US domestic market, but an international expansion has become a recent addition to its network;
  • Mexico has been the focus of this international growth with flights to Puerto Vallarta, Mexico City and Cancun from various points across its US network;
  • But executives warn that in 3Q2018 Mexico was weak in terms of revenue performance, and concluded the country had been “off trend” for 2018.

Southwest inherited some international routes from its acquisition of and merger with AirTran. More recently, it has expanded its network in Latin America and the Caribbean, serving 14 destinations in the region. Presently,  Southwest serves Puerto Vallarta, Mexico City Juarez and Cancun from various points in its US network, and Mexico represented nearly 45% of the airline’s international departing frequencies.

Southwest executives recently remarked that in 3Q2018 Mexico was weak in terms of revenue performance, and concluded the country had been “off trend” for 2018.

CHART – Mexico is the main international market for Southwest Airlines and accounts for almost half of its international capacitySource: CAPA – Centre for Aviation and OAG (data: w/c 12-Nov-2018)

The airline’s executives concluded that up until 2018, there was a strong demand for leisure customers to Mexican beach markets. As previously reported by The Blue Swan Daily,  the Mexican resort area Cancun has been the subject of travel advisories during the last year as a result of violence and incidents of blackouts from alcohol consumption at its resorts.

“Consumers have options, and if they feel like they’ve got better options, they’ll go other places. So it may have in fact helped our business in other Caribbean beach destinations,” Southwest’s CEO Gary Kelly stated.

Looking forward, Mr Kelly remarked Southwest does not see any signs of the weakness in Mexican market abating dramatically, “but it does sound like it’s not worse and maybe we’ll see some strengthening here”.