Southwest’s participation in GDS system nixes agent friction in ‘big deal’ for the LCC

Southwest Airlines admits its entry into the Travelport and Amadeus Global Distribution Systems was a “big deal” that was in large part driven by the company’s desire to eliminate friction in the booking process for corporate travel agents.

Company CFO Tammy Romo recently told analysts and investors at the Cowen and Company Global Transportation Conference that working with Travelport and Amadeus opens up a new pool of corporate customers for Southwest, and “it complements the investments we’ve made through SWABIZ and our API channel, while preserving our direct-to customer strategy…”.

By participating in the Travelport and Amadeus GDS’, “we’re bringing Southwest service to the corporate travel agents in the channel they want to book in. And really, what we’re doing is eliminating the friction for our corporate agents to book travel on Southwest”.

Stripping away that friction was a highlight of discussions that Southwest had with its corporate travel agents during the last few years, and “now, we’ve eliminated that obstacle for them and we think that’s going to be a great area of growth for us,” Ms Romo explained.

Previously, Southwest has stated it expects to have the GDS capability functional by mid-2020, and the company estimates USD10 million to USD20 million of pre-tax income benefit in 2H2020, “with significant improvements expected in 2021 and beyond”, Ms Romo declared.

Southwest has also signed a multi year agreement with CellPoint Digital and UATP to allow its passengers to purchase tickets and ancillary services through Apple Pay. In Jun-2018, CellPoint Digital signed a strategic partnership agreement with UATP to offer this joint solution to airlines that leverages CellPoint’s alternative forms of payment hub and UATP’s Ceptor payment platform.

“Providing modern digital payment solutions to our Customers is critical,” says Christopher Priebe, director, treasury, payments and risk at Southwest Airlines. “The launch of Apple Pay enhances our ability to sell flights, as well as ancillary products using one of the most widely-used digital wallets in North America.”

Southwest is one of the airlines that has been most heavily impacted by the ongoing 737 MAX grounding. It has 34 aircraft now parked with a significant amount more ready for delivery at Boeing’s production facility. The airline’s CFO Tammy Romo said the carrier is anticipating the aircraft will be returned to service by early to mid Nov-2019. The carrier plans to reintroduce the aircraft in “a very controlled and organised way and ramp up in a manner that we think is prudent”, according to Ms Romo, adding it also intends to come “back on track” with its 737 MAX order schedule by mid to late 2020, with the potential for six deliveries to move into 2021.

However, Southwest’s chief revenue officer Andrew Watterson said that the 737 MAX return to service “could drag out” given the size of the backlog of aircraft that have been stored. Following the grounding of the aircraft in Mar-2019, Boeing lowered 737 family production from 52 to 42 aircraft per month. The manufacturer has reportedly produced around 250 aircraft since the grounding, which it is storing at its own production facilities and a number of regional airfields.