Southwest Airlines Does Web Business Right

Thirty years ago, Southwest Airlines put itself on the map with low fares, direct flights be-tween three Texas cities and attractive attendants. Today, the company still offers below-the-belt prices and has expanded its direct service to 58 cities in 30 states. During the past 28 years, Southwest has remained profitable in the face of oil crises, wars and recessions. And while many major airlines scaled back their schedules following the Sept. 11 terrorist attacks, Southwest continued at full operation. The fourth-largest carrier in the United States, South-west attributes its success to its low fares and customer service focus.

Of course, Southwest couldn’t offer such low fares and dependable service without efficient inter-nal operations. For instance, the company keeps its maintenance costs in check by exclusively flying Boeing 737s. It further reduces operational costs by primarily serving less congested satellite airports, which helps the company make better use of its pilots and planes because at those airports, aircraft spend less time waiting at the gate and more time in the air. Those tactics help the airline keep ticket prices down.

Now Southwest is exploiting the Inter-net to further its low-cost, happy-customer mission. The company launched South-west.com on March 17, 1995, and began selling tickets online the following year. While it costs the airline $10 to book a ticket through a brick-and-mortar travel agent, booking a ticket on the website costs just $1. Southwest.com saved the company $1 million in ticket booking and distribution costs last year alone.

Passenger revenues generated through the website soared from 8 percent in 1998 to 19 percent in 1999. Last year, South-west.com generated 31 percent of the company’s passenger revenues?or $1.7 billion. Not bad considering Southwest initially invested $5 million to launch the site and spends $21 million a year to maintain it.

Now compare Southwest’s online re-sults with Delta, the third-largest carrier behind United and American. Last year, online sales accounted for just 9 percent of Delta’s passenger revenues. In a recent survey of travel sites by New York City-based Internet research firm Jupiter Media Metrix, Southwest.com ranked ahead of American’s, Delta’s and United’s websites. Southwest.com is clearly the most successful airline site on the Web.

“They’ve done a lot of business, and their marketing campaign is absolutely brilliant,” says Alan Alper, an analyst with Waltham, Mass.-based Gomez, a company that evaluates websites.

Since the company first started selling tickets online in 1996, Southwest has launched a variety of campaigns to motivate people to buy tickets via the site. For example, the airline sends a weekly electronic newsletter to 3.3 million subscribers that includes special offers available exclusively through Southwest.com. These incentives will be even more crucial to the airlines’ survival in this tough economy and as Americans think twice about flying. While other airlines suspended Internet-only deals after the Sept. 11 attacks, Southwest continued to offer them.

Of course, no incentive would drive customers to the site if it weren’t easy to use. Booking a ticket on Southwest.com is a straightforward process. Customers first enter their origin and destination cities, date of travel and number of passengers, select their flights and fares, confirm or change the resulting itinerary, enter their credit card information, and receive their confirmation. Unlike most travel sites, customers don’t have to log in or register with Southwest.com to purchase tickets.

“We have no roadblocks. We’re not tracking you to see your purchasing habits. It hasn’t been a need of ours. We just want to provide convenience and ease of use so you can get where you want to go at a low fare,” says Melanie Stillings, marketing automation manager for Southwest.com.

To that end, Stillings and her team have added all the tools travelers need to plan a trip. Since December 2000, Southwest.com has provided rental car reservations through Galileo, a computer reservation system. As of last March, customers could book hotel rooms on the site. Last June, it began posting flight status information. “We are making ourselves a one-stop travel shop,” says Stillings.

Adding car and hotel reservation capabilities to the site just months before the company pulled out of Travelocity.com, which also offered those features yet generated less than 1 percent of Southwest’s ticket sales, was somewhat prophetic. It also prepared Southwest for its decision not to partner with American, Continental, Delta, Northwest and United last June when those airlines formed Orbitz, another one-stop online travel shop. It wouldn’t make sense for Southwest to sell tickets on its own site without also providing a way for customers to reserve hotel rooms and rental cars, while other online agents from which the company was trying to divorce itself attracted customers by offering the whole travel kit and caboodle.

Southwest doesn’t partner with other travel sites because it can’t control the service a Southwest customer gets from the online agent nor can it guarantee the ease of buying a ticket online. “If we make it harder to purchase online than we do using the phone, then we’re going to lose the battle of low cost,” Stillings says.