Southwest aims to expand internationally: CEO

By Karen Jacobs

DALLAS (BestGrowthStock) – Low-cost U.S. carrier Southwest Airlines Co (LUV.N: ) plans to expand international service over time and would likely offer flights to Asia and Europe through partnerships, its chief executive said on Thursday.

“What is a deficiency for us right now that we intend to address is international,” Gary Kelly said in an interview at company headquarters in Dallas.

Southwest on Thursday announced a partnership with Mexican carrier Volaris to offer flights to five Mexico cities. Southwest will be able to offer service to the Caribbean once it completes its acquisition of discount rival AirTran Holdings (AAI.N: ), which flies there. The deal is expected to be completed in the first half of 2011.

Kelly said Southwest expects to decide soon whether it will add bigger Boeing Co (BA.N: ) planes that could be used to fly to Hawaii and Caribbean cities.

“I would see us serving Asia, Europe, South America, Australia with an international connection, partner-like product that we have with Volaris,” Kelly said.

Southwest also said on Thursday that it planned to launch daily nonstop flights from Newark, New Jersey, to Chicago and St. Louis in March 2011.

Kelly said Southwest had a cost advantage against bigger airlines that would enable it to offer lower fares as it enters new U.S. markets.

He said Southwest’s policy to not charge fees for checked baggage or flight-plan changes were key factors that distinguish it from legacy airlines and give it an advantage with value-seeking consumers.

Kelly said his company’s costs were roughly half those of legacy airlines.

“We’ll continue to be the competition in the United States for the high-cost carriers,” Kelly said.

CONSOLIDATION

Kelly said he wouldn’t be surprised to see more industry consolidation but made no predictions. In light of Delta Air Lines Inc’s (DAL.N: ) 2008 acquisition of Northwest Airlines and the just-completed merger of UAL Corp and Continental to form United Continental Holdings (UAL.N: ), he said he wasn’t sure what else could happen among U.S. legacy carriers.

But he added that more merger deals among regional carriers that are pressured by rising fuel costs and shrinking market share was a logical expectation.

“With United and Delta being so large and so dominant, it does put other smaller airlines — like us, too, frankly — in a position of at least thinking about how are we going to remain competitive,” Kelly said.

Kelly said Southwest looked at entering the regional airline business but was not comfortable with the market size or economics of individual trips.

He said the AirTran purchase would allow Southwest to close a hole in its route map with entry to Atlanta, site of the world’s busiest airport. He added the acquisition would enable his company to grow in ways not possible without it.

“We have found a way to unlock our potential. That’s what really excites me about the AirTran deal,” Kelly said.

(Reporting by Karen Jacobs; Editing by Gary Hill)

Southwest aims to expand internationally: CEO