Southwest Airlines Projects $1B in Online Sales

Having generated one quarter of its January passenger revenues from online sales, Southwest Airlines projected Monday that its 2000 e-commerce revenues will top $1 billion (US$).

For the fourth quarter of 1999, Southwest reported that revenues from its Web site exceeded $250 million, up 140 percent over the same quarter in 1998.

The fourth quarter earnings have made it clear that Southwest is now formidable competition for such leading online travel Web sites as Travelocity.com and Expedia.com. Expedia reported Q4 earnings of $220 million, while Travelocity and Preview Travel, which are slated to merge, had combined online revenues of $280 million.

Still, Expedia and Travelocity each had a significantly higher number of unique visitors than Southwest. In fact, the big travel sites had millions more visitors.

Although Southwest remains the number seven U.S. airline, it is the largest low-cost carrier.

Southwest Asserts Independence

While a number of airline companies throughout the world are scrambling to drive sales through partnerships, Southwest has maintained its independence primarily by transferring its well-worn offline success to the Internet.

“It took our customers a while to get comfortable with the concept of purchasing their airline tickets on the Internet,” said Southwest chairman Herb Kelleher. “But their acceptance has increased now and they want more.”

The numbers support Kelleher’s assertion. In 1997, only eight percent of Southwest tickets were purchased online. By 1998, that figure grew to 19 percent, and 27 percent of all Southwest tickets were purchased online in January of this year.

Online Travel Setting E-Commerce Standards

The success of Southwest Airlines on the Internet bears out a number of predictions by industry analysts.

Last month, research firm GartnerGroup said the worldwide online travel market is expected to increase from $5 billion in 1999 to $30 billion by the first quarter of 2001.

According to Lou Marcoccio, research director for GartnerGroup, the main victims of this astronomical growth will be offline travel agencies. Specifically, Marcoccio warned, “By the second quarter of 2000, nearly all leisure travel companies that do not offer competitively designed online reservations, ticket sales and customizable travel information will be driven out of the business or acquired.”

As reported earlier this month by the E-Commerce Times, travel trade association The American Society of Travel Agents (ASTA) formally requested that the U.S. Department of Justice (DOJ) block the sale of airline tickets by 27 U.S. and foreign carriers on an industry-wide Web site.

To date, no action on the part of the DOJ has been reported.