April 11, 2002 12:30 PM PDT
Southwest soars without travel sites
Southwest, however, has avoided those middleman expenses by selling tickets directly to the public.
"We've never believed that it was smart to put control of our destiny in someone else's hands," said spokeswoman Beth Harbin of Southwest, long considered a maverick in the airline industry. Southwest.com is so popular that it has become one of the most heavily trafficked of any travel site.
Critics of the independent strategy warned that Southwest would lose market share when travelers shopping on Expedia and Travelocity couldn't find the airline's fares. Yet Internet purchases accounted for about 40 percent of the company's overall ticket sales in 2001, a 15 percent jump from the year before.
Selling online is cheaper for airlines, which have stopped paying commissions to travel agents, even when they sell fares through third-party travel sites. On average, most airlines see their Web sites account for about 50 percent of their Internet sales, according to estimates by industry researcher PhoCusWright. Web travel sites account for the other half.
But the number of sales is only one factor; what matters most, analysts say, is how much money an airline saves on each ticket sold. And in this category, Southwest is tough to beat.
When most airlines sell a ticket through an online travel agent, the transaction can cost from $5 to $10 to process. When Southwest sells a ticket through its Web site, its cost is about $1, Harbin said.
The airline has passed some of these savings on to the customer, offering discounts for fares booked online.
"They've always operated as a low-cost leader so people will hunt for them," said analyst Lorraine Sileo of PhoCusWright. "They've earned this reputation by keeping their distribution costs low and passing along some of the savings on to customers."
Nevertheless, analysts say, what has worked for Southwest may not work for others.
Most of the major airlines sell tickets through a wide range of channels. Besides the Web travel agencies, carriers such as United Airlines, Delta Air Lines and American Airlines work with companies that run computer reservation systems that deliver fare information to travel agents around the globe.
The large airlines may be reluctant to cut off a distributor with a proven track record of selling tickets.
"Carriers such as Delta or United sell in mass markets and need travel agents," Sileo said. "The majority of people that fly on these airlines still use travel agents."