Two days ago, the new CEO of WestJet stated that WestJet would be pursuing a code share agreement with Delta with the potential to implement this either before or in place of their existing agreement with Southwest Airlines.   Several reports tie this in with the proposal to give WestJet some slots at (5 pair) at La Guardia Airport in the Delta/US Airways slot swap deal currently being discussed. 

First, I continue to be skeptical that there will be an agreement between Delta and US Airways for this major slot swap between La Guardia and Washington National airports given both the FAA’s and Department of Justice’s attitude towards this deal.  Other than Delta and US Airways, no one is thrilled about the idea of Delta and US Airways getting to “pick” their competition by granting these slot swaps to airlines who aren’t poised (and never really will be) to compete with these two legacy airlines.   If a deal does go through, I expect it will look different than the current proposals and it will involve a transparent auction of these slots to a high bidder. 

Nonetheless, this is a bad announcement for Southwest airlines for a few reasons.  First and foremost, the thundering silence that continues from Southwest since this announcement was made sort of indicates they were as caught off guard by this as anyone.   It isn’t good for such a large airline to appear as unprepared for this development as they seem to be.

Second, the original deal between Southwest and WestJet is part of a 3 nation alliance between Southwest, WestJet and Volaris, all airlines operating in the tradition of being LCC carriers and all with a model similar to Southwest’s own.  Southwest was clearly the leader in this alliance and it appears that it’s delays in getting themselves positioned to start this alliance have hurt this agreement.   Acting like the 800lbs gorilla and then not getting the job done in time doesn’t make you appear to be an agile player in the airline community. 

Southwest has said the delays came from making other changes a priority within their IT system.  Whilethere are some changes such as new business class options, none of those changes to date are the kinds of things that should have delayed such an alliance for a year or more.  No other airline would have taken nearly as long to integrate into that kind of alliance and that points out problems with Southwest’s IT system.  Southwest is accustomed to going it alone on their systems (they do not, for instance, participate in a global reservations system) andhave done so for nearly 20 years.  Now, that departure from industry norms is starting to hurt them apparently in being unable to make these kind of changes and integrations in a quick and agile fashion.

Third, Southwest’s image of leadership among LCC carriers is further hurt by this.  Many founders of LCC carriers have pointed to Southwest as their inspiration for how to run a modern airline.  No doubt that this is true but it also points out that these 2nd and 3rd generation LCC carriers have become more responsive to both their customers and the potential for new business than Southwest has managed.  Losing that image of leadership is a bad thing for Southwest both externally and internally. 

Making substantial partners wait to engage in a strategic alliance that, by all accounts, should be very beneficial as well as ground breaking is neither smart nor a good show of leadership.  Canada really only has 2 airlines capable of entering into an agreement like this and the last thing you want is to annoy the 2nd largest airline of Canada into exploring options with a heavy hitting airline such as Delta and its associated alliance, SkyTeam.   Volaris may prove to be more patient but you have to wonder if they aren’t asking themselves if there is another partner in the US who might be interested in them.  A partner such as jetBlue or Virgin America or even the Republic Airways two-headed beast, Frontier/Midwest. 

This doesn’t mean that a wholesale change in leadership is called for at Southwest but it may well indicate that it is time to find ways to become a leaner, more agile competitor.  The days of simply having to show up and winning customers are over.  Witness the competition that SWA is seeing in new markets such as Denver and Milwaukee.   In this industry, winners attack and grow rather than ponder and play it cautious.

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