Southwest and their New Reservation System

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ANALYSIS: Southwest's new reservations system takes off

• 09 May, 2017
• SOURCE: Flightglobal Pro
• BY: Ghim-Lay Yeo
• Washington DC

When it comes to airlines and new reservations systems, no news is good news, and Southwest Airlines is hoping that will be the case today.

After a few years of juggling up to three different reservations systems, the Dallas-based airline will finally have its entire operations on a single system – a milestone that will set the stage for the low-cost giant to take on new revenue streams.

Southwest began selling domestic flights on the new system from early December, ticketing passengers who had booked flights for today and beyond. Chief executive Gary Kelly made the first domestic reservation on the platform, provided by Amadeus.

Since then, the airline has gradually filled up the new system with bookings while simultaneously draining down its long-standing domestic reservations system, powered by Sabre.

Today, Southwest gate agents will check in and board all domestic passengers on the Amadeus Altea system at airports across the country, finally congregating the carrier's more than 100-city network on to the same platform.

While the average passenger might not be aware of an airline's reservations system, history has shown how a system hiccup can snag hundreds of flights in one go. Southwest itself has not been impervious to such meltdowns in the recent past, but the airline believes it is prepared for the big day.

"We have looked at every bag tag printer, every kiosk, every computer. We have updated them all and tested them all to make sure they were compliant," says Southwest chief revenue officer Andrew Watterson, speaking with FlightGlobal in Dallas last week.

"If we do our job well, you will notice nothing."

Sales of domestic airfares on the Amadeus Altea platform have been seamless, he adds. The airline was already using a different version of Altea to sell its international flights, which it began operating in July 2014 after it acquired AirTran Airways.

He says Southwest's experience with Altea on its international flights had served as a sort of beta, as it prepares for the final steps in moving its domestic flights on to the system. "It gives us confidence that it will go well," says Watterson.

MODERN SOUTHWEST

As the airline that carried the most passengers of all US carriers in 2016, Southwest's old reservations system was preventing it from catching up technology-wise with its peers.

For example, the airline faced restrictions in handling standby passengers. A passenger booked from Dallas to Houston on a 4pm flight might switch to the 2pm flight, but the seat would remain booked on the 4pm.

"So no one knows who's on the 4pm," says Watterson. That would have been fine in the 1970s when flights were often not full, but with today's packed aircraft, that limitation just wasn't going to cut it.

"With the modern reservations system, if a passenger moves up, the seat is freed up, We will know exactly who's there," says Watterson.

Behind the scenes at Southwest, the new reservations system will allow it to manage revenue better, particularly as the airline has grown and started taking on more connecting traffic. Specifically, it will be able to manage its revenue by origin and destination.

"With the new reservations system, you will be able to receive information from the revenue management system on how to evaluate a booking that is just one segment, versus a booking that is a multiple segment," says Watterson.

The carrier is investing about $500 million in the new reservations system, which it says it will recoup by 2020. In 2018, the new system is expected to contribute an additional $200 million in operating revenue.

Ancillary revenue will receive a boost from the new system. The airline will be able to introduce new ancillary products and services at a much faster pace, says Watterson.

"This is a capability we can take advantage of. It will increase our speed to market," he says. "It allows us to be more agile with developing products."

The carrier will also be better able to manage the sales of existing ancillary products depending on availability and timing of sale, he notes. "If you look at what we sell now, it's mostly one size fits all. The pricing doesn't vary."

Watterson and Southwest spokespeople were quick to emphasise that the airline has no plans to charge for bags or assign seats, or what they call "DNA changes".

However, the reservations system will finally place the airline in a position to interline and codeshare with other airlines – a practice that is part of most airlines' operations today.

Watterson says Southwest needs to do more on its back-end systems before the airline can enter into such agreements with other airlines, and this is unlikely to happen this year.

But when the airline is ready to wade into interlining and codesharing, it plans to start in a modest fashion. "We will pick one or two carriers to pilot this," he says. "We will work it out to get the kinks out… We want to do it properly to make it a good experience for customers and employees. There's no urgency to go too fast."

Further down the road, the new reservations system will also enable the airline to sell in foreign currencies, although Watterson says the airline's current network is heavily US point-of-sale.

"Our current network doesn't need it right now but the future network will," he says. "We will fly to cities where point-of-sale is more evenly divided."

JUGGLING ACT

Southwest's move to a new domestic reservations system comes as the airline continues work on another important task – retiring its remaining Boeing 737 Classics by the end of the third quarter.

The carrier has also deployed updates to its Amadeus international reservations system, so the airline-wide reservations system will be synced up today.

Despite spinning so many plates, Watterson is confident that the airline will pull it off, after its experience integrating subsidiary AirTran and managing the reservations systems complexity that came with that.

AirTran had used a completely different reservations system and had operated Boeing 717s alongside 737s. Southwest phased out AirTran at the end of 2014 and removed the 717s from the merged airline's fleet.

Years after that integration, Southwest is keeping its fingers crossed that its reservations move today will go as smoothly as that major milestone, after months of preparation and double-checking.

As Watterson quips: "This is all part of our effort to de-risk and to make it so uneventful that you are like, 'What do I have to report on?'"