Southwest Leaves Mexico City, Shows the Limitations of Its US-Focused Strategy

Below, you’ll find a map of Southwest’s destinations outside the continental US. One of these dots is a different type of destination than the rest. Which one is it?

Southwest Airlines international route network via Southwest.com

If you said Mexico City, you’re right. Mexico City is very different from the rest of these destinations, and it’s different in a way that makes it hard for Southwest to serve profitably. So it should come as no surprise that Southwest quietly announced it was pulling out of Mexico City entirely at the end of March. If anything, this move shows the limitations of Southwest’s strategy as it expands into the international realm.

When Southwest first started flying internationally, its charge was clear. It would fly Americans to foreign leisure destinations. This was about expanding the appeal of the network to people in the US, not those abroad. And for most of these destinations, that’s exactly what has happened. (Havana is a bit more complex, but it’s still, I presume, a leisure/friends/family focus.) Mexico City was different. That isn’t a leisure destination, so it may have seemed like an odd choice.

I can only assume that Southwest fell for the trap that all airlines fall for… Mexico City is a slot-constrained airport, therefore, I MUST FLY THERE. Just having slots creates a perception of them being valuable. So Southwest began flying to Mexico City from both Houston and Orange County.

Orange County was an immediate failure, and it wasn’t all that long before Southwest pulled the plug on that. (A loss of slots at Orange County only hastened its demise.) But in 2017 when Delta and Aeromexico were forced to divest slots in Mexico City, Southwest wanted some so it could grow further.

It had plans to grow Houston flying (and re-time it to better departure times), it wanted to fly to Ft Lauderdale and Los Angeles. The latter two never happened, and Southwest gave those slots back. In recent times, Southwest has been flying four daily flights between Mexico City and Houston/Hobby and nothing else.

Now, Southwest says at the end of March, it will pull out entirely. So what went wrong?

Mexico City was just never a market that would work well with the Southwest model. Southwest has always looked at international as an extension of the US market, and that was the first problem for Mexico City’s survival in the network.

Since Mexico City is not a big leisure destination for people in the US, it’s a market that needs to rely both on business travel and travelers originating in Mexico. Southwest just isn’t built to make that happen.

For business travelers, Southwest couldn’t even book international flying on its SWABIZ portal for a long time, so that shows just how important it was for Southwest to cater to. Southwest also had such limited service to Mexico, that it would be hard to convince people to connect through Houston when there were so many more convenient options available on other airlines.

And we’re not just talking about convenient options being available on other airlines, but rather CHEAP convenient options. Mexico City fares are pretty low. I wrote this on Friday. Here’s what Southwest wanted for travel the next day:

It’s no better elsewhere. Just remember how much trouble airlines have had flying to Mexico City from Los Angeles. Alaska and United pulled out. American cut back one flight. Fares in other markets are low as well. When I looked, I could get from New York to Mexico City the next day for just about $200 one way.

With limited demand from within the US, looking to people originating in Mexico could have helped, but good luck with that. Southwest still can only accept payment in US Dollars. Further, since Southwest requires booking direct, people in Mexico City would have to know to go to southwest.com to find options.

What are the chances that a large number of Mexicans are going to go to southwest.com and pay in dollars when there are so many other more convenient and cheap options available through simpler channels? Pretty slim.

For Southwest, this was the one market where a foreign point of sale really could have made a difference. Considering how much backlog the airline has on completing far more important IT projects, there was little chance that it would devote resources just to try and boost this one route.

Instead, it’s easier for Southwest to just walk away. If anything, this affirms what we already knew about Southwest. Unless it wants to actually change its model, the only international markets that make sense are those leisure spots that appeal to the US traveler. It’s a niche that helps make Southwest’s Rapid Rewards frequent flier program more valuable, but it’s a small niche. And Mexico City just didn’t fit in.

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