Southwest Airlines in ‘Reputation Rebuilding Mode,’ Expert Says Transcript

This holiday season has come and gone, we’re now left in the aftermath of one of the worst travel weeks ever. Thousands of flights delayed or canceled. Customers are still in search of answers and some compensation. From our travel, we welcome in the Managing Editor of News at The Points Guy, Clint Henderson. Clint, good to see you. Good to see you on the ground, not in the airport, given all the craziness that has been going on. Let’s start with Southwest, because they are the causer of some of this latest craziness. Do you see them being forced to now offer aggressive discounts this month or this quarter, just because of what happened during the holiday season to them?

It’s a really interesting question. They’re in reputation rebuilding mode right now. So, far I haven’t seen a lot of deal alerts from them, but I expect that will ramp up as we get into the new year, just because they’ve got a lot of reputational aura to restore. I think one of the ways they’re going to lure passengers back is with cheap flights, so that will be really interesting to see. The more important thing I think for Southwest right now, is to really make sure they’re compensating passengers whose travel was interrupted, who got Christmas ruined in some cases. So, Southwest is really going to be trying to prove itself again. Already, we are seeing some anecdotal evidence that Southwest has been issuing refunds, that they have been processing some people’s claims, so we’ll have to hold them to account over the coming weeks and months to make sure that they do right by their passengers

After an event like this, what type of hit do Net Promoter score, or even just the overall customer sentiment do we typically see on any travel operator, as Southwest is going to have to navigate through?

American consumers have very short memories, especially when it comes to airlines for some reason. So, they want the cheapest ticket possible. I don’t expect this to have huge long-term ramifications for Southwest. We saw meltdowns from airlines like Delta and American Airlines over last Christmas, and they didn’t really take a hit. You do hear some consumers say, “I’m never going to fly Delta again,” or whoever, but they tend to forget that when they’re pricing tickets the next time. So, that remains to be seen. I think Southwest meltdown was pretty spectacular, so they did do some damage to the brand. But I think they’ll be able to turn things around really quickly. That’s another reason I think you might start to see some discounts for them to try to get consumers back.

Well, what are we seeing industry-wide in terms of discounts, or in terms of pricing? It seems like pricing is holding up here, but are we seeing any pushback or changes in decision-making from consumers?

It’s really interesting. There’s a couple things going on. First of all, I would say 2022 was the year of revenge travel for domestic travelers. So, US destinations like Hawaii, Alaska, National Park destinations in places like Bozeman. I think 2023 will be all about international travel. So, revenge travel to more wider, more exotic locations. I think you’re going to start to see some prices go up in 2023 for international destinations. I’m starting to see some anecdotal evidence that prices have dropped substantially for domestic destinations. So, we’re seeing deal alerts to places like Wyoming, Alaska, Hawaii, places that were not on sale in 2022. So, that’s going to be an interesting trend to see what happens there. I think domestic travel, fully recovered, we’re back to, and then some, 2019 levels in many cases. I think business travel has not fully recovered. We may be at a new normal of lower business travel, and international travel still has not recovered. So, we have seen extraordinary deals when it comes to international travel. Those deals may become fewer and farther between as more and more people want to travel internationally.

We’ve continued to monitor where the return of corporate travel in comparison to a lot of the leisure and revenge travel has been, and how much historically that has mattered for the bottom line, for the profit margins for a lot of these businesses too. But then, even if you go into the car rental side of the equation here too, it really does come back to where the car rental businesses will also see some type of resurgence, along with the broader trend of people going back into travel and this golden age of travel that some executives, who we’ve interviewed, have talked about.

For a couple years basically, we hear at The Points Guy, have been reporting on the car rental apocalypse. You couldn’t get a rental car. If you could you were paying through the nose for those rental cars. That has stabilized. So, the fleets, for the most, part have been rebuilt. Remember, during the pandemic, a lot of the car rental companies sold off their fleets for cash, and they’ve since rebuilt those fleets, so prices have stabilized and have come down. Even in places like Maui that were almost impossible to get a rental car, you can now get a rental car at prices that are approaching 2019 levels. So, definitely some stabilization in the rental car market. We tell people at The Points Guy, get one of those premium credit cards that will get you automatic status in some of these rental car programs and can help ease the pain, because we’re still seeing long lines and short staffing, et cetera, at car rental companies too.

Clint, on the topic of prices, a lot of recession fears floating around the economy to kick off this year. Is that impacting, and we just mentioned Southwest prices, but is that starting to cause price cuts or declines at other airlines?

So, it’s interesting. We have not seen a lot of dramatic price cutting. Remember, that January, February, March is traditionally one of the slowest periods in the airline industry. Business travelers are not really traveling as much. Leisure travel has dropped off because it’s wintertime, so prices are down substantially in January, February, March. But right now, prices for spring break, summertime travel, are inching up again. So, you might want to think about booking those trips now. If you are a deal hunter, now is a great time to travel. Remember, the crowds are not there. If you want to go to a place like Europe, you can find really good deals, places like Portugal, and even places that used to be really expensive like Oslo. So, there’s a lot of discount carriers going-

I’ve got to say, I don’t know when you’re looking or what you’re looking for. I’m looking to go away. Maybe it’s because of when I’m looking. I’m looking to go away for spring break, and I’m not finding any bargains anywhere.

That’s what I’m saying. I’m saying your bargains are going to be January, February and March, but once we start getting into spring break and summer travel, that’s when things get a little trickier, and a lot more expensive. In fact, prices are higher than they were in 2019 pre pandemic. So-

Was it Miami beaches? Miami beaches?

No. But I’m subject to the tyranny of the school system. I’m not going to pull my kids out of school for a random week in February sadly.

That’s the beauty of points and miles. So, now is when you need to build up your points and miles so you can use those when cash prices are really high. That’s what we preach at The Points Guy. Earn those points and burn them when prices are high. Like holiday travel, open a couple credit cards now, and then you can book your holiday travel on points when cash prices are obscene.

Okay. All right. I’m getting the preaching a little bit. Thanks so much, Clint. I appreciate it. Points Guy Managing Editor of News, Clint Henderson. Appreciate it.