Bob Jordan on Boston Logan

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[asset|aid=240|format=image|formatter=asset|title=RBRiPodLogoSmall.gif|width=180|height=179|resizable=true|align=right]On this episode of Red Belly Radio, I interview Bob Jordan our Executive Vice President Strategy & Planning using questions that people submitted to us via Twitter. A portion this podcast is also on a video titled New Southwest Service To Boston Logan where you can see me with headphone hair (I’d been wearing headphones earlier) asking Bob the questions that people tweeted in the hour preceding the interview.

The video, however, does not include the story about how Bob has worked on four of the five floors in our headquarters building (has to be some kind of record) which led me to Whitney Eichinger who has a funny story about how she and several others could not find him one day—it seems he had moved at least once since she had found him last.

That day, they were looking all over for Bob to interview him about shaving his signature mustache after only 30 years of having it. Whitney references that video, which has not been released until now! And now, this exclusive link for the readers of my blog, the Mustache Video

[Anonymous100]

Bob, As I read about the WestJet relationship that Southwest had considered, I was curious as to whether or not Southwest has considered an industry changing bold move. Southwest acquires AA, for global expansion, and maintains the AA brand. Crazy yes, but hear me out. I've always felt that the airlines have followed a very similar business path as the telecom carriers. Going through similar phases from being heavily regulated, to deregulated, fragmentation, hyper competition, high capital costs, high losses, which inevitably leads to reconsolidation. In addition to the business cycles, arguably we even use the same terminology; Telecom had smaller point to point networks (Baby Bells), and the LD hub and spoke International carriers (AT&T, Worldcom). The local point to point carriers of course were making money, while the hub/spoke networks were hemorraging money. Sounds awfully familar. So in the case of the telcos, we find Southwesstern Bell making the first move, and acquires AT&T, and sheds their managment, while retaining their brand, and the LD International reach. Seeing the inevitable consolidation cycle, Verizon feels compelled to grab the considerably less attractive second prize, Worldcom. After that, there was nothing left for Qwest, and you can see where that left them, a tertiary player in an industry now dominated by AT&T and Verizon. So in the airline carrier space, it seems that Southwest is in a very similar place to Southwestern Bell. Dominating the point to point local networking business, and making fairly consistent profits, in an industry that is hemoraging money. However, at some point, similar to Southwestern Bell, Wall Street has to ask the tough question....how do you grow your enterprise when you dominate your traditional sector. Growing into the LD/International space was the obvious answer for Southwestern Bell, as I believe it is for Southwest. But just like Southwestern Bell, you've got to ask yourself, does it make sense to build out a new LD/International network, when the market is already saturated with excess capacity? Clearly not. Better to buy and integrate the valuable LD/International assets, and shed the rest. So Southwest acquires AA, sheds their Eagle RJs and the obsolete MD80s, in favor of continuing with Southwest's proven domestic model. Under the new AA Global brand (similar to the New AT&T), Southwest tweaks their schedule to allow connections at their newly acquired "International Gateways" (i.e. LAX, JFK, MIA, DFW, ORD), where their customers can now enjoy seamless connections to AA Globals International cities on both their own fleet of 777/767s, and the worldwide reach of the oneworld network, and the amenities business travellers expect for long haul travel (Admirals Club network, premium service handling, first/business class seating, etc.). Even closing Love Field and consolidation of operations at DFW is considered. Huge efficiencies are to be gained through the shedding of the complexity of AA's domestic fleet, and rationalization of the transcon and international fleet to the 777s and 767s, with one being replaced by the upcoming Dreamliners. Consolidated M&E, Airport operations, and certainly a significant portion of the AA backoffice/management team would become redundant. More importantly, the bold move would signal once and for that the long overdue consolidation cycle is upon us. Other carriers would have to react (just like Verizon did), but after Southwest's first mover advantage, there wouldn't be much opportunity for consolidation except for the old legacy carriers getting married up. One dinosaur marries another dinosaur, doesn't generate a game changing model, but rather just adds more complexity into the mix, with the inevitable higher costs resulting. Yes, some would point to the culture challenges, and historical animosity between AA and Southwest. Perhaps, but again, this is not a merger...but an acquisition...with Southwest running the company and shedding a lot of the detractors (similar to Southwest). The key to the success of the acquisition is not being at all ambiguous about the intent, and who is running the new AA. Some might also point to DOJ concerns. While acknowledging that this would likely cause some challenges, depending upon the timing of the acquisition....say, right after United pairs up with someone, I suspect a case could be made that with the new dominance of Delta and United, is it terribly uncompetitive for Southwest to acquire to continue to compete with these new global powerhouses? So, perhaps the idea is too bold, and some would say it goes against the historical separation of LCCs vs. Network Carriers...but everyone said the same thing in the telco busines until Southwestern Bell made the first move. Curious in Dallas.