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Southwest is No Small Potatoes, But How Do We Stack Up?

Employee
Employee

Judge Smails: Ty, what did you shoot today?
Ty Webb: Oh, Judge, I don't keep score.
Judge Smails: Then how do you measure yourself with other golfers?
Ty Webb: By height. 

If you’re a Caddyshack fan like me, you’ll certainly recognize the dialogue above from the 1980s cult classic movie.  My friends and I could quote lines from the movie for hours on end, as I’m sure many of you can.  Chevy Chase’s famous dry, cool sense of humor is on display throughout the entire movie, evidenced by the quote above when the uptight Judge Smails is trying to size Ty’s golf game up.  So what is this doing on an airline’s blog?  

If you follow the industry closely, you’ll notice that there are many different ways to measure an airline’s size, or “market share.”  There are Revenue Passenger Miles (RPMs), Enplanements, Onboards, or O&D (Origin & Destination) passengers.  Many people are surprised when I tell them that Southwest Airlines is the largest U.S. carrier based on domestic passengers (O&D) carried (as of Dec. 31, 2010—the latest available Department of Transportation statistics).  Let’s go through each one to explain the difference, and why Southwest uses the O&D passenger count and views this as the most accurate portrayal. 

  • Revenue Passenger Miles/Kilometers (RPMs/RPKs):  A revenue passenger mile is literally defined as one passenger being flown one mile. Because it is based on distance, flying a longer distance will disproportionately inflate this metric. This is why longhaul international airlines almost always look larger than domestic airlines. For example, one 4,751-mile flight from Dallas to London Heathrow with 300 passengers has the same number of RPMs as 2,610 passengers flying the 546-mile route from Dallas to St. Louis.  It also counts the distance a passenger travels to/from a hub, and since Southwest carries the most domestic nonstop passengers of any airline, it doesn’t accurately show Southwest’s size since our Customers can often skip flying to another airport just to connect.  It’s a useful metric to show distance flown, but it doesn’t really accurately portray how many people the airline carries.
  • Enplanements:  An enplanement is defined as one passenger boarding an airplane, or literally one passenger walking through the airplane door.  On the surface, that’s not a bad metric, but it means that if a passenger has a connecting flight, they’re counted twice, while a nonstop passenger (or a direct/no plane change passenger) is only counted once. This tends to favor airlines with significant connecting traffic over their hubs since it makes them look bigger. Meanwhile, an airline with a lot of convenient nonstop flights, like Southwest, looks smaller.
  • Onboards:  A very simple metric, an onboard is defined as one passenger in a seat onboard the airplane when it takes off.  A passenger is counted for each flight, regardless if they changed planes or stayed on the same plane for a stop.  If somebody flies Omaha-Denver-San Francisco on a direct flight on Southwest or via a connection on another airline, they’d be counted twice in both cases.  The challenge here for measuring is that it looks higher when people have to stop on their way to their final destination.  Since Southwest flies more passengers nonstop to their destination than other airlines, it looks like Southwest carries fewer passengers if you just look at onboards.
  • O&D Passengers:  This is the metric that we use the most because it’s one of the cleanest ways to measure market share using a level playing field.  An O&D passenger is one passenger flying between their origin and their destination, regardless of the number of stops or connections along the way.  It counts every passenger flying from Phoenix to Newark the same whether they fly nonstop or if they connect somewhere in between. We count each Customer once on each O&D, so if they fly roundtrip we count them twice—once on the outbound flights, and once on the return. Because our Customers book tickets by looking at an entire journey, not a separate ticket for each individual flight, we think this is the best metric to truly measure the number of Customers each airline carries. We also refer to O&D passengers as “originating passengers boarded” in some contexts, but it is the exact same statistic.

So, when you read a report that references the size of an airline relative to the rest of the industry, it’s important for you to also look at what metric is being used in the report.  Obviously, all of the numbers are important for different reasons.  And now you know how Southwest measures itself against other golfers, er, airlines.