Southwest Airline’s first passenger fatality is still costing the company money and expected to drag down sales well into the summer travel season.
On Monday, Southwest said it expects a 3 percent decrease in revenue per available seat mile in the second quarter. That slump is at the lower end of predictions the company made in April, when president Thomas Nealon said lost revenue per available seat mile - a key metric in the industry – would land somewhere between 1 and 3 percent down, in part because of the April accident.
The airline said the decrease is mainly driven by lower bookings after it scaled back marketing because of the fatal accident on April 17, in which one passenger died and seven others were injured. An engine on Southwest Flight 1380 exploded and forced the plane into an emergency landing, resulting in the first passenger fatality on a U.S. carrier since 2009 - and Southwest’s first passenger fatality in its 51-year history.
Still analysts and crisis management experts seemed assured that the airline would bounce back. In a report published Monday, analysts at Cowen wrote that the burden on bookings would be short-lived.
“We view the near-term impact from Flight 1380 as one time and expect bookings to normalize shortly,” the analysts wrote. They added that in recent conversations with Southwest’s management and investors, it was clear that the airline’s lack of marketing after the April accident would mean a negative hit on bookings.
Phillip Phan, a professor of strategy and entrepreneurship at the Johns Hopkins Carey Business School, said the 3 percent decline could be especially damaging by going “straight down through [Southwest’s] operating margins.” Airlines shoulder the burden of heavy fixed costs - from salaries to maintenance - and can’t easily adjust after bookings decline (unlike in other industries where businesses can shorten operating hours, for example).
“There’s very little give,” Phan said.
One option is for Southwest to reintroduce heavy discounts to keep up with competitors offering low-cost fares, Phan said. But with the opportunity of summer travel, he noted, comes the risk of hurricane season and its inevitable hassles and delays.
Shortly after the incident, Southwest scaled back its usually upbeat advertisements and commercials. Only in mid-May did the company return its advertising to normal levels.
At the same time, Southwest announced a four-day sale offering some one-way fares for as low as $49. The deals promoted cheap, domestic flights for summer travel, with other discounted prices of $79, $99 and $149.
That deal followed other incidents on Southwest flights. On May 12, a plane experienced a “pressurization event” and made an emergency landing in Dallas. Just 10 days earlier, another flight en route to Newark had to land in Cleveland after a window cracked on board.
Chris Mainz, a spokesperson for Southwest, said the summer sale did boost sales - but not enough to overcome scaled-back marketing for three to four weeks. Mainz said the company doesn’t report on specific results of fare sales.
“It did generate bookings and bring traffic back to the website as intended, but not enough to offset the loss of bookings from our marketing efforts being down,” Mainz said.
Timothy Coombs, a crisis communication expert at Texas A&M University, said it’s difficult to predict how long flyers will continue to worry about Southwest’s April accident.
Moving into summer, Coombs said that Southwest will have to walk a narrow line between needlessly reminding people of its darkest day and reassuring them that it’s safe to fly.
“You worry, ‘well, if I talk about that now, do I remind them, because I want them to forget,’ “ Coombs said. “You want people to forget.”