Southwest Airlines’ marketing activity ceased following engine failure

Southwest Airlines executives said they do not believe it is yet appropriate to resume television advertising in the aftermath of the April 17 Boeing 737-700 engine failure that resulted in a passenger fatality, conceding this may slow the carrier’s business recovery from a noticeable softening in bookings following the incident.

“We are continuing to see some weakness in our bookings and we’re currently running below our pre-accident run rate,” CFO Tammy Romo told analysts and reporters. Southwest executives estimate the carrier has taken a 1% hit in year-over-year second-quarter RASM growth in the aftermath of the incident, and are unsure how long it will take to recover.

All of Southwest’s marketing activity was stopped immediately after the April 17 incident. Some activity has been slowly ramped up this week, but Southwest’s normally ubiquitous television advertising remains on hold, as is social media marketing. Since Southwest bookings are driven by direct bookings on its website more than most carriers—and people are directed to the website through advertising—the decision to cut off advertising further complicates the recovery from the predicable short-term softening in bookings that usually happens to an airline after a high-profile safety incident.

Nevertheless, Dallas-based Southwest has determined that television and social media marketing campaigns should remain on hold out of respect for the passenger who died in the April 17 incident. “We really do want to get our marketing back on line … [but Southwest’s television and social media advertising] has a lot of fun and personality and we just don’t think that’s appropriate right now,” Tom Nealon, Southwest’s president, said. 

“What is obvious is we are off-plan,” Southwest CEO Gary Kelly added. “I think we all just have to admit we’re off our trend” following the April 17 incident and it is difficult to know how quickly Southwest will rebound from a revenue perspective.

The cessation of advertising is “very significant,” Romo said. “We expect our trends to rebound [over time], but … the 1% loss in second-quarter RASM [likely] won’t be recovered.”

Kelly said that while he expects Southwest to have a positive year from a financial perspective, and particularly expects the carrier to have a strong revenue performance in the second half of the year, the company’s near-term priority is supporting those affected by the April 17 incident, supporting the US National Transportation Safety Board’s (NTSB) investigation and conducting accelerated inspections of the airline’s CFM56 engines. April 17 “was a dark day,” Kelly said. “But the compassion and concern and support since the event have been extraordinary. It just touches your soul.”

Source: atwonline