America's top airlines will be flying to Canada by the end of 2022, with the exception of Southwest Airlines. The low-cost carrier, which is the largest airline in the U.S., will not be serving places north of the border despite the huge market of Canadian travelers who frequent the U.S.
Tom Nealon, the president of Southwest Airlines, recently explained the situation in an earnings call with investors. When JP Morgan's Jamie Baker asked him why the airlines will not be flying to Canada, Nealon responded that there is a technological barrier that is preventing them from doing so, versus a lack of customer demand.
"To make Canada work for us, that's both the business and leisure market, we've got to be able to sell," Tom Nealon, Southwest's president, said. "Again, it's back to the whole foreign currency for point of sale that we've been talking about for a long time."
Southwest Airlines is not equipped with the proper system for handling transactions in Canadian dollars. It's a fixable issue, but the company has not prioritized it as its focus is on other major projects, such as the preparation of its Boeing 737 planes for routes to Hawaii.
"Even if we tackle that technology challenge, I don't know that we would have airplanes to be able to add those new markets," said Gary Kelly, the CEO of Southwest Airlines.
The pandemic doesn't help the situation either—with the U.S.-Canada border still closed to leisurely travel, setting up routes to Canada could be a risky move. While the Canadian market could be a profitable one for the company, there's no guarantee that people will even want to travel while the coronavirus is still at large.
Currently, Southwest Airlines' northernmost routes are to cities like Buffalo, New York; Detroit, Michigan; and Bellingham, Washington; which are all several miles away from the U.S.-Canada border. Considering the fact that such locations are common connection points to major Canadian cities, not providing service to Canada could be a huge missed opportunity for Southwest Airlines.
For now, Kelly says the company will be focusing on the U.S. market first before expanding internationally. Since March 2020, 17 U.S. cities were opened and they have become the airline's top priority as of late.
"It's whenever we're ready, we'll commit to that, we'll get the work done, we'll add it to our route network. Right now, we got all we can eat with the current capabilities we have."
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