Southwest execs reveal the reason the airline doesn't fly to Canada yet is because its system isn't set up to accept Canadian dollars
- Southwest Airlines is the largest US airline that doesn't serve Canada.
- The lack of service isn't for a lack of potential customers but is technological is nature.
- Southwest's system isn't set up to handle foreign currency sales, required for Canada flights.
By the end of 2022, all except for one of America's top six airlines will be flying to Canada. The notable hold-out is Southwest Airlines.
The low-cost carrier is the largest American airline not to serve the Great White North despite the huge market of leisure travelers across the border that are frequent visitors to the US, especially Southwest's namesake region of the country.
On a recent earnings call, Southwest's leadership explained why the airline doesn't serve Canada when pressed by JP Morgan analyst Jamie Baker. The issue isn't for lack of potential customers; rather, it's technological in nature.
"So, 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."
Canadians purchasing tickets would have to do so in Canadian dollars, which Southwest's system isn't set up to handle. The problem isn't insurmountable but one that Southwest hasn't prioritized ahead of other projects like preparing its Boeing 737 Max fleet for Hawaii flights, Nealon said.
Southwest has kept its eye on Canada and identified "5, 6, 7 really nice markets," CEO Gary Kelly said, but the focus, especially with the continued closure of the US-Canada border, has been its recent domestic expansion. "Even if we tackle that technology challenge, I don't know that we would have airplanes to be able to add those new markets," Kelly said in a recent earnings call.
The closest Southwest comes to serving Canada is through US border cities like Buffalo, New York; Detroit, Michigan; and its soon-to-be newest destination, Bellingham, Washington. All three cities are miles from the US-Canada border and attract a multi-nationality clientele from both sides of the international boundary.
And during the pandemic, serving US borders cities is effectively serving Canada. Canadian citizens returning home from the US have been flying to destinations like Buffalo and then crossing the land border to avoid a quarantine imposed on those arriving in Canada by air.
JetBlue Airways was able to overcome its Canada problem and will launch flights to American's northern neighbor for the first time ever in 2022. Flights to Vancouver will be offered from New York and Boston as part of a new partnership with American Airlines dubbed the "Northeast Alliance."
Conquering Canada would also better enable Southwest to compete with its West Coast rival as Alaska Airlines flies to Canadian cities like Vancouver, Victoria, and Calgary. Southwest not only lacks international flight to the north but also a lack of airline partners to provide the service on its behalf, forcing customers to look elsewhere.
And with newly opened US markets on which to focus, Southwest's Canadian debut will likely be delayed even further. The pandemic has drastically shifted Southwest's route network with 17 cities opened since March 2020 alone, and CEO Gary Kelly made clear that those are the new priority before an international expansion could be considered.
"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," Kelly said." Right now, we got all we can eat with the current capabilities we have."