Southwest's Revenue Upgrade

The airline recently implemented a new revenue management system that gives it much more sophistication.

Dear readers,

When Southwest reports earnings next month, industry watchers might notice a bump in unit revenue. It’s not entirely because demand is strong (though it is) — it is also because the airline recently implemented a new revenue management system from Amadeus that puts Southwest on the same level as its competition. It replaced an antiquated system that relied on core logic from the early 2000s.

Southwest had been teasing this change for a while, but the airline moved slowly. After starting with a small pilot in 2021, Southwest used three systems last year as a test: the old one, the Amadeus platform, and an option from another vendor. Southwest assigned each system to all flights on one third of departure dates to compare revenue production. Earlier this year, Southwest deemed Amadeus the victor. "The revenue production was just superior," Ryan Green, chief commercial officer, said in an interview. He added that the revenue change should be material — but declined to put a number on it.

“When you talk about revenue management system upgrades, just historically, and as the science evolves, you get small single digit improvements in revenue across the system,” Green said. “That's in the ballpark of what we're expecting.”