Perhaps we should keep in mind that certain markets that WN doesn't fly is because WN's demands aren't met. At my location we are aware of this because circa 05, or around that area, WN wanted a gate that was occupied by NWA at the time. Why? Because the concessions, the amenities and easy access for passengers was at that location. WN would not negotiate any other gate. Currently the face of the airport is changing with construction that should be completed by 2012. Currently there is one sticking point that makes it difficult to bring in any other low-fare airline. And we are working on rectifying that issue so that not only WN, but other low-cost competition can arrive and stay
Perhaps some airports are not willing to inconvenience every other airline in order to accommodate a newcomer, even if that newcomer is WN which does have a pretty good track record of stimulating traffic initially.
But airports also recognize 30 plus years into deregulation that what often happens is that WN often just moves the traffic from other carriers to WN... the US airline industry is quite mature... there is not a whole lot of new traffic to stimulate. You can add a few new routes but very few markets do not have access to some low fare service either at that airport or at an adjacent airport. Thus, WN is not creating a whole lot of new traffic as much as they are rearranging the traffic that exists in the US.
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That fact can be born out at the national level. If you look at the winners and losers in the domestic marketplace over the past ten years, and then go back 20 years, and then go back 30 years, you see that WN has shifted the domestic market much more to itself. Few network carriers are stronger domestically today than they were in 2001 (before 9/11). DL and UA have grown their domestic market share largely through mergers - with the difference that DL is unique among the big 3 - AA, DL, and UA - in being able to retain its share in most of the medium and small markets where WN has grown the most.
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Airports also have long term contracts with other airlines and they can't screw one tenant in order to please another one.
You know WT, the original OP and topic of this thread was how WN had raised fares 39% and how the myth of WN low fares was broken. Maybe with this awful economy that is the limit for now.
I know that you don't want to hear this but Gary Kelly has stated a few times that ATL will be WN's largest city. Right now LAS is the largest city and there was an article in the Las Vegas Review-Journal where he was quoted that LAS will grow. So if LAS will grow and ATL will be the largest city, I see growth. From what I know of the man and the company, he doesn't reveal much of his cards and when he does, he can be more dismal. So while you may not want to believe it and have your spreadsheets surround your computer, I wouldn't put too much stock in the theory that WN ATL will not grow.
Last time I passed through ATL, there were all kinds of posters proclaiming ATL as DL's home town and how all of a sudden that the Red Coats were coming back. Why this attention to the Customer? Is it the dismal view of the Customer has of DL right now? Is is that DL knows of the Customer Service that WN and that the ATL Customer base will want to try out the new guys in town?
Yes, WN's fares have gone up by 39% - and that was driven almost entirely by the end of WN's huge fuel hedge bonanza that allowed them to aggressively grow into key competitive markets like PHL and DEN... but WN's success then was driven by its low priced fuel which was unique in those markets. And as the low price leader, it was up to WN to decide when they wanted to raise fares.
In PHL, they built a solid position but US still has a 4 to 1 margin over WN domestically.
In STL, AA decided they strategically didn't need STL and WN was quite free to expand.. and AA wasn't able to retain control of the local market.
You can look at many other small and medium sized cities and see WN's growth over the past 10 years, but much of it came as a result of the fuel hedges.
Their profitability came because they could price at levels low enough to expand in those markets at other carriers' expenses - but still at levels at which WN could profit.
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WN has to pay market prices for fuel now - that is their hedges have not been anymore successful at reducing their fuel prices than anyone else's. WN is no more able to aggressively grow than any other airline.
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The fact that WN has said that their revenue is now growing at levels far below the rest of the industry shows their ability to grow through aggressive pricing is over... and that is precisely why they are cutting capacity and halting their growth until capacity catches up with demand at the fare levels necessary to support current fuel prices.
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As for ATL, DL has recognized their customer service took a hit post NW merger; the red coats and customer service focus aren't just for ATL... but DL also realizes that ATL is their crown jewel and they will protect it.
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Regardless of customer service levels, even in ATL, DL has continued to maintain a 15-20% average fare premium over FL not only in the ATL domestic market as a whole but also in nearly every market in which they compete. FL does have the advantage in a few small markets - but these are the markets which are most in jeopardy w/ WN because they are so small that DL has not attempted to outgun them on capacity - remember the rule about the average fare differences if capacity by one carrier is 4 to 1 times larger than any other carrier?
Yes, WN may well remain a lower cost, lower fare alternative in ATL, but that is the position that FL has had for years - and one which they recognize is not sustainable. You can't continue to be second fiddle to another carrier and expect to surve long-term. The whole purpose of the WN acquisition of FL was to build on what FL had by benefit of WN's network... they now have to deliver on that.
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Kelly and others made alot of statements about what ATL would be - but that was all before the run up in fuel prices, WN's very substandard revenue performance, and their decision to halt capacity growth... all of which were the basis of growing ATL. Now add in FL employees who are realizing they didn't get such a great deal, and WN's merger with FL might come to earth and reality just as much as other carriers merger plans before.
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I still contend that WN's acquisition of FL will be considered a success if within 2 years WN's operation in ATL is the SAME SIZE as it is now - but WN will have been able to increase average fare levels to WN's levels - which are also 15-20% lower than WN's.
WN's first priority is getting revenue levels on original FL markets up to WN levels... growth will only come when WN's ATL operation generates revenue levels comparable to other large WN business markets such as MDW.
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IN the process of working through their own performance and merger related issues, WN may lose the "punch" they originally thought they would have as they entered the ATL market.
In the meantime, DL continues to pull out all the stops to protect its hometown market and add capacity that will make it even harder for WN to grow even when it decides it can.
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The "just a matter of time" for WN to make an impact in ATL is being pushed further and further back with DL entrenching stronger and stronger, making it less likely that WN will achieve what it originally intended to accomplish.
(signed, AA f/a)
