mweiss said:
N7 was hubbed at one of the lowest-fare airports in the country. That was an accident waiting to happen.
While I agree that it makes little sense to have the headquarters of the company be 2,500 miles away from the primary base of operations, and in one of the most expensive cities in the nation to boot, I don't think that SFO is a horrible place to try to build a low-fare hub. It's not like UA has a large amount of cash sitting around waiting for a battle with yet another low-fare airline.
Well, as far as I see it, SFO has three positives that are outweighed by a slew of negatives. The positives are high average fares, a large and prosperous local population, and a bankrupt incumbent hub carrier. The negatives, though, are the existence of an incumbent hub carrier, high airport costs, high local cost of living for employees, poor airfield configuration at SFO, and the abundance of low-fare alternatives at OAK and SJC. Not to mention that recent attempts to offer low-fare transcon service from SFO haven't met with great success; ATA gave up on SFO-EWR fairly quickly while AWA hasn't done as well on their transcons to and from SFO as they would like.
SFO can handle the increased traffic that Virgin USA (for lack of the real name) would add -- but only when the weather is nice. When the weather is poor (or even if there's just a marine layer of stratus clouds), the airport can only handle about 30 arrivals per hour. Having frequent weather-related delays is not conducive to operating a successful low-fare carrier, especially when there's an alternate across the bay with far fewer delays.
SFO itself does have high fares, but the region already has significant low-fare competition at OAK and SJC. WN offers a broad selection of short-haul service from both airports, while OAK has jetBlue offering low-cost/low-fare service to most of the largest East Coast cities. And there are low-cost alternatives from either SFO or OAK on other airlines to ATL, DEN, SLC, MCI, etc. The questions that will determine Virgin's sucess here are: (a) how much additional traffic from the region can they stimulate with lower fares, over and above people who use OAK and SJC for lower fares, (B) how many people will choose to use SFO over OAK and SJC when prices are more equal, © how will the airlines with service from OAK and SJC respond to Virgin's entry into the market, and (d) how will United respond on competitive routes. You can see that traffic counts to most short-haul destinations from OAK (largely dominated by WN) are dramatically higher than from SFO due to average fares that run about 50% of SFO's average fares. And I think it's really questionable how much additional traffic could be generated by a hypothetical "Virgin Effect" at SFO.
Southern California (LA area + San Diego) in 3Q03 generated a bit over 40% more domestic O&D traffic than Northern California (Bay Area + Sacramento) but has over twice the population. By comparison, the NYC area still has less domestic O&D traffic per capita than either California region (though this is skewed a bit by the proximity of BOS, WAS, and PHL).