Southwest Affect still working

Discussion in 'Southwest Airlines/Airtran Airways' started by swamt, May 20, 2014.

  1. swamt

    swamt Veteran

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  2. swamt

    swamt Veteran

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    BTW why was the Branson thread locked out?  Any info?
     
  3. WorldTraveler

    WorldTraveler Corn Field

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    The thread was specifically about Virgin and its access to DAL. Given that question has been decided, the original topic is no longer necessary.

    Go ahead and start a new topic about DAL that will remain relevant... something along the lines of "why WN will win at DAL" or "WN's preparations for spreading LUV nationwide grow" - you get the idea.

    You have every right to talk about WN's growth at DAL - and dI o it as long as you want before and after Oct 13.

    as for the WN effect, you and the article haven't told us what happened in OMA when passengers quit driving from DSM to OMA. The WN effect exists on a local market basis because WN serves a lot fewer cities than the legacy carriers do - but the overall effect of low fares is less and other carriers are stimulating more traffic than WN is doing.

    as much as you want to believe otherwise, WN's ability to price in the market is directly related to its costs. Most recently, WN's cost advantage is smaller relative to the legacy carriers is smaller than it has ever been - down to about a 5% advantage. WN is simply unable to gain a pricing advantage with a cost advantage that small, esp. since a lot of the efficiencies that have driven WN's low costs are related to efficiencies which WN has gotten out of its operation based on quick turns, using less congested airports etc. As WN is forced to fly to the same congested airports and sit in line at LGA just like every other airline, the cost advantage shrinks. Add in that WN's quick turns have the greatest impact on short flights and yet WN is flying longer and longer flights, and it is even harder for WN to gain efficiencies over other airlines when every other airline flies the same 737s that WN does - including the 739ER which seats as many passengers as WN carries on its 738s. and someone pointed out that one of the most significant changes that took place with the Nov 1 schedule is that the minimum ground time for any WN flight is now 30 minutes and WN is looking more and more like a legacy airline and a whole lot less than the maverick that transformed air travel 4 decades ago.

    I would hope you clicked thru the schedule spreadsheet that WN releases and you noticed that there are many cities just like DSM where WN has far less than the 10 flights/day that was the minimum for a WN station. In fact, there are a lot of cities like WN that have less than 5 flights/day.

    Notice also that WN continues to cut the most in other airline hubs - look at the cuts in ATL, PHL, and SLC. WN knows how big it can be in a particular market and they are not going to add more seats than that because they can't steal a disproportionate amount of traffic than any other airline would get solely based on providing service in that market.

    The whole reason for growing into the Caribbean and Latin America is because WN is looking to use what is left of the WN effect in markets such as to Latin America where fares have traditionally been high and to the Caribbean where there is huge demand and it is relatively easy for WN to get a part of that demand. A look at how much B6 has grown in the Caribbean over the past few years makes it impossible for any airline to ignore the potential there.

    And then WN is growing in cities like DFW/DAL where there is no drive alternative as well as to DCA and LGA where the market is so much and where WN has been so far below its national share that it will have no problem growing.

    Yet WN's traffic statistics clearly show that they are not stimulating traffic on a national basis the way they used to - and they cannot based on costs that are only a few percent lower than legacy carriers whiel at the same time WN is trying to temper labor's expectations of higher and higher salaries.

    You can find a few markets here and there where WN is able to shift traffic from one city to another but the WN effect is far less than what it used to be on a national basis and as WN's network grows, it will be less and less even in local markets.
     
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  4. eolesen

    eolesen Veteran

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    Bringing mainline jets into what was an RJ market certainly skews the average fare equation a bit, since WN has 3x as many seats to sell per departure.

    I have to wonder if WN's strategy around places like DSM is less focused on the Big 3 and more on keeping Allegiant in check...
     
  5. WorldTraveler

    WorldTraveler Corn Field

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    in a lot of cities like DSM, WN carries a very small percentage of local traffic and lots of connections on one or more routes because the markets are just too small to use large jets with any kind of frequency.

    Sure, legacy airlines have been able to justify the use of small RJs because fares in a number of these smaller cities are high but the WN model does not lend itself to high frequency service so the legacy carriers will have an advantage because of their ability to use a combination of RJs (large or small) alongside possible mainline.

    the reason why DL is so excited about the 717 is because it is a CASM-competitive aircraft for hub operations at a size that is twice the size of a small RJ or 50% more than a large RJ - not a whole lot of seats to fill. When used in a hub like ATL where it is easy to fill any aircraft with hundreds of connections or in heavily PTP markets like NYC or on the west coast where the 717 will undoubtedly end up, the 717 is well suited as a bridge aircraft between larger mainline aircraft and RJs - while still maintaining high frequency and multi-hub service which business travelers require.

    AA will do much of the same thing with the 319 but the 319 has a considerably higher CASM and AA still has far more hubs than DL does which makes rationalizing their network with larger aircraft hard to do - but I think AA is heading in that direction anyway.

    The bottom line is that WN without the use of a small mainline aircraft and with no RJs will have a harder time serving smaller markets which means they will not get the revenue premiums that AA and DL can do; UA will be the most hard pressed to serve small/medium markets because they have such a high percentage of small RJs, the most competitive hubs, and fewer small mainline aircraft.

    WN might keep a presence in small markets but their schedule change shows they recognize that higher costs mean a smaller - at best token - presence in many smaller cities while using their larger aircraft increasingly in larger markets such as their big focus cities, Florida, California, and NE markets.
     
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  6. swamt

    swamt Veteran

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    Another Southwest Affect in Dallas and DC...
    I have never argued that the gaps between SWA and other carriers have not lessened.  And they have closed the gap directly due to BK filings thru-out the industry.  But even though they have all gone thru BK's SWA still has overall cost advantage and the "Southwest Affect"  is very much alive and will continue into the future as well as into the international community.  
    Note also how this article is pointing out the affects on AA from the added SWA and Virgin flights, which is what E and WT have been saying...
     
     
    Southwest Airlines Co. Is Planning Disruptive Growth in Dallas and D.C.
     
  7. SharoninSAT

    SharoninSAT Veteran

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    .
    Benefits from the "Southwest Effect"...
    'Fares will fall stimulating increases in traffic.'
     
    For starters...
     
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  8. robbedagain

    robbedagain Veteran

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    swamt  it seems like WN will make DCA sorta like a focus city as they increase flights
     
  9. WorldTraveler

    WorldTraveler Corn Field

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    WN will have about the same number of slots as AA standalone and DL had prior to the slot divestiture. DL has 54 peak day flights/day from DCA now; AA has 51. I'm not sure AA pre-merger would have considered DCA a focus city and DL doesn't. DL is the 2nd largest carrier with about 6000/seats day which would be close to what WN will offer.

    new AA and DL will both likely make some adjustments to their DCA schedules and will likely upgrade some flights but the likely result will be that DL and WN will be pretty similar in size in terms of seats even though DL will operate more flights (since some markets like the Shuttle are 76 seat RJs) while new AA will likely be about 3X larger.

    WN will absolutely use lower fares to move market share and highlight its new service, esp. since Oct is an offpeak leisure travel period in N. Texas.

    Further, N. Texas is not really a leisure travel market so in long haul markets the stimulation value is not going to be large. There might be some increased levels of travel that occur because of lower fares but WN has been able to offer lower fares from DAL for several years - just not nonstop. The real result will be share shift from AA predominantly at DFW to WN at DAL.

    Long-term WN's fares will rise - that happened when they began serving MCI and STL.

    As with all new markets, WN is counting on a ramp up period in which they will likely lose money but WN's ability to make money long-term in N. Texas is strong. No one can doubt that.
     
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  10. swamt

    swamt Veteran

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    100% correct Sharon...
     
  11. eolesen

    eolesen Veteran

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    If you're going to make the claim, please use the proper terms... Effect is a noun, affect is a verb. Effect is the result, affect is an action.

    An effect is creating by affecting. Clear?.... :)

    Southwest's pricing affects the behavior of others, resulting in the Southwest Effect.
     
  12. yoyodyne

    yoyodyne Veteran

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    [​IMG]
     
  13. swamt

    swamt Veteran

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    Now that's funny.  I know alot of folks refer to cattle call boarding process when talking about SWA, but, most of the customers prefer it this way, which is exactly why SWA still does not do assign seating so far.  And load factors also point to it as well.  
     
    As for you WT, you are wrong again.  You claim that the S.E. is only temporary due to the temporary price intro ticket sales.  In all the articles I posted they compared YOY not just during the temp time frame you have indicated.  Yes there is an intro fare for 5 days, then SWA will return to their everyday low fare pricing after that with every now and then throwing in sales here and there.  I also just read that both VA and AA just "lowered" their fares to match SWA's.  Looks like the S.E. is starting once again in the Dallas market, we will all see after a full year of operations if it triggered the increase in passengers for the correct definition of the S.E.  
     
    VA was even higher than SWA at LF starting in Oct.  The cheapest flight by VA out of LF was $179.  SWA's cheapest was $161.  With SWA bags fly free.  Pretty darn sure VA charges something for bags but do not know how much.  If VA's casms are lower, then why don't they come in with lower fares like they said they would?  And they too had to lower their fares to match SWA's...
     
  14. WorldTraveler

    WorldTraveler Corn Field

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    whatever price is charged in a new market is not reflective of where it will be after the market is established.

    Every carrier has introductory pricing and there will be movement in prices by all competitors and eventually AA.

    No, I am not wrong. You continue to point to markets like DSM without considering OMA where the traffic moved from. You fail to note that much of the traffic that WN pushed over BHM has disappeared as ATL has become an option.

    It is not hard to shift traffic. It is a whole lot harder to maintain high levels of new traffic on a sustained basis.

    And as much as it hates for you to admit it, WN does not have the cost advantage to be able to cut fares significantly below their competitors on a sustained basis.

    Again, WN will do fine at DAL precisely because they are targeting markets that have had high fares for a long time and WN is able to erode AA's profits. In time, WN and AA will have similar prices that will be closely related to their costs which aren't that much different.

    Success at DAL will come to the presence of WN in markets which it has not been able to serve and the sheer shift in market share that will come with a new airport option.

    IN the meantime, don't get wrapped up with the numerous sale fares that you will see over the next few months.

    They are for marketing purposes as much as anything and won't be around for the long haul.
     
  15. robbedagain

    robbedagain Veteran

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    swamt,  I saw on www.virginamerica.com/vx/fees  its got a list of fees..   quite interesting.
     
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