Code Share Growth

swflyer

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Aug 20, 2002
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First article is Dow Jones, second is SFO Examiner.

Southwest,ATA Air Add Codeshare Services To Oakland,Houston
DALLAS-1/23/06-(Dow Jones)- Southwest Airlines Co. (LUV) (LUV) said it is expanding its codeshare agreement with ATA Airlines Corp. (ATAHQ) with new connecting service through Houston Hobby and Oakland.

Southwest Airlines (LUV) said in a press release Monday the Houston service will begin April 2, and will connect customers from various Southwest Airlines (LUV) cities to ATA flights to New York City's La Guardia Airport.

The Oakland service starts April 28, and will connect customers from various Southwest Airlines (LUV) cities to ATA flights to Hilo, Honolulu and Maui, all in Hawaii.

The codeshare agreement allows Southwest and ATA Airlines to exchange passengers and their checked baggage at either of Houston Hobby or Oakland, with a single ticketing option through either airline.

The codeshare arrangement with ATA began in 2005 with connecting service in Chicago.

ATA Holding, the Indianapolis-based parent of ATA Airlines, filed for Chapter 11 bankruptcy protection in October 2004.

SFO’s loss, Oakland’s gain: Low-fare airline to move
ATA plans to consolidate with Southwest
By Neil H. Dempsey, Staff Writer

Throwing a wrench into San Francisco International Airport’s attempts to lure and retain low-fare carriers, officials confirmed Sunday that ATA Airlines will pack up its bags this spring to move across the Bay — making it the fourth discount airline SFO has lost in less than four months.

Officials said the airline, once known as American Trans Air, will consolidate its flights with Southwest at Oakland International Airport beginning on April 27. ATA joined Southwest in a code-share agreement allowing passengers to build trips using both airlines last February, spokeswoman Michelle Foley said. Southwest itself previously left SFO for Oakland.

ATA constitutes about 0.5 percent of SFO’s total business, according to airport officials, and recently reorganized its senior leadership structure in anticipation of emerging from bankruptcy this year. A formal announcement regarding the move is expected today.

Despite SFO’s long-standing campaign to recruit discount airlines, ATA will be the fourth in a list of low-fare carriers to part ways with SFO since late last September, when Independence Air announced it would fold because of high fuel prices. In October, Song announced a merger with parent company Delta; then, this winter, WestJet quietly stopped serving SFO, airport representatives said.

Despite overall increases in passenger numbers at the airport, the departure of low-fare carriers is a blow to SFO’s attempts to compete with airports in San Jose and Oakland — both of which host discount leaders Southwest and JetBlue — for a national market that an SFO report recently noted represents about 30 percent of domestic passengers across the country.

In that report — an appeal to the Department of Transportation for a swift certification of low-fare carrier Virgin America — SFO Director John Martin noted that only 15 percent of SFO’s domestic traffic utilizes low-fare airlines. In San Jose, 48 percent of domestic passengers use low-fare carriers, and in Oakland, 70 percent of all passengers fly on Southwest and JetBlue alone.

“Notwithstanding the sustained work of the airport and the city to secure additional low-cost air service, the community remains sorely lacking trans-Atlantic low-cost carrier service of the kind that Virgin America promises,†Martin wrote, adding that the number of providers was declining.

Moving to limit the damage done by massive cuts to the United Airlines workforce following Sept. 11, 2001, the airport in 2003 approved slashing landing fees by 50 percent for new carriers offering to serve an underserved market at the airport.

But SFO representatives said Sunday the airport won’t again offer reduced landing fees — currently only allotted to international airlines — or provide any other type of incentive plan to gain low-cost airlines, or to retain them. Instead, they said, the airport is focusing on its international and long-haul business. “Mostly, we’re trying to build the international side of the business,†airport spokeswoman Kandace Bender said. “We’re pretty happy with the way things are going.â€

Bender said the anticipated arrival of Virgin America and the emergence of United Airlines from bankruptcy will help SFO keep competitive prices.

ATA will offer a full schedule out of Oakland beginning April 28. The airline will increase its flights when it moves, adding a flight to Hilo, Hawaii, in addition to the 30 weekly flights it now provides to Maui, Honolulu and Chicago from SFO, Foley said.
 

Ch. 12

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I'm no Ms. Cleo, but my prophecy is coming alive more and more every day. It looks like TZ is positioning its scheduled service to be able to be absorbed by WN. Once the OAK-HI service and HOU-LGA service is ramped up, look for WN to begin taking them over. TZ will then become charter-only and give its over-water 737's to WN for the HI routes. Any scheduled carrier that plans on emerging as a scheduled carrier would not be as eager to continually shift its route structure as TZ has been. They are just setting up to spin off their scheduled ops to WN.
 

Busdrvr

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I'm no Ms. Cleo, but my prophecy is coming alive more and more every day. It looks like TZ is positioning its scheduled service to be able to be absorbed by WN. Once the OAK-HI service and HOU-LGA service is ramped up, look for WN to begin taking them over. TZ will then become charter-only and give its over-water 737's to WN for the HI routes. Any scheduled carrier that plans on emerging as a scheduled carrier would not be as eager to continually shift its route structure as TZ has been. They are just setting up to spin off their scheduled ops to WN.

I don't know. I don't think SWA wants to compete on HNL with it's on jets. Now they would have to maintain ETOPS jets and do all the OW training for crews. Why do that when they can feed ATA with traffic at ZERO risk and with ATA's much lower payrates for employees, pull a "free" profit while still having enough left over to give ATA positive margins. Likewise, with ATA's limited LGA presence with no avail additional slots for SWA growth, I think it wouldn't fit the model to go to LGA with the brown jets. Too much financial and schedule exposure when they could just get the revenue without any risk. I'd be more worried about the camels nose. This could lead to as situation where SWA could attempt to basically have control of two airlines, one to fly domestic, and another to fly international (plus some domestic). This is a Legacy carriers dream, two airlines means much lower training costs, and the HUGE benefit of WHIPSAWING each other. Knowledge is power, and there may not be plans to try it, but if I were SWAPA, I'd make it clear that it would be a very big mistake to try.
 

Ch. 12

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Nov 24, 2002
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I don't know. I don't think SWA wants to compete on HNL with it's on jets. Now they would have to maintain ETOPS jets and do all the OW training for crews. Why do that when they can feed ATA with traffic at ZERO risk and with ATA's much lower payrates for employees, pull a "free" profit while still having enough left over to give ATA positive margins. Likewise, with ATA's limited LGA presence with no avail additional slots for SWA growth, I think it wouldn't fit the model to go to LGA with the brown jets. Too much financial and schedule exposure when they could just get the revenue without any risk. I'd be more worried about the camels nose. This could lead to as situation where SWA could attempt to basically have control of two airlines, one to fly domestic, and another to fly international (plus some domestic). This is a Legacy carriers dream, two airlines means much lower training costs, and the HUGE benefit of WHIPSAWING each other. Knowledge is power, and there may not be plans to try it, but if I were SWAPA, I'd make it clear that it would be a very big mistake to try.

I agree that WN has a good thing by having no ETOPS jets and maintaining a rather simple fleet with simple training. Perhaps you are right that TZ will keep flying these routes for WN for as long as WN wants them to. On the other hand...WN is clearly showing serious signs of limited growth potential by strictly adhering to their historical biz plan and that could spell out some changes that we have not seen in the past. Just like Target/WalMart (or any retailer) needs to continue growth in order to maintain profits, WN must continue to expand. I agree that LGA would not be a likely city for WN given their history and a slot system that WN has desperately avoided for decades and that HI would add training and mtx requirements well above-and-beyond what they are used to, but I also think that WN is running out of space.

Whatever happens, I do think it will be interesting to see how this "relationship" works out in the coming year.
 

markkus757

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Jul 26, 2004
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what about SWA taking ownership of TZ and keeping it seperate??? SWA Holdings Corp. or something. That way they really would have "control" of 2 seperate but cooperative airlines. Actually, then all of TZ's flight could be ground handled by WN employees at places like OAK, PHX, MDW, etc. and create better synergy and cost savings. TZ would operate the "oddball" stations like DCA, LGA, and Hawaii, while SWA "Holdings" would still ahve conrol
 

mga707

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Aug 19, 2002
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what about SWA taking ownership of TZ and keeping it seperate??? SWA Holdings Corp. or something. That way they really would have "control" of 2 seperate but cooperative airlines.

Herb tried exactly that 20 years ago with Muse/TranStar. Didn't work then, but maybe TZ is a different enough type of carrier that now it would. Muse was basically a smaller WN with MD-80s rather than 737s.
 

Busdrvr

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Aug 20, 2002
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Herb tried exactly that 20 years ago with Muse/TranStar. Didn't work then, but maybe TZ is a different enough type of carrier that now it would. Muse was basically a smaller WN with MD-80s rather than 737s.


I honestly think SWA bought Muse to kill them. Remember, Muse was started to be a direct competitor of SWA and operate on SWA's "bread and butter" TX routes. The last thing SWA wanted was Muse to get bought and financed by some deeper pockets. So they bought Muse, constrained them in such as way that they couldn't make money (no mail, no cargo and no interline), and put them on differant routes (primarily long haul). They watched them bleed to death then closed the door. No one could accuse them of buying them to close them since they "tried" to make it work and only shut it down after it was unprofitable. For all those folks that think Herb can make no mistake, how could he have been SO wrong on Muse Air UNLESS it was the plan to kill it. Muse brought nothing to the table (except LESS competition) while ATA at least brings long haul ETOPS cert jets.
 

KCFlyer

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I honestly think SWA bought Muse to kill them. Remember, Muse was started to be a direct competitor of SWA and operate on SWA's "bread and butter" TX routes. The last thing SWA wanted was Muse to get bought and financed by some deeper pockets. So they bought Muse, constrained them in such as way that they couldn't make money (no mail, no cargo and no interline), and put them on differant routes (primarily long haul). They watched them bleed to death then closed the door. No one could accuse them of buying them to close them since they "tried" to make it work and only shut it down after it was unprofitable. For all those folks that think Herb can make no mistake, how could he have been SO wrong on Muse Air UNLESS it was the plan to kill it. Muse brought nothing to the table (except LESS competition) while ATA at least brings long haul ETOPS cert jets.
I think you hit the nail on the head.
 
OP
swflyer

swflyer

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ATA is Valuable Alliance
Passengers can connect to Southwest network out of Midway
By ERIC TORBENSON / The Dallas Morning News
January 29, 2006

On the verge of leaving bankruptcy protection, ATA Airlines Inc. is about a third of its size before the filing. But it's playing an increasingly important role for Southwest Airlines Co.

Last month, ATA and Dallas-based Southwest deepened their passenger-sharing alliance.

As part of the revised deal, travelers can now buy a Southwest ticket on ATA's flights from Dallas/Fort Worth International Airport to Chicago's Midway Airport, and then connect into Southwest's network.

And last week, Southwest chief executive Gary Kelly reiterated his carrier's promise to sell seats on ATA's international routes, though he didn't specify where Southwest customers will be able to fly.

"It'll be several years before we're up and running with international itineraries," Mr. Kelly said in a telephone interview Friday.

ATA currently flies only to Mexico but had a broader network of international flights before seeking bankruptcy protection.

"We're looking for all the opportunities where we can find incremental passengers."

One of the most exciting opportunities for Southwest passengers is the ability to fly to Hawaii.

Southwest is already using the agreement to book passengers on ATA flights to Hawaii and airports in several U.S. cities Southwest doesn't serve.

Frequent fliers
However, the frequent-flier programs between the carriers aren't integrated yet.

"We can't overwhelm them," Mr. Kelly said, referring to the millions of Southwest frequent fliers who would want to redeem credits to Hawaii on ATA. "They can't handle that demand right now."

Even if the two carriers strike a deal on letting Southwest passengers redeem flight awards to Hawaii, the number of tickets available won't be very large, said consultant Robert Mann.

Then again, most carriers don't have an abundance of award tickets to Hawaii anyway, so it may not put the Southwest/ATA link at a competitive disadvantage, he added.

Mr. Mann said Southwest's move in late 2004 to lend financial support to ATA was risky, but it has paid off so far.

"It was one of those Hail Mary passes that worked out very well," said Mr. Mann.

"It was a gutsy call, but Gary's done those before and they've also worked out."

ATA, based in Indianapolis, "now acts like a proxy" for Southwest, because it flies from Midway to cities that Southwest has so far avoided.

For example, ATA serves New York's LaGuardia Airport, which Southwest has stayed away from out of concerns over congestion.

And Southwest can sell tickets from D/FW, which it has avoided for competitive reasons because Fort Worth-based American Airlines Inc. has 84 percent of the market.

Competing for fliers
To be sure, Southwest and ATA compete for passengers, Mr. Kelly said.

If ATA's restructuring plan proceeds in February, Southwest will end up with no equity stake in the new ATA and no control over its officers or board of directors, he said.

Southwest pledged $117 million in financial support to ATA in late 2004 in exchange for six gates at Midway and an equity stake if ATA survived.

That stake will be converted into four additional gates at Midway upon ATA's emergence from Chapter 11 protection.

Midway is poised to become Southwest's largest city this year.

ATA served both Denver and Fort Myers, Fla., when Southwest announced new service to those cities, so having ATA service in any city won't deter Southwest's interest in being there, Mr. Kelly said.

For North Texas passengers, the alliance opens up Southwest's growing network at Midway, including Baltimore; Cleveland; Detroit; Indianapolis; Philadelphia; Providence, R.I.; and Seattle.

Under a federal law known as the Wright amendment, Southwest is limited at its home airport, Dallas Love Field, to serving a nine-state territory.

ATA flies three times daily from D/FW to Midway, where passengers can transfer to Southwest flights. A fourth flight will be added April 2.

Pleased with results
ATA executives like the results so far, especially on the D/FW flights to Midway.

"The passenger bookings have done extraordinarily well – demonstrating the power of the joint Southwest-ATA network as well as the strong customer affinity and loyalty for Southwest in the Dallas area," said Subodh Karnik, executive vice president and chief operating officer.

"Other markets, such as Hawaii and Houston, where we recently announced new service, also provide a perfect opportunity for this kind of synergy because they give travelers the opportunity to experience the best of what both carriers have to offer."

Analysts are focused on the revenue contribution from the cooperation with ATA – $50 million in additional revenue for 2005 and a projected $10 million for the current quarter despite ATA's smaller schedule – and the potential for more.
 

sfb

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Aug 21, 2002
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I honestly think SWA bought Muse to kill them. Remember, Muse was started to be a direct competitor of SWA and operate on SWA's "bread and butter" TX routes. The last thing SWA wanted was Muse to get bought and financed by some deeper pockets. So they bought Muse, constrained them in such as way that they couldn't make money (no mail, no cargo and no interline), and put them on differant routes (primarily long haul). They watched them bleed to death then closed the door. No one could accuse them of buying them to close them since they "tried" to make it work and only shut it down after it was unprofitable. For all those folks that think Herb can make no mistake, how could he have been SO wrong on Muse Air UNLESS it was the plan to kill it. Muse brought nothing to the table (except LESS competition) while ATA at least brings long haul ETOPS cert jets.

Well, when Southwest bought Muse, IIRC, the situation was such that the two were beating each other up on a number of routes, but it was also pretty clear that selling out was probably the best exit strategy for Muse, given that Southwest at the time was still profitable, while Muse was not.

Southwest restructured Muse into TranStar, which was for the most part a hub-and-spoke carrier focused on Houston Hobby. WN and MC at that point competed on very few routes and if memory serves they did offer interlining between the two as well as interchangeable tickets. Southwest was not in the business of flying from Houston to California and Florida which were two of Muse/TranStar's primary markets.

The most significant blow to TranStar was Frank Lorenzo's decision to start a crippling fare war in Houston; after all, a competing hub-and-spoke carrier across town at HOU had the potential to undermine Continental's IAH hub. While TranStar had eked out a profit at one point, the fare war and a relatively weak Houston economy in the mid-80's turned MC into a money-loser again. When Southwest shut down TranStar, a good number of the planes ended up at Continental.