Cows Will Fly

[luver41]

Press Release Source: Southwest Airlines


Southwest Airlines to Serve Denver International Airport
Thursday October 20, 6:50 am ET


DALLAS, Oct. 20 /PRNewswire-FirstCall/ -- Southwest Airlines (NYSE: LUV - News), the nation's low-fare leader, announced today it will initiate service from Denver International Airport beginning in early 2006. The airline will announce specifics of its flight schedule and fares via a news conference in Denver next week.

"Southwest has experienced strong Customer demand to serve an obvious gap in our route network, and this service will return Southwest's legendary low fares to Colorado," said Gary Kelly, Southwest's Chief Executive Officer. "Denver's growing community is one we have studied and intended to serve, for quite some time, and we look forward to also serving the people of the entire State of Colorado."

Southwest's announcement today is a testament to the positive changes that have occurred as a result of the construction and cost conscious operation of Denver International Airport. Southwest served the Denver market between 1983 and 1986 from Stapleton International Airport. Since then, the Denver airport system has established a strong infrastructure, with six runways, and substantially reduced its rates on a cost per passenger basis, creating an economically attractive environment for Southwest Airlines. Additionally, Denver International Airport was ranked number one for ontime arrivals in 2004, making the airport a great fit for Southwest's quick aircraft turn times.

"Over time, Denver International has dramatically reduced its costs, increased its efficiency, and demonstrated that Denver can be a viable opportunity for Southwest Airlines," Kelly said. "This year a leading travel publication named Denver as the 'Best Airport in North America.'"

Southwest Airlines was able to accelerate the start-up of this planned new city due to aircraft availability created by Hurricane Katrina-related schedule changes and the resumption of new aircraft deliveries from The Boeing Co. subsequent to the cessation of a Boeing work stoppage.

Historically, when Southwest enters a new city, fares drop substantially and demand for travel greatly increases. The U.S. Department of Transportation (DOT) in a 1993 study described the phenomenon as the "Southwest Effect." Statistics from one of Southwest's newest cities, Philadelphia, provide a perfect example:


* Since Southwest Airlines entered the Philadelphia market in May 2004,
total Philadelphia traffic has increased nearly 30 percent.
* In the third quarter of 2004, the average one-way fare between
Philadelphia and Chicago Midway Airport fell 46 percent, while traffic
increased by 137 percent. In addition, the average one-way fare between
Philadelphia and Chicago O'Hare (an airport that Southwest Airlines
does not serve) fell 44 percent, while traffic increased by 28 percent,
showing that Southwest Airlines' arrival in new markets benefits even
sister airports and other airlines.

Southwest has reported 32 consecutive years of profitability and job security for its Employees, and earlier this year celebrated its 34th year in business. Based in Dallas, Southwest operates a fleet of 439 Boeing 737s with an average age of nine years-among the youngest pure jet fleets in the domestic airline industry. Southwest Airlines, the nation's largest carrier in terms of domestic passengers enplaned, currently serves 61 airports in 31 states. Based in Dallas, Southwest currently operates more than 2,900 flights a day and has 31,000+ Employees systemwide.

 

[lowfareair]

Hmm... they mentioned Philadelphia 5 times in that article. Here's hoping they start DEN-PHL as a route.

Frontier must be pissed though.

 

[732guy]

wow!

 

[coolflyingfool]

As Ozzy said, "Momma, I'm coming home!!!" Thanks SWA!!

 

[jimmyd]

Just wondering, does Southwest know something we don't. Meaning, could there be some low-fare carrier consolidation in the near future (Frontier and lets say AirTran) which would create a significant competitive threat in the West, and a few other market areas as well. Is Southwest's re-entry to Denver a pre-emptive strike into a market that could be become a huge low-fare carrier gateway.

 

[Ch. 12]

Just wondering, does Southwest know something we don't. Meaning, could there be some low-fare carrier consolidation in the near future (Frontier and lets say AirTran) which would create a significant competitive threat in the West, and a few other market areas as well. Is Southwest's re-entry to Denver a pre-emptive strike into a market that could be become a huge low-fare carrier gateway.

That OR they just know that F9 is not doing so well even though they have been able to avoid the press thus far. I am sure that F9 is definitely looking to do something drastic (like your merger?) now as a contingency plan. Their bread-and-butter has been PHX/LAS/CHI, etc and those are sure to become WN markets.

 

[luver41]

Something that occurred to me is that WN may be trying to add some more Congressional support from new states as it continues its efforts to overturn the Wright Amendment.

 

[767jetz]

DCT JVL posed the question:
"I suppose this depends a lot on where they fly, but who does this hurt the most Frontier or UAL? "
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This one could go several ways. Historically, when SWA enters a market prices decline. However, even they are starting to feel the pressure of rising fuel costs as their fuel bill is projected to increase about $500 Million in 2006, according to a recent report. They are also aware of the fact that being as lean as they are, there are very few places for them to trim fat. This means they will reluctantly have to raise prices to cover costs in 2006. (what a novel idea!)

Now enter DIA. They obviously will come in with low intro fares to establish a customer base. Perhaps they see the competition of Ted and F9 as low cost, but not as low or brutally difficult as say the east coast corridor.

IMO (no surprise to most of you, I’m sure) I think UA will fare better than F9. This is because UA is positioned to come out of BK with a large cash balance to fight the competition. F9 is not quite so lucky, and has been steadily losing ground to Ted. UA has also gained much experience in the low cost arena competing against F9. DIA is a major hub for UA and will not likely change any time in the foreseeable future. If anything, UA will increase long haul flying from DIA to offset any pressure from SWA. Just look at IAD and FlyI as an example. (No, I’m not comparing IA to SWA.) UA defended their market effectively. Independence Air is significantly pulling back in IAD, which will benefit UA substantially.

Don’t get me wrong. SWA entering our stomping ground is never a good thing. But it will also not be disastrous for UA. In the long run it might even push F9 over the edge, leaving DIA to UAL and SWA instead of UA and F9. Also, SWA will find out that DIA is not the best place for their type of operation. Traffic flow and delays when the weather turns sour is not conducive to the “quick in – quick out†operation they are used to. When that happens UA’s size allows much more flexibility, like re-routing passengers through other hubs, etc.

Bottom line is that DIA is no ISP. I’d be more concerned if they started flying into some secondary field near the Denver market. The pure nature of flying into a large airport like DIA tends to even the playing field a bit, and UA will defend its hub.

767jetz

 

[boeing787]

I welcome the competition. Bring it on SWA...!

 

[FWAAA]

Frontier's stock is currently off more than 26% so far today on this news. MrFish must be really happy.

 

[mrfish3726]

FWAA,

The drop in stock is a given, it won't last. SWA is just an airline like all the others, they are nobody special. It will be interesting to see were they will aquire gate space. And remember, Frontier is and always will be Denvers Hometown Airline. As 787 said "Bring it on SWA"!!!!!

767,

UniTED hasn't put F9 out of business yet, not even come close! What makes you so certain that SWA can?? I dont recall ANY airline that went out of business just because of SWA???? No one even knows the details yet and you all spread the doom and gloom.

 

[767jetz]

767,

UniTED hasn't put F9 out of business yet, not even come close! What makes you so certain that SWA can?? I dont recall ANY airline that went out of business just because of SWA???? No one even knows the details yet and you all spread the doom and gloom.

No doom and gloom Fishy. As I clearly indicated, it was just my OPINION.

As for SWA, remember an airport called BWI??? They basically chased USAir out of there. Same with ISP. Now SWA is attacking US in Pennsylvania.

I personally don't think this a huge threat to UA. Don't know about F9, but probably more of a direct competition for you guys.

Good luck,
767jetz

 

[corl737]

Nice comments, 767jetz.

I think Denver has enough passengers to go around. I'd expect SWA to start out with the typical routes: PHX, LAS, MDW plus a few others maybe to include Wright Amendment gateways such as ABQ or AUS perhaps.

While this will bring new competition to the routes I don't foresee an armageddon. The fact is, people in Colorado prefer to FLY rather than DRIVE.

As for those who simply stated "bring it on!", thanks. We'll be there and will do our best. I'd expect nothing less than your best to compete, too. It should be fun, don't you think?

Hmmm, now Frontier's animals will have to make way for SWA's Orcas! Sorry they're not as easy to eat as Alaska's salmon!

 

[C54Capt]

DCT JVL posed the question:
"I suppose this depends a lot on where they fly, but who does this hurt the most Frontier or UAL? "
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IMO (no surprise to most of you, I’m sure) I think UA will fare better than F9. This is because UA is positioned to come out of BK with a large cash balance to fight the competition. F9 is not quite so lucky, and has been steadily losing ground to Ted.
767jetz

Imagine that!!! Don't be confused about what the "large cash balance" is supposed to be used for.

767jetz you still make the erroneous statement about Ted taking marketshare from F9. Not true. Ted is taking marketshare from United, Frontier is growing. Besides I thought the "marketshare arguement" has been deemed obsolete in successful airline business circles.

SWA entering the Denver market is good news for the consumer only, period. It puts airframes to use for SWA that would have otherwise been idled due to the MSY pull-down, which is ok not great. Beyond that it trashes the yields on the routes served by F9 and United, which is not so good. All parties will adapt to the market condition and survive just fine. Be careful what you wish for, we're not the bad guys.

 

[whlinder]

This means they will reluctantly have to raise prices to cover costs in 2006. (what a novel idea!)

WN has been slowly raising fares this year and I think next year they'll bump their 299 cap up to either 349 or 399.

UA has lowfare competition at all their hubs, and while bringing the strongest airline to an additional hub will certainly hurt UA, I don't think it is the end of the world.