Business Travel News - December 15, 2008 - (Page 24) NEWS NYC To Test Southwest Effect a “modest opportunity for us.” Southwest in October announced “a modest operation” at MinneapoContinued from page 1 little competition goes a long way.” lis-St. Paul International Airport service we could offer,” the Of the Southwest Effect on New with service to Chicago Midway Inspokesperson said. York, Robert Mann, president of air- ternational Airport beginning next The “Southwest Effect,” coined line consultancy R.W. Mann & Co., March. The carrier in October said by the U.S. Department of Trans- said it most likely would bring fares it “plans to release more details of portation in a 1993 report, describes down, but it would not necessarily its future service to Minneapolis-St. the drop in fares and stimulation of stimulate new demand. Paul in the coming months,” and demand that often occurs after Southwest chairman, president last month filed its fares for the Southwest enters a market. Though and CEO Gary Kelly told investors launch for the service. some buyers anticipating a similar this month at the Credit Suisse GlobThe move serves as a minor case effect are cheering the move to New al Airline Conference that their only study in the Southwest Effect, with York, some analysts said the effect interest in ATA’s assets are the La- the carrier heading into a legacycould be tempered by the carrier’s Guardia slots. “We’re not bidding for dominated market with what Southminimal market presence and a cost any other assets: no aircraft, we’re west deems to be high fares. structure that is tightening the mar- not looking to hire “With new margin with its legacy competitors. employees related kets that we go into, Terry Trippler, an airfare analyst to this bid. All we our competitors and owner of Trippler’s View, said want is access to Lacharge as much as of the Southwest Effect, “We have Guardia slots.” With $400 one-way,” Kelseen it in Denver, we saw it in Balti- the airport operatly said. “You won’t more and we saw it in Philadelphia. ing under capacity find one market What’s amazing about that is these caps, slots are an where we do that.” are three large cities, and generally elusive commodity, Farecompare.com cities they wouldn’t go to. Now Kelly said. Though CEO Rick Seaney they’re coming to Minneapolis/St. DOT plans to make last month in a rePaul in March and then they’re some available search note conheading into LaGuardia.” through slot aucfirmed Kelly’s figSouthwest has focused operations tions, Kelly said, “Of ures. He noted that in secondary airports in or near ma- course, transferring as Southwest filed SWA CEO GARY KELLY jor cities, in many cases avoiding ma- FAA landing slots is fares for that marA modest opportunity in NYC jor hub airports. Southwest provides very controversial. ket, “the cheapest New York area service from Long Is- Airlines are arguing one-way airfare on land MacArthur Airport, where it that they own those rights; FAA said Northwest, American and United operates nonstop flights to Chica- that they do not. It is about the only was $426,” though he noted better go, Las Vegas, Baltimore/Washing- technique we’re confident in that deals on the legacies could be found ton International and five airports will get us to LaGuardia. There may for roundtrip service. Within days of in Florida. be slot auctions in the future, but the fare filing, Seaney noted that Business Travel Coalition chair- the airline industry has made clear “United and Northwest have both man Kevin Mitchell said New York that it will challenge that.” matched” Southwest on the route. service would fill a significant gap The slots, however, do not come “Knowing Southwest, if something in Southwest’s appeal to corporate replete with airport facilities at La- works, they expand rapidly, and I buyers. “With all the things they’ve Guardia, but Kelly said the carrier expect them to go to Kansas City done to attract the business cus- is in discussions with the Port Au- and Salt Lake from Minneapolis,” tomer, from going into the GDS and thority of New York and New Jer- Trippler said. bulking up their sales force, this was sey, which operates the airport. “We Fares at Denver International their big hole,” Mitchell said. can handle seven dailies with one Airport offer another a recent ex“It will adjust the pricing in that gate,” Kelly said. “They have assured ample of the effect. Southwest enmarket,” said Domin- Visit the BTN Archive us they can make a tered the market in January 2006. ion director of travel gate available and if we In the first subsequent quarter of see btnonline.com/archive and corporate services decide to grow beyond operations, average airfares in Denand BTN’s 2007 Travel Manager of the 14 slots, I’m reasonably comfort- ver declined 2.2 percent, accordthe Year Donna Kelliher, pointing to able we can get more facilities at ing to the U.S. Department of Southwest’s 2004 entry into New York LaGuardia.” Transportation’s Bureau of TransPhiladelphia International Airport Southwest is keeping its one-des- portation Statistics’ Air Travel Price (BTNonline, Nov. 10, 2003). “Look tination launch into Minneapolis Index. Only Honolulu witnessed a at how it adjusted the pricing in that minimal, and Kelly described the greater decline, while average airmarket. This is what I want to see. A New York move similarly, calling it fares nationwide grew 10.3 per- cent, BTS reported. The decline largely is attributed to Southwest’s entry to the market. Still, Trippler said Southwest’s impact on demand and fares in New York and Minneapolis likely would be tempered by Southwest’s minimal presence in those markets. Additionally, the carrier’s fuel hedges are not as advantageous in the lower fuel-cost environment, making it more difficult to undercut the legacy carriers on price, he noted. “On the surface, that’s the way it looks. It would be somewhat difficult to battle the legacies with the fuel hedges, even though those have been in such their advantage for the past couple of years,” Trippler said. While Southwest’s move into New York City again could prove the carrier’s effect on market fares—at least on a limited route-for-route basis, according to Trippler—JetBlue treasurer and vice president of corporate finance Mark Powers during the Credit Suisse conference noted fewer opportunities for low-cost carriers to pour capacity into markets. With the capacity out of the domestic system this year, Powers said, “Now we find ourselves in this situation that even if we wanted to bring capacity back, we really couldn’t because there are pretty skinny order books anyway.” As such, Powers said, “You don’t have guys like JetBlue—the LCCs—undermining the legacies’ efforts to bring down capacity by flooding the market.” Southwest’s Kelly told investors this month that the carrier’s firstquarter 2009 schedule would be down by as much as 5 percent, as the carrier scales back services “that aren’t popular or productive.” Still, Kelly told investors the carrier is able to get into new markets like New York and Minneapolis by “optimizing our fleet schedule” and still slow overall growth next year. “We want to grow,” he said. “We’re not satisfied with our route map, we’re not satisfied with our revenues. While this is a very tough environment today, for companies that are prepared as usual, there should be a tremendous number of opportunities.” ■ jboehmer@btnonline.com ■ 24 Monday, December 15, 2008 www.BTNonline.com Business Travel News http://www.Farecompare.com http://www.btnonline.com/archive http://www.BTNonline.com
Table of Contents Feed for the Digital Edition of Business Travel News - December 15, 2008 Business Travel News - December 15, 2008 Contents Inside Track Profiles In Travel Mgmt Forum Aviation Lodging Ground Transportation Travel Management Meetings Today Washington Wire Business Travel News - December 15, 2008 Business Travel News - December 15, 2008 - Business Travel News - December 15, 2008 (Page 1) Business Travel News - December 15, 2008 - Business Travel News - December 15, 2008 (Page 2) Business Travel News - December 15, 2008 - Contents (Page 3) Business Travel News - December 15, 2008 - Inside Track (Page 4) Business Travel News - December 15, 2008 - Inside Track (Page 5) Business Travel News - December 15, 2008 - Profiles In Travel Mgmt (Page 6) Business Travel News - December 15, 2008 - Profiles In Travel Mgmt (Page 7) Business Travel News - December 15, 2008 - Profiles In Travel Mgmt (Page 8) Business Travel News - December 15, 2008 - Profiles In Travel Mgmt (Page 9) Business Travel News - December 15, 2008 - Forum (Page 10) Business Travel News - December 15, 2008 - Forum (Page 11) Business Travel News - December 15, 2008 - Forum (Page 12) Business Travel News - December 15, 2008 - Forum (Page 13) Business Travel News - December 15, 2008 - Aviation (Page 14) Business Travel News - December 15, 2008 - Aviation (Page 15) Business Travel News - December 15, 2008 - Lodging (Page 16) Business Travel News - December 15, 2008 - Lodging (Page 17) Business Travel News - December 15, 2008 - Ground Transportation (Page 18) Business Travel News - December 15, 2008 - Ground Transportation (Page 19) Business Travel News - December 15, 2008 - Travel Management (Page 20) Business Travel News - December 15, 2008 - Meetings Today (Page 21) Business Travel News - December 15, 2008 - Meetings Today (Page 22) Business Travel News - December 15, 2008 - Meetings Today (Page 23) Business Travel News - December 15, 2008 - Meetings Today (Page 24) Business Travel News - December 15, 2008 - Meetings Today (Page 25) Business Travel News - December 15, 2008 - Washington Wire (Page 26) Business Travel News - December 15, 2008 - Washington Wire (Page 27) Business Travel News - December 15, 2008 - Washington Wire (Page 28)
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