Southwest Goes In For The Kill
 

This thread is very interesting and telling:
http://www.flyertalk.com/forum/showthread.php?t=834251

New planes, new routes and no fees. They hedge their fuel costs aggressively, and when they smell weakness, they move in. Will they take over any of the cities CO canceled, or perhaps make a preemptive move into CLT and drive down fares on US' most profitable routes to finish them off?

Could they be targeting the NY area?

I doubt that they'll target the NYC area unless they go for SWF; the three airports we have are not efficient enough to support WN's scheduling needs. Plus, they already serve ISP.

And I can't figure out where they're "going for the kill" based on their decision to receive new planes. I like that they're choosing to compete directly on fares and not fees. I like that they are continuing to get new planes. But I'm not sure where they're going for a kill.

I'm also not sure how this is relevant to CO. :D

I have a few questions ....

A number of people who post here and seem quite knowledgable of the industry keep saying that there needs to be an overall decrease in capacity. How does Southwest's continued expansion affect this? Can their one airline offset the others' reducitons enough to make the overall drop in capacity significant?


And .....just to try to link this into the CO forum appropriately...... what continental service would be most likely to be affected/replaced by Southwest?

The relevance to CO is around the potential threat of a WN entry into key CO markets presents - NY, CLE, etc...expansion at IAH. They go after weakness. Now I'm going to guess that WN is more likely to target CLT if the yields and market potential are there, but any legacy carrier on the defensive and in urgent need to stabilize fare is pretty vulnerable to a competitor whose fuel cost burden is significantly less.

WN needs new airplanes to replace it large fleet of 733s. For the average Joe, the no fee for bags is going to be a big factor in choosing WN. Folks with families that are not into FF benefits view WN as more family friendly. What if you have a family of 5 traveling on vacation, fees for bags would be a big hit.

If another airline, particularly one with a better cost structure, were to step up and fill the void left by the legacies, it would offset the reduction in capacity. However, Southwest won't do that. Southwest has a very measured approach to expansion. The carrier also doesn't have the equipment to fill that void.

I think it is relevant to CO because WN isn't a signifcant threat in the markets that CO is leaving.

My prediction is that the "kills" WN will go for are DEN and PHL. UA hasn't announced their cutbacks, but I expect DEN will evolve into a secondary, CLE type of hub for them. Frontier is in CH 11, so the conditions are ripe for WN to take advantage of the weakness of DEN's two largest carriers. WN has already made inroads on US at PHL, and US's bonehead moves regarding FF and nickle-dime charges make them vulnerable in this market.

I don't expect WN to expand in the NYC market, because there is already a lot of competition there. I don't expect WN to expand at IAH because they already have their hub at HOU. I don't know enough about CLE to comment.
I do believe WN will go "in for the kill" in some areas where CO is not a major factor, but in a measured way. They have a lot of opportunities right now, but I don't think it will significantly affect CO, IMHO this thread belongs in a more general category.

But perhaps WN can finally nail US. LAS, PHX, CLT, PHL.... now that US's bennies for elites are disappearing, WN can grab them.

I don't know the details of the claims you're referring to, but certainly it's been well documented that management at the legacy carriers continues to claim that there needs to be a decrease in capacity for *them* to be profitable. The fly in their ointment is that WN has not be unprofitable in 35 years and continues to grow, as they cut capacity, cut service, and raise fees, how does that hurt Southwest? The answer is, it certainly does not. Sure CO's cuts aren't much ... but now when a CO Platinum in Houston needs to fly to Reno for business, what are they going to do? They're not flying CO ... can CO afford to lose even one business trip that Platinum is taking? Losing business does not seem like a great way to return to profitability.

Quite frankly, I don't think the legacies can shrink to profitability, the only way they will return to profitability is a drastic decrease in the price of oil or if one of them cuts 100% of their capacity (i.e., they completely shut down) allowing the others to stay as big as they are now.

WN withdrew from IAH!
 

WN just withdrew from IAH last year and fly exclusively from HOU. They cited profitability as the reason to withdraw from IAH, so barring any sudden changes, I do not forsee WN starting IAH-RNO or IAH-OAK.

CO cut destinations such as RNO because they were not profitable overall. Maintaining an unprofitable route from the marginal profit from a Plat's business trip causes CO to lose money. Although they may make a handsome profit from the Plat's unrestricted or higher fare bucket ticket, the overall loss from the route more than offsets that marginal profit. CO certainly looked at the numbers before deciding on route reductions.

There are certain fixed costs associated with operating a location - staff, counter, baggage, etc. Yes, some can be subcontracted, but for routes with small volume and lower fares, it just isn't profitable. Just doesn't have the economies of scale.

About Southwest out of HOU. Interesting that they fly non-stop HOU-OAK, but not to SFO or SJC. And they don't fly HOU-RNO non-stop either.

As for "killing" US, I won't be surprised if WN expand PHL some more. Now, the question that's relevant to this board is that what happens when WN gets stronger at PHL and US gets weaker.

A weaker US at PHL may mean less international competition for CO at EWR, as people in Philly may go up to EWR to fly international. But a stronger WN may mean pulling CO's passengers from NJ to PHL instead.

Yes and no. If the international traffic gets driven to EWR, great. But PHL is a spoke in the hub and spoke model for CO, and they only offer CLE and IAH. I would think that a PHL-EWR would do great as a Turnpike avoidance flight, but that's just me. Domestic traffic for CO at PHL isn't much of a concern unless numbers can bear out that the CLE and IAH flights are feeding into people going onward. WN will get all the short-haul and low-yield traffic from US once US dies. Not if US dies, but when.