Thursday, February 19, 2009

Boston gains Southwest....

Southwest Airlines announced Boston as their next expansion city this morning. Actual routes and service patterns were not defined as of yet but this is certainly good news for Boston area residents who currently trek to Providence or Manchester to take advantage of Southwest's service.

Southwest seems to have run out of the "niche" markets they have traditionally played in - markets that avoided big city airports laden with high costs and delays etc. For many years, Southwest eschewed markets such as New York LGA, Boston and Washington DCA in favor of smaller airports nearby such as Long Island's Islip, the aforementioned Providence and Manchester along with Baltimore.

In recent years, Southwest has returned with a vengeance to two markets it abandoned years ago - San Francisco International (SFO) and Denver. Southwest's operations in these two cities were competitive, offensive positions designed to keep Virgin America in check at SFO and make life hard for Frontier in DEN. So far, both seemed to have worked.

But of late, Southwest has pushed deep into territory that were not on Herb's radar during his tenure. First was Philadelphia where Southwest has built a large operation under USAirways' nose. Southwest will begin service to Northwest's (or Delta's) Minneapolis "fortress hub" later this year. And LGA will soon be a heart on Southwest's route map as well with the recent acquisition of bankrupt ATA's slots there.

And now Boston.

Currently, JetBlue is the largest carrier in Boston with nearly 17% market share as per the Bureau of Transportation Statistics. Boston is a interesting market in that, unlike many large cities today, traffic is split between many carriers - far different from American's Miami, Newark's Continental, Detroit's Northwest/Delta or even the duopoly at Chicago O'Hare of United and American. The remaining pie is split between American, Delta, USAir and United. Obviously, Delta will get a boost once Northwest is added in.

Airlines battle it out for market share in Boston, yet fares remain, on the whole slightly above average. Again, according to the Bureau of Transportation Statistics, average domestic fares in Boston for Q3 2008 were about $397 - placing Boston slightly above the domestic average fare of $362 but far below small cities such as Cincinnati (#1 at $596!) or even Washington Dulles ($451) or LAX ($418.)

So, to the obvious question of "where?" Where will Southwest fly from Boston? As we posted earlier, Virgin America will also arrive at Logan later this year with nonstops to both SFO and LAX. But don't expect to see Southwest launching trans-con flights from Boston anytime soon.

The top three destinations from Logan are Chicago O'Hare, Atlanta and New York LGA. Even with new slots at LGA, there is no chance that Southwest will burn them fighting the US and DL Shuttles.

If we were gamblers, we would expect to see Southwest launch service to Chicago Midway and Baltimore right off the bat. If they feel like tweaking JetBlue, an obvious additions could be Tampa, Fort Lauderdale and/or Orlando. Philadelphia could also be a strong market. St. Louis, Kansas City or Houston Hobby would also build on Southwest's strength's in those cities - all of which have high fares to Boston and aren't JetBlue markets (yet, anyway!)


  1. A couple thoughts on this one...

    First, it seems entirely possible that this move will hurt them badly at Providence and Manchester. I know that the Boston metro area is pretty big and spread out, but there have to be a reasonable number of folks heading out from the city proper to those airports to support the 60 flights that they operate daily. Could this ultimately kill the service (or at least some of the destinations/frequencies) to those airports?

    Second, they have announced that they are going to do it without changing their plans to cut capacity overall this year. That's not a good sign for someone, though until they announce who is getting cut in favor of this we won't really know who. Is it possible that Southwest is finally moving realizing that they can succeed as a carrier focusing on business markets rather than alternate destinations? Every indication seems to be pointing towards yes right now.

  2. Great comments, Seth. I agree that MHT and PVD may be in for a surprise.

    Your thoughts on overall capacity are spot on - someone loses in this. I expect we'll see WN start to pull down some of the high-frequency markets (e.g. MDW-STL, MDW-MCI) to fund at least part of this growth.

    Clearly, as you point out, they are looking for future growth in key business markets, not alternate destinations more popular with leisure. If you want business traffic, you have to go where business is!

  3. Great post... just a couple of comments. You may have a typo where you write: The [Logan] pie is split between American, Delta, USAir and Delta. One of those "Delta" may have been NW or WN, I'm guessing.

    Atlanta may be the second biggest route from BOS, but it just seems counterintuitive that it's O&D traffic -- ahead of NYC, DC, and Florida. First hunch is that it would be a likely by-product of DL routing onward passengers via its largest hub.

    And FLL or MCO are obvious routes for WN to launch from BOS. If you look at WN's Florida route system, it is very cannily organized along east and west systems... SE Florida nonstops are to the Northeast and WN's central zone cxn points, while the West Coast Florida cities have the nonstops for Midwest and Southwest O&D traffic (just try flying WN from FLL to Indiana, Ohio or PIT).

  4. Thanks for the catch, Martin!

    Agree that a lot of ATL traffic is the huge sucking sound of DL hauling people south. Airtran as well....

    Likewise, agree FLL and MCO would make a lot of sense but worry about the yields. But, if anyone can make a buck in those markets, its WN!