1/3: When Southwest launches Atlanta service

Moderated by Tom Sabulis

Southwest Airlines launches service in Atlanta Feb. 12, as it acquires AirTran.

Two industry experts tell us what to expect when the low-frills, free-bags carrier begins competing against Delta, the hometown giant. Expanded service and beaucoup deals? Perhaps. But it’s not all rosy. One predicts passenger traffic will drop at Hartsfield-Jackson airport.

Read what Michael Boyd, president of Boyd Group International, an aviation research and consulting firm in Evergreen, Colo., has to say, and check out commentary  by Tom Parsons, CEO of bestfares.com, below that. Then tell us what you think of Southwest’s acquisition of AirTran.

By Michael Boyd

The Southwest acquisition of AirTran signals major changes in airline service at Hartsfield-Jackson International Airport. Most of them are not what people are expecting.

Southwest is one of America’s most ethical companies. Its success is because they really do like their customers, and it shows on every flight. From that perspective, Southwest is a great successor to AirTran.

However, Atlanta consumers are in for some surprises when Southwest launches service next month. First, there will be fewer flights.

Over 60 percent of all passengers on AirTran’s Atlanta flights are connecting to or from other cities. But Southwest has announced that it will “unwind” that connecting operation, which means fewer passengers through Atlanta, and hence, fewer flights than AirTran is operating.

In fact, Southwest has indicated that it will operate 13 percent fewer flights at Atlanta than AirTran. Since connecting passengers represent the equivalent to fill about 100 of the current 180 AirTran flights, these reductions are likely just the first.

Fact: more than 25 of the cities to which AirTran now flies have less than 40 percent of the passengers made up of folks going to or from Atlanta. The other 60 percent are connections. Without these, Southwest will not be able to support those routes.

And there won’t be much of a “Southwest effect” — where a sudden reduction in fares will stimulate more traffic. AirTran has already achieved that in 24 of the top 25 routes from Atlanta.

Remember, Southwest’s operating costs are higher than AirTran’s. It’s the added connecting passengers that support the high-flight frequencies. That means that if Southwest is only after Atlanta passengers, they absolutely will need to reduce flights from where AirTran is today. (To read a report on Southwest’s merger effects on Atlanta, go to www.aviationplanning.com.)

As for Delta, they’re not worried. In fact, they’re probably smiling broadly.

The merger gives them a higher-cost competitor than AirTran, and one with a much more limited product. There’s no advance seat selection on Southwest, and regardless of the hype, a lot of travelers prefer it. But, for a family of four, not knowing until they get on the plane whether they’ll be sitting together is an issue — one that they didn’t always have with AirTran. Unlike AirTran, there are no business-class seats for passengers to upgrade to, either. And the Southwest strategy to not chase connecting passengers in Atlanta opens a huge new base of passengers for Delta.

Then we have the issue of operational systems.

Unlike AirTran, Southwest has work rules that restrict how it can handle flights at airports. AirTran can use outside vendors and part-time employees. This means a number of the routes that AirTran could fly — not only at Atlanta, but elsewhere — Southwest cannot. Example: Bloomington, Ill., was a successful market for AirTran. Southwest decided it couldn’t make money there. Result: over 48 percent of Bloomington’s traffic is at risk. That’s a downside of this merger. Some communities are seeing air service reduced — as Atlanta will.

There’s no argument: Southwest is a fine company. But it’s a very different airline than AirTran, and that means it will have a different operation at Atlanta, too. A smaller one. Our forecasts indicate passenger traffic through the airport will decline by about 6 percent as a result of this merger.

It’s nothing personal. It’s strictly business.

By Tom Parsons

The good news is that once Southwest’s acquisition of AirTran is complete, Atlanta will have 180 to 200 daily nonstop Southwest flights, making it one of the airline’s number-one hubs, along with Chicago and Las Vegas. This will offer Atlantans more options than ever before.

If you are trying to get to Austin, you’ll find nonstop flights and also multiple one-stop options through Houston, New Orleans and St. Louis. If you want to fly to San Diego, you’ll find connecting flights through Chicago, Denver and Houston. When you look at the options, with both nonstop and one-stop service, it will be the first time that a low-cost carrier has served over 100 cities.

There are some downsides to the acquisition, too. Southwest will eliminate service to some AirTran cities like Newport News and Moline, and frequent flyers who are used to racking up segments on cheap short-haul flights on AirTran may not like Southwest’s program.

Also, Southwest does not have first-class seats or seat assignments, so you’ll want to check in online 24 hours in advance to get in the best boarding group. You can also pay $10 extra each way to get in the early boarding group. If you are traveling with young children, you’ll be able to board early on Southwest. (Delta reserves many of its premium seats for elite flyers.)

Southwest’s frequent flyer program is much different than Delta’s. Southwest’s program is based on the dollar amount spent and the type of ticket you purchase, while Delta’s is based on the number of miles flown. I don’t know any other program that offers more perks for the business traveler, especially if you qualify for A-list Preferred status, which offers double the number of points, or 24 points per dollar spent on Business Select fares.

When it comes to on-time performance, lost luggage and customer service, Southwest is a top-ranking airline. The airline proclaimed itself the winner of this triple crown five years in a row. The airline also has friendlier rules than Delta when it comes to changes, cancellations and luggage. If you need to change a ticket, Southwest does not charge a change fee, you just pay the difference in fares. On Delta, you’ll pay a $150 change fee plus the difference in fares. On Southwest if you need to cancel a ticket, you’ll receive a credit for the entire amount and you can check two bags for free.

When it comes to fares, I believe Atlanta will be like Denver, where Southwest is competing against Frontier and United — it has been one big dog fight, especially when it comes to cheap fares and promotions. In Atlanta, I expect deals to be flying from Delta and Southwest. The last airfare sale we had from both Southwest and AirTran offered sale flights through May 16; I’ve never seen Southwest offer a sale window that big.

Atlanta, I think, will see cheaper fares to new cities that were not served by AirTran. For example, during Southwest’s recent sale, Southwest offered fares from Atlanta to Austin for $99 one-way or $198 roundtrip, for travel beginning Feb. 12, when Southwest starts service. Delta matched the fare, but Delta is currently charging $409 roundtrip on that route.

To take advantage of the cheapest fares, book in advance, be flexible, wait for sales and remember that 80 percent of Southwest-initiated sales start on a Tuesday and end on a Thursday. Not only will we see cheap new destinations, but we will also see deals to old destinations.

At the end of 2012 when we look at the statistics on fares from Atlanta, I think you’ll find a substantial drop in the price of fares, while the rest of the U.S. will see a price increase.

26 comments Add your comment

kc

January 7th, 2012
9:55 am

Steve must indeed be a stockholder in SWA. Unfortunately his characterization of SWA as a profitable growth stock and an Atlanta expansionist is wrong (profit margin LTM – LUV -3.3%, DL 1.3%, UAL 1.7% – ouch!)

As aptly stated by others, Airtran is Dollar Tree and SWA is Walmart. Some like value with a smile, others want full amenities.

In my opinion (and I actually do know something about the airline biz), the SWA acquistion of FL is bad for consumers. /As a regular air traveler, I would much rather have two LCC’s operating than a combined, and frankly adrift singular SWA.

The SWA that people like Steve idolize is as dead as his former TWA employer. I used to live in Texas in the late 80’s and people loved SWA – high frequency, cheaper than legacy carriers, and lowly paid but happy employees. No one cared about advanced seat assignment when flying on a 45 min flight HOU to DAL. However that SWA is DEAD – Do a search for yourself on Orbitz (vs SWA’s requirement to shop on their site) and compare prices – SWA is more expensive. Profitability – DEAD. Employee producivity gap – GONE. The SWA CEO recently said that SWA needed to address their high cost structure to ensure their survival against the revamped legacy carriers (again I present facts, not opinion).

Interesting that Steve “knows” SWA will grow – “what are you smoking” – when SWA states in the article they will be a smaller carrier in ATL. As for added services, SWA is replacing non-stop service in markets like LAX with 1 and 2 stoppers – I can feel the consumer benefits already!

Again coming from someone who has to travel almost weekly for a living, I dread the SWA entry. They are not as aggressive as Airtran ( ie we get higher fares and fewer sales). Listen to people who live in FL / SWA overlap markets like BWI and MKE – FL out-SWA’ed SWA. Talk on the street is that SWA took out Airtran to eliminate their most troublesome competitor. I just fear that my corporate travel policy will, on that rare occasion that SWA is actually cheaper than DL, book me one of their flights. Trust me folks, if you had to earn a living flying and you had to do it on SWA, you would find another job!

TC

January 7th, 2012
9:35 am

The point everyone seemed to miss in my first post was this: AirTran WAS CHEAPER TO FLY. Yes, they had XM, a biz class, and the ability to reserve a seat online at checkin (or at reservation time for a fee). But most importantly, THEY WERE CHEAPER THAN SOUTHWEST. I know this because I fly from one of the few cities that had both AirTran and Southwest as major player. You guys carping about how great the Southwest experience is and how you can entertain yourself with your iPads anyway will be paying MORE for those routes that AIrTran flew from ATL.

As others have pointed out, Southwests costs are astronomical. Right now they can stay ahead of it by growing and growing into cities they used to shun, like Atlanta. Soon they will run out of airports they can fly to that will let them keep offsetting their costs with growth. I guarantee when that happens, you will see Southwest’s fares go way, way up, right near to your favorite “Legacy Carrier” levels. It won’t happen this year, but it will happen.

So keep waving the flag, Southwest Fanboys. The AirTran merger is just the beginning of the disease that will eventually consume you, too.

Darvocet spending

January 5th, 2012
12:44 pm

Timmy

January 3rd, 2012
4:57 pm

@ “Darvocet spending”: holy crap and wow…

I am shocked and insulted by the poisonous comments you posted:

“Gee, wonder why everyone can’t wait for legacy carriers like yours to go under” and
“Hey great strategy, try to scare people back into flying with you dinosaurs. Your post is exactly why everyone is cheering for the end of the legacy carriers.”

I seriously doubt you would have the guts to say any of that to “CC” or to any employee of a so-called “legacy carrier” to their face. I think, like many people, the anonymity of the internet has given you the ability to express statements you would not otherwise have the courage to communicate.

Also, you are apparently emboldened to spout off about matters which you have very little knowledge or experience, such as the complicated business of commercial aviation in the U.S.

I hope that, whatever it is you do for a living, you never have to read the thoughts of small-minded individuals wishing for the company, and in fact the entire INDUSTRY, you work in to fail so you would join the legions of unemployed in this country. Shame on you.

lol here’s another butthurt, bitter legacy airline employee, god I can’t wait until you guys bite the dust. Your post is a scattershot, emotional reply with no relevance. Try harder–both online and at work.

Kent

January 4th, 2012
6:01 pm

SWA has already announced a 15% reduction in flying from Atlanta. I’m not sure where the idea of SWA expanding service is coming from. They are closing their Atlanta pilot base with the
Merger which also is an indication that growth in ATL is not in the near future. With SWA and American being the only two large carriers who are losing money the past 2 quarters I fail to see the case for any expansion in a market where the company they just took over had a lower cost per available seat mile than than they do.
By the way, how do you charge less when your costs are higher? The answer is simple-you cannot.

Steve

January 4th, 2012
12:46 pm

What on earth are you smoking. Southwest is not going to reduce Atlanta service. It is going to build on what it gets from AirTran. Southwest is going to eliminate some smaller AirTran cities that can’t support more than 1 or 2 flights a day….big deal. It will build its presence at Atlanta. Look at Atlanta 5 years from now and it will be a huge Southwest city with about 300 flights a day going everywhere. And, it will have a huge fan base by then of local Georgians who love it.

The Southwest service startup on Feb. 12th is classic Southwest and how it launches service to a new city. It is almost as if AirTran was not involved…and it isn’t really at this point. These new flights are coming from Southwest..not AirTran. New service is coming in from Southwest’s strong points: Chicago Midway, Baltimore, Denver, Phoenix, Houston Hobby, Austin and Las Vegas. It will build on these flights in the months that follow. Later, it will cut over AirTran cities. That will take time. But the Southwest onslaught has begun.

Southwest ATL

January 4th, 2012
11:43 am

If Southwest reduces flights in Atlanta, could that open up for someone else to expand (American post-bankruptcy) or a new player like Jetblue?