Kelly Says Southwest "Must" Evaluate New York LaGuardia

Southwest Airlines "must monitor and continue to evaluate" a possible entry into New York LaGuardia Airport, said CEO Gary Kelly during a meeting this morning with industry analysts. Though no decisions are imminent, Southwest and other relatively healthy carriers are keeping options open in the wake of last week's bankruptcy filings by Delta and Northwest, and domestic capacity adjustments planned by other major carriers. Both Delta and Northwest share space at LaGuardia in Delta's main terminal.

"We have always avoided New York LaGuardia because of slot controls, high costs, congestion and inefficiency, and the impact that would have on our system," Kelly said. "The bigger we get, the less susceptible we are to a choice like that, but the fact of the matter is that right now you cannot get into New York LaGuardia. It is a more theoretical discussion right now. Where it goes in the future, as an airport in terms of access, I do not know."

Kelly noted that Southwest is "not willing to cede any market to anyone," including other low-cost carriers with designs on expanding into markets where bankrupt carriers reduce service.

"While we at one time questioned whether low-cost carrier growth opportunities were beginning to wane, that issue no longer seems relevant in the face of a rapidly retreating Delta and Northwest," said J.P. Morgan Securities analyst Jamie Baker, in a research note this morning.

Baker also said Southwest "is increasingly turning to fare increases in order to boost revenue," and "appears to have rescinded its three-day advance purchase fares in approximately 800 markets in an attempt to drive passengers booking three-to-seven days in advance into its higher, walk-up fare category."

Kelly addressed the first point this morning, saying $2-to-$4 one-way fare increases enacted in August and September would increase systemwide revenue by as much as 2 percent. "I feel real good about the revenue momentum this year," he said. "There are no signs of weakening demand and September will be another solid month."