As their larger competitors seek to trim unprofitable domestic flights, four low-cost carriers continue expanding their networks. In just the past few weeks, AirTran, Frontier, JetBlue and Southwest each announced new services in business markets.
According to a recent Accenture survey of 530 U.S. business travelers, 73 percent said they expect their use of low-cost air carriers to remain the same or increase in the next six months. Roughly 76 percent said their use of LCCs would increase further should those airlines offer more flights from primary airports.
Marking a return to Denver after a 20-year absence, Southwest Airlines in January 2006 will resume service. It will operate five daily roundtrips to Las Vegas and four dailies to both Chicago Midway and Phoenix. The new services also will facilitate connections across Southwest's coast-to-coast network.
"Southwest has experienced strong customer demand to serve an obvious gap in our route network," said CEO Gary Kelly. "Denver International Airport has dramatically reduced its costs, increased its efficiency and demonstrated it can be a viable opportunity."
The airline said it made the announcement earlier than it originally planned, due in part to aircraft availability after Hurricane Katrina service disruptions.
J.P. Morgan Securities analyst Jamie Baker said that in the three affected markets, "total seat capacity is expected to rise 27 percent, year-over-year."
"The company has been looking at Denver as a potential market opportunity for years," added Calyon Securities analyst Ray Neidl. He also said Southwest is planning to grow overall 2006 capacity by roughly 8 percent as it takes delivery of 33 new Boeing 737-700s.
Meanwhile, Southwest's network would grow in other areas should the U.S. government decide to phase out or entirely scrap the Wright Amendment, a controversial regulation that limits flight operations at Dallas Love Field
(BTN, June 6). The Senate Commerce, Science, and Transportation Committee's Aviation Subcommittee on Nov. 10 will hold a hearing on the issue. Witnesses officially have not yet been announced, but printed reports said both American Airlines CEO Gerard Arpey and Southwest Airlines chairman Herb Kelleher would participate.
Denver serves as a hub for both United Airlines, which has decreased service in the market during its three-year bankruptcy restructuring but still commands more than 50 percent market share, and Frontier Airlines, which accounts for nearly one-quarter of all Denver market seats and this month announced plans for a deeper schedule. Frontier in the coming months will boost frequency to Chicago Midway, Dallas, Las Vegas, Phoenix and Salt Lake City.
In new Southwest markets, Frontier seat share is expected to drop from 32 percent to 26 percent, said J.P. Morgan's Baker. "We're more worried about United," he added. "With Independence Air faltering, United has finally begun to trim back its supersized operation in Washington Dulles. So far, this capacity hasn't be redistributed to Denver."
AirTran on Dec. 6 will launch multiple daily roundtrip flights between Chicago Midway and both Boston and Minneapolis. The carrier already operates eight daily frequencies between Midway and its Atlanta hub. Next month, it also will launch daily nonstop service between Detroit and Atlanta.
AirTran also last week stopped listing inventory and fares in Expedia. The carrier cited its need to reduce distribution costs and the fact that its arrangement with Worldspan, the global distribution system that processes most Expedia bookings, has been terminated. AirTran inventory after Dec. 15 no longer will be accessible through the Worldspan system.
Meanwhile, JetBlue will continue taking delivery of new 100-seat Embraer aircraft. It already announced plans to deploy some on a new high-frequency route between New York JFK and Boston
(BTN, Oct. 17), and to Austin, Texas, and Richmond, Va. It is expected to enter several other medium-size markets.