Southwest Airlines plans to launch service at New York's LaGuardia Airport in late June with five daily nonstops to and from Chicago Midway International Airport and three to and from Baltimore/Washington International Airport.
Though the carrier's entry into the New York market remains modest, its planned service taps into larger networks already established at Chicago Midway and Baltimore/Washington. Southwest said connecting options at those airports offer more than 45 destinations from New York.
Southwest's new routes put the carrier "smack-dab in the middle of a hornet's nest of competition," airfare tracker Rick Seaney, CEO of FareCompare.com, this month in a research note said, noting there already are 103 daily departures connecting metro Washington, D.C., with New York-area airports, and 76 daily departures connecting New York with Chicago airports.
"The method to Southwest's madness is revealed with a quick look at these two prominent Southwest 'focus cities.' Chicago Midway, with 222 daily departures, and Baltimore, with 173 daily departures, allow Southwest to extend their one-stop reach from New York LaGuardia to slightly over three-fourths of the remaining 65 cities in their route system," he said.
The carrier in December 2008 announced its initial plans to launch service in New York through the purchase of airport slots owned by the now-defunct ATA Airlines. The announcement prompted analyst musings on the coming of the "Southwest effect" to the largest U.S. business travel market and spurred hopes among some corporate travel buyers that Southwest's entry would lower fares
(BTNonline, Dec. 8, 2008).Michael Boyd, head of aviation consultancy The Boyd Group, in a research review of Southwest's move into LaGuardia said the potential for the "Southwest effect"—which results in reduced fares and higher demand—would be minimal.
"The consensus-following analysts will inject that the 'Southwest effect' will stimulate the market based on lower fares. Memo to analysts: You are wrong." Boyd wrote. "True, they may try lowering fares, but United and American will match. In a business market like Chicago-New York, that'll result mostly in decimated yields, not stimulated traffic."
Still, true to form, Southwest is entering the market with introductory fares of $89 per way for Chicago Midway service and $49 per way for Baltimore/Washington service.
Seaney, examining fares filed for the new routes, said, "In the new price structure out of New York, the walkup airfares purchased by many business travelers are lower than the legacy airlines, in some cases substantially, with prices ranging from $225 to $425 each way. This may be in part to compensate for the legacy airlines' advantage with frequent nonstops to several popular business destinations out of New York where Southwest must connect with a one-stop."
Meanwhile, addressing concerns about long delays at LaGuardia tainting system performance, CEO Gary Kelly during Southwest's first-quarter earnings call this month said, "With 16 trips, we think the risk of that is modest." Kelly noted the revenue potential of the New York market, saying, "We have real evidence based on our ATA codeshare about what LaGuardia will do for Southwest. We're very confident that with that number of flights it will be a positive contributor."