AirTran Article
Here's an interesting article on AirTran's DFW expansion.
Cheers
By Trebor Banstetter and Bryon Okada
Star-Telegram Staff Writers
THE ASSOCIATED PRESS/PETER COSGROVE
Passengers line up at the AirTran Airways counter in Orlando, Fla. The discount carrier plans an expansion at Dallas/Fort Worth Airport, meaning more bargain flights and more competition for American Airlines.
D/FW AIRPORT - Low-fare carrier AirTran Airways plans to dramatically expand its service at Dallas/Fort Worth Airport, a move that analysts said is likely to drive down fares and cause major headaches for rivals American Airlines and Delta Air Lines.
AirTran, one of the few carriers that has been consistently profitable since 9-11, will operate up to 24 flights daily from four gates at the airport by early next year, D/FW officials said Thursday. The airline now operates six flights daily from a single gate.
"This is going to be good for consumers, and bad for American Airlines," said Morton Beyer, an airline industry analyst with consulting firm Morton Beyer & Agnew in Arlington, Va. American will be forced to match AirTran's deeply discounted fares in every market where the carriers compete, he said.
"Both airlines are brutal competitors," he said. "There will be blood on the tarmac."
The expansion will be the first major attempt by a discount airline to attack American's market share at D/FW, which is the Fort Worth-based airline's largest hub. American controls about 70 percent of the airport's traffic and can charge a premium for tickets on noncompetitive routes. With its single gate, AirTran currently accounts for less than 1 percent of D/FW's traffic.
"We face this type of competition from budget carriers in markets across our network," said Tim Wagner, an American spokesman. "From that perspective, this is not new to us."
The expansion will also mean challenges for Delta, which operates a small hub at D/FW and controls about 20 percent of the airport's traffic. Delta officials did not return phone calls Thursday seeking comment.
AirTran did not disclose which cities it will add to its D/FW schedule. The airline currently flies only to its primary hub in Atlanta. AirTran announced recently that it will begin serving Orlando, Fla., and Baltimore/Washington from D/FW later this year.
"We've been very pleased with the response we've seen at D/FW over the past eight years," said Tad Hutcheson, an AirTran spokesman. "We've ordered 110 new Boeing airplanes and we're looking for profitable markets to deploy those airplanes."
Analysts said Wednesday that, with so many new flights, AirTran is likely to add several cities to its schedule.
"I think we're going to see at least six to eight new destinations" from D/FW, said Ray Neidl, an airline analyst with Blaylock & Partners, an investment banking firm in New York.
"This is David and Goliath," said Dallas Mayor Laura Miller, an airport board member. "We expect American to be competitive from Day One. It will be great for the citizens who travel."
AirTran, which is based in Orlando, is in the midst of a significant expansion that began this year. In July, the carrier announced a $6 billion contract to buy 100 new Boeing 737s and 10 new Boeing 717s.
And the airline has been adding flights, focusing largely on destinations in the West. New service has included Los Angeles, Las Vegas and Denver.
In June, AirTran served 1 million passengers in a single month for the first time.
The airline is one of a handful of carriers that remains profitable. During the first six months of 2003, AirTran earned $59 million. The six largest airlines lost $4 billion during the same period.
Like other discounters, including Dallas-based Southwest Airlines and JetBlue Airways, AirTran has a lean cost structure. During the second quarter, its operating costs totaled 8.3 cents for every available seat on every mile of the airline's network.
In contrast, American spent 10.2 cents, and Delta spent 9.7 cents.
But AirTran differs from its low-fare rivals in some ways. While Southwest operates a city-to-city schedule focusing on secondary airports like Midway Airport in Chicago and Houston Hobby Airport, AirTran has a traditional hub-and-spoke system based at Atlanta's Hartsfield Airport, the world's largest airport.
AirTran also offers a first-class cabin, a perk that many business travelers and frequent fliers enjoy.
"AirTran has a very strong business model, and the business travelers love them," said Terry Trippler, an industry analyst with travel Web site Cheapseats.com.
For consumers, the move is likely to mean a significant decrease in airfares to any city that AirTran serves, analysts say, as American and Delta are forced to match its prices.
"AirTran is going to be setting the prices" on competing routes, said Tom Parsons, chief executive of Bestfares, an Arlington-based travel service that monitors airfares. "And that's American's worst nightmare."
For years, D/FW passengers have paid significantly more to fly. According to a recent consultant's report produced for an airport bond offering, the average yield for airlines at D/FW -- the money airlines collect per passenger mile flown -- is 47 percent higher than the national average.
The higher average airfares are due to the airport's status as a hub, the shorter-than-average length of flights and American's "dominating service in many travel markets," the report stated.
As the largest carrier at D/FW, American reaps most of the benefits of the higher airfares.
Delta may be even more vulnerable to AirTran's expansion, analysts said. That airline has been replacing many of its aircraft at D/FW with smaller regional jets. Many customers may prefer to fly AirTran's full-size planes rather than Delta's smaller ones, Neidl said.
"I think it's more of a threat to Delta than it is to American," he said. "They're a weak player at D/FW right now."
Delta has been battling AirTran for years at its primary hub in Atlanta. AirTran competes with Delta on 80 percent of that carrier's domestic routes from Atlanta, Beyer said.
He estimates that Delta loses about $1 billion in revenue annually because of competition from AirTran.
"Delta challenged them almost everywhere they went, but despite that, they've survived and are thriving," he said.
Neidl predicted that the carrier might build a "mini-hub" at D/FW that would connect the East Coast with western destinations such as Los Angeles and San Francisco. AirTran has created a similar small hub in Baltimore, where it has 33 daily flights, Neidl said.
D/FW officials expect the new flights will generate $22 million to $25 million in airport revenue and contribute millions of dollars more to the North Texas economy.
Joe Lopano, the airport's executive vice president of marketing, said the expansion should stimulate more traffic at the airport, bringing in an additional 1.2 million passengers.
The airport will set aside $250,000 to make changes to gates B13 through B16 to accommodate AirTran, said Kevin Cox, D/FW's chief operating officer. The gate leases begin Jan. 7.
After its expansion, AirTran's D/FW service will be the airline's fifth-largest operation, after Atlanta, Baltimore, Orlando and Tampa.
"We love American, and they will remain No. 1 at D/FW," Miller said. But she added that "we are thrilled to increase the competition at this airport."
Passenger growth is forcast to grow from 29,000 a month to 70,000 plus.
Both 737 and 717 aircraft are slated to operate from DFW.
