lowecur
Well-known member
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- Sep 14, 2003
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Just trying to stir discussion Zero. They will have to do something at DFW and soon. My guess is they will offer LUV these enticements. If not, they will elect Richard Daley, and he will close DAL.mach zero said:
[font=Georgia, 'Times New Roman', Times, serif]D/FW facing AA dilemma[/font]
Big carrier a huge obstacle to much-needed low-cost rivals
By Margaret Allen
Dallas Business Journal
Updated: 7:00 p.m. ET Dec. 12, 2004
Dallas/Fort Worth International Airport desperately wants a low-cost carrier to fill the 24 gates that will be vacated there next month, when Delta Air Lines Co. shutters its D/FW hub.
But good luck with that happening, industry analysts say. The big reasons: American Airlines Inc. (NYSE: AMR) and, to a lesser degree, Southwest Airlines Co.
Any carrier entering North Texas will be treading on the highly protected home turf of D/FW behemoth and fortress carrier American, which will have nearly 90% of the airport's flights once Delta is gone. And Southwest -- the undisputed King Kong of the low-cost segment -- has a hammerlock on the close-in regional routes allowed from Dallas Love Field.
Even so, it's critical that D/FW fill the vacant gates as quickly as possible. That's because Delta's pullback will open up about one-sixth of the airport's 137 total gates, and reduce the airport's total departures by more than 21%. The pullback will also slash D/FW's 2005 passenger volume by 10%, and cut the airport's estimated annual revenue by $35 million.
Ironically it all means that American -- which has a reputation for aggressively defending its turf -- is likely to scare off any potential low-fare carriers from taking the Delta gates, said airline analyst Jim Corridore, an equity analyst with New York-based ratings agency Standard & Poor's.
"With competition being brutal, it would be very difficult for a low-cost carrier to come in," said Corridore. "American Airlines is going to defend D/FW at all costs. American Airlines will price its fares below break-even, forcing another airline to match them, and gobble up losses."
Dallas is an especially competitive market, added Alan Sbarra, vice president with California-based Unisys R2A Transportation & Management Consultants.
"You have a dominant legacy carrier there, American Airlines, and they're going to defend their turf," said Sbarra. "A low-cost carrier can't come in and just pick off market share. What existing low-cost carrier would want to go in there and face that kind of competition?"
Only Southwest (NYSE: LUV), JetBlue Airways (Nasdaq: JBLU) and AirTran Airways (NYSE: AAI) would be likely to do so, say analysts including Boston-based Kevin Neels, director of the transportation practice at consulting firm Charles River Associates Inc.
But even those carriers are unrealistic candidates, Neels indicated.
"American Airlines has owned D/FW for a long time and you have to expect that if someone comes in, American is going to do something serious," said Neels. "The low-cost carriers tend to look for a place where they don't have to pick a fight."
Low fares more popular Currently, 10% of all the passenger fares for trips starting from and ending at D/FW are low-cost, according to Max Wells, chairman of the D/FW Airport board and chairman of Dallas-based The Oaks Bank & Trust Co. Two years ago, that number was just 3.5%. "So it's gone like a rocket and is growing," he said.
D/FW now has five low-cost carriers operating there. Besides AirTran, with 13 flights, there's ATA Airlines, with seven flights; America West Airlines, with 10 flights; Frontier Airlines Inc. with five flights; and Sun Country Airlines, also with five flights.
Southwest has already spurned D/FW's invitation to take Delta's gates, saying it wants instead to expand at Love.
And the low-cost carrier has once again set off an airline turf war in North Texas by saying it wants to roll back the long-standing, existing federal legislation that restricts long-haul flights from Love.
D/FW Airport officials say that kind of talk cost them a strong low-cost prospect that was recently close to signing on the dotted line for Delta's gates.
A JetBlue spokesman said the prospect wasn't JetBlue, and an America West spokesman said it wasn't America West. Meanwhile, Orlando, Fla.-based AirTran, which already has four gates at D/FW, declined to say whether the D/FW officials were talking about AirTrain or not.
But the discounter is comfortable with the level of service it currently has at D/FW, said Kevin Healy, AirTran's vice president of planning and sales. Just now, the airline clearly has other fish to fry.
AirTran is currently absorbed with a hoped-for acquisition of bankrupt ATA's assets, which would allow AirTran to expand in Chicago, the nation's second-largest airline market, at Chicago Midway Airport.
As for Frontier, the low-cost, Denver-based carrier already has a growing hub at Denver International Airport. And it's now in a huge market-share war with bankrupt United Airlines (OTC: UALAQ), the Colorado airport's increasingly shaky fortress carrier.
Similarly, D/FW shouldn't hold its breath waiting for New York-based JetBlue. That airline would like to come to Dallas at some point, said Todd Burke, a spokesman, but nothing's been accelerated as a result of Delta's departure, and nothing's going to happen anytime in 2005.
'Scary' competition Of all the low-cost carriers, only AirTran has experience staring into the mouth of the beast at D/FW.
Healy acknowledged it's "scary" going up against Fort Worth-based American.
From D/FW, AirTran offers discounted fares to Atlanta, Baltimore, Los Angeles, Las Vegas, Orlando and, soon, Fort Lauderdale, Fla. American has matched the discounter's fares on all routes.
For example, American added flights not only to Los Angeles International Airport, but also to that area's four nearby airports.
"For every one seat we offer, American offers 26 at discount prices," Healy said. "They match all of our fares, and all of our fare rules. ...We tend to bring out the best in our competitors. But that makes it tough."
The good news for consumers is that D/FW fares on those competitive routes have dropped by half, while passenger traffic has doubled, Healy said.
That kind of aggressive pricing might cripple a smaller carrier. But Healy said AirTran is big enough to withstand it.
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