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Interesting article about WN at MDW

Buckaroo

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[font=Tahoma, Verdan. Lucida]The Midway Situation:
[/font][font=Tahoma, Verdan. Lucida]An Example of The New Competitive Environment[/font]

[font=Tahoma,Verdana,Lucida]Southwest's acquisition of an additional nine gates at Chicago Midway would tend to draw one to the conclusion that the airline is planning a massive expansion there. [/font]

[font=Tahoma,Verdana,Lucida]The latest Airports:USA forecast for MDW indicates this is not likely. Furthermore, this action by Southwest reveals a major change in the competitive environment in general, and that which Southwest faces in particular. [/font]

[font=Tahoma,Verdana,Lucida]That's the part that most analysts are missing. This isn't about gates at MDW. It's about a quiet sea-change in the airline industry. Two years ago, it was Southwest that pretty much called the competitive shots. They would make a move, and legacy carriers would scramble to react. [/font]

[font=Tahoma,Verdana,Lucida]Today, the competitive landscape has fundamentally changed. Southwest must now deal not only with traditional legacy carriers - a couple of which are getting more cost-competitive by the day - but also with other LCCs. WN now has to watch its six for moves from jetBlue and AirTran and Spirit, among others, who are staking out turf on the East Coast and in Florida. [/font]

[font=Tahoma,Verdana,Lucida]Southwest also has internal imperatives which it must address. It recognizes that it must expand substantially in the next 18-24 months, to allow revenue growth to offset high labor costs that will become more pronounced as its fuel hedges expire. Events in the industry - external to Southwest - will have a lot more influence on how and where Southwest will apply its resources in the future.[/font]

[font=Tahoma,Verdana,Lucida]Making this even more complex is the irrational carrier or two, such as Independence Air, offering fare sales that appear to have been dreamed up in a barroom. The result is that Southwest is now in the position for the first time of having to respond and react to other carriers' actions. [/font]

[font=Tahoma,Verdana,Lucida]Take a look at fleet plans. AirTran has dozens of 737s coming on line. jetBlue is keeping factories in France and Brazil busy with over 100 more jets. Spirit just ordered more A-321s. Frontier is looking for places to add service, too. Forget the drivel from some in academia. There's a finite number of markets that can support the LCC model operating exclusively airplanes between 100 and 150 seats. [/font]

[font=Tahoma,Verdana,Lucida]So here's the conclusion. Where Southwest goes in the future and how they do it will be increasingly affected by aggressive moves on the part of other carriers - particularly other LCCs that are hungry for expansion.[/font]

[font=Tahoma,Verdana,Lucida]The Midway gate acquisition was such a move. [/font]


[font=Tahoma,Verdana,Lucida]Prior to ATA’s restructuring in late 2004, Midway was a stable airline environment, with ATA and Southwest in an uneasy competitive détente. This changed toward the end of the year, when ATA began to rapidly collapse. This left 14 gates up for grabs, which meant that another, more potent competitor could enter MDW, and set up a truly competitive hub operation facing Southwest.[/font]

[font=Tahoma,Verdana,Lucida]AirTran and America West both made overtures for ATA and/or its gates, with the full intention of doing just that. Southwest was forced to shift focus from other markets and concentrate on gaining control of enough of the former ATA gates to preclude either AirTran or America West from being able to establish what would be a very nasty competing operation at MDW.[/font]

[font=Tahoma,Verdana,Lucida]This was not likely part of Southwest's overall strategy prior to ATA doing a re-enactment of the Titanic. WN had been (and still is) focusing on building its East Coast network in reaction to expanded competitive threats from jetBlue and other carriers. Examples: entering Philadelphia to preclude another LCC from entering in a big way, opening Pittsburgh as a necessity to shore up and strengthen PHL, and enhancing service to points in the state of Florida, where carriers such as AirTran, jetBlue, and Spirit are becoming increasingly frisky.[/font]

[font=Tahoma,Verdana,Lucida]Therefore, this nine-gate acquisition by WN should not be misread as a plan to massively expand at Midway. The entire purpose was to resolve an immediate competitive problem.[/font]

[font=Tahoma,Verdana,Lucida] [/font]


[font=Tahoma,Verdana,Lucida]Which brings us to MDW’s future. Airports:USA forecasts now indicate that it may be late 2007 - two years - before 2004 enplanement levels are hit again. [/font]

[font=Tahoma,Verdana,Lucida]It will all depend entirely on the rate which Southwest populates its new gate capacity. There are no other airlines with the intent or the ability to enter MDW with a major expansion that would spike MDW enplanements. jetBlue is a possibility, but it has a substantial number of other opportunities - such as Boston - before it tries going head to head with WN. Service from a few points, yes. A major operation that would re-set MDW on a strong growth path, no.[/font]

[font=Tahoma,Verdana,Lucida]The bottom line: MDW is now stabilized competitively. For the time being, Southwest has other, more pressing competitive imperatives elsewhere. [/font]

[font=Tahoma,Verdana,Lucida]Imperatives that are increasingly driven by other airlines, not Southwest.[/font]

[font=Tahoma,Verdana,Lucida]________[/font]
[font=Tahoma, Verdana, Lucida]Airports:USA is unique. This analysis of MDW is typical of how the Airports:USA forecast methodology produces better and more informative data. [/font]

[font=Tahoma, Verdana, Lucida]Not only does it provide its subscribers with on-going updated forecasts for 136 of the nation's airports, but it explains the trends and issues that are driving passenger shifts. Knowing the numbers is only partial knowledge. Understanding them is the whole picture.[/font]

[font=Tahoma, Verdana, Lucida]No other forecast source provides this.[/font]

[font=Tahoma, Verdana, Lucida]If you need accurate, timely, and in-depth airport forecasts and trend analyses, updated constantly throughout the year, we suggest you check out Airports:USA.[/font]
 
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