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Southwest limits growth at BWI

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lowecur

Well-known member
Joined
Sep 14, 2003
Posts
2,317
Well ain't this the truth. BWI owes it's growth and stability to LUV, but when an airline monopolizes an airport, capacity growth, international traffic, and n/s destinations either stand still or shrink once LUV's plans have matured. LUV will move into their own proprietary terminal shortly, growing from 21 to 26 gates, but don't expect to see a ramp up in capacity anytime soon. PHL will see all the growth in the coming years from LUV, and you may actually see a reduction in flights if demand begins to shrink as I predict in the coming years. They will abandon 8 gates in the former facility, and as yet no one is in a hurry to claim them.

Let this be an example of how when airport mgt lets one carrier dominate an airport (whether LCC or Legacy), there is an eventual price to pay.;)



Discount airlines' success limits BWI's growth

By Meredith Cohn
Sun Staff

November 14, 2004

In the past decade, Southwest Airlines and a handful of small followers have turned a sleepy airportinto a low-cost powerhouse and the envy of other airports.

But when Southwest moves into a state-financed $264 million terminal of its own next year, the airline that so pleases the airport and its budget-conscious travelers will hamper BWI's efforts to lure other carriers that could bring new services, destinations and income.

The industry is not widely expanding in the face of overwhelming financial woes resulting from fuel and labor costs, and a decline in big-spending business travelers. And the gold rush that brought Southwest, AirTran Airways and others to BWI has spread to other airports, where low-fare carriers hope to find a new niche.

"We're not avoiding competition with Southwest, but we're looking at where fares are still high," said Gareth Edmondson-Jones, a spokesman for JetBlue Airways Corp., the industry's newest low-cost darling with its leather seats and televisions.

The slowdown in growth at a mature BWI will affect all kinds of service. The airport probably won't get more low-fare carriers that travel to the nation's biggest cities and offer first-class amenities that set them apart from Southwest.

International service is expected to expand even more slowly, despite a $140 million terminal that opened in 1997 to accommodate more overseas flights. Ghana Airways recently was shut down, and Aer Lingus has said it will suspend service in the winter, and possibly longer, shrinking the number of international carriers at BWI to six.

At the same time, BWI faces new threats to its regional market share from Washington and Philadelphia airports, which have also landed low-cost airlines.

"At BWI, Southwest and a few others have done that. The issue now is Southwest has outgrown the space it has, and BWI had to do something or risk strangling the one thing keeping it going."

So, BWI is expanding its terminal to allow Southwest to grow, but the airline will leave eight empty gates that Mann and other analysts say might be only partially filled by other healthy low-cost airlines serving BWI.

A small amount of growth could come from major airlines that shift airplanes as they undo their traditional hub-and-spoke networks in favor of more point-to-point flights. But the rate of growth will be nothing compared with the rapid expansion of Southwest, which surpassed US Airways as the dominant carrier at BWI in 1999.

Jonathan Dean, a BWI spokesman, said airport and Wall Street officials worry when an airline takes over 70 percent of the service in a city the majority of travelers are passing through rather than coming to or from that city. Southwest is just nearing half the market share at BWI.

"Southwest clearly changed BWI forever," Dean said. "That's the Southwest effect. But BWI offers a healthy level of competition. ... Some airlines have already said they plan more service here. And the airport is consistently working with all its current airlines, as well as others, to boost service."

Carriers now at the airport have confirmed that they will expand in Baltimore. They include low-cost airlines AirTran, the airport's No. 2 carrier, which flies directly to big cities that Southwest doesn't serve, and USA 3000, which flies to some international cities not served by Southwest. US Airways, a major carrier operating under bankruptcy protection, said it will move a few flights to BWI as it shifts its airplanes around in its reorganization.

AirTran's executives say they feel no pressure to move quickly at Baltimore because space will be readily available. The more urgent focus for that airline and others has shifted to airports such as Chicago's Midway, where ATA Airlines recently agreed to give up its hub after filing for bankruptcy protection.

AirTran is ATA's choice to take over 14 gates there and a smaller number of gates at New York's LaGuardia Airport and Washington's Reagan National Airport. But Southwest, which announced new flights for Chicago last month in response to the ATA developments, and other airlines have expressed interest.

"There is plenty of room to grow in Baltimore, but in Chicago this is it," said Stan Gadek, AirTran's chief financial officer. Hey 2 Daves, are you reading this. If you ever plan to have a 190 base in Chicago in the next 5 years, this is your last chance. O&D traffic isn't anywhere close in St. Louis, Detroit, or Kansas City. Step to the plate, or forever regret it.

Southwest has much the same attitude about BWI. In the spring it will begin to move into its new terminal space, where it will have room to grow from 163 daily flights to more than 200, but the airline has not said how fast it plans to add service. The number of Southwest gates at BWI will increase from 21 to 26, with room for five more.

Because of Southwest's size, that means much of the flights and amenities offered by the airport will be up to the airline.

Southwest does not offer meals, posh hospitality suites or assigned seats, although officials said recently they are reconsidering the seating policy. The airline does not have first-class or business-class sections and doesn't fly directly to most large cities.

Further, analysts say there is excess capacity in the Northeast, so Southwest and other airlines will have to slow their growth at the airports they serve or add to their networks cities that are under-served.

Southwest has said it will add service, but to only one city in the next year. It will continue to identify airports that, like BWI, are near large populations but not so crowded as to slow the quick turnaround time that has allowed Southwest to keep its planes in the air and making money.

"It has to fit into our business model," said Whitney Eichinger, a Southwest spokeswoman. "It has to be overpriced and under-served. We look at landing fees and the radius to pull customers."

Southwest has a history of moving swiftly into airports, pushing high-cost airlines out and keeping others from moving in.

The airline passed over airports in Washington and Philadelphia in 1993 to move into BWI. But more than a decade later it started service at Philadelphia International Airport when others started looking there, even though the move could siphon off some of its business in Baltimore.

Southwest officials said they are near capacity in Philadelphia and would be interested in the 20 to 25 gates controlled there by US Airways if that carrier surrenders them.

"The country wants low-cost carriers," said Chris Chiames, senior vice president of corporate affairs at US Airways, who added that the airline will compete with Southwest by matching its low fares. "How we exist together remains to be seen."

The total annual economic impact from BWI, according to a report last year, exceeded $5.6 billion in 2002 and is bound to grow with Southwest's expansion.

Business neighbors are thrilled about the posh new terminal, which will not only entrench Southwest here but also offer modern baggage handling and security gates, as well as a new food court and shops.

"The ability of this new terminal to increase Southwest capacity here is a boon to the economic development of this region and to the state in general," said Samuel F. Heffner, board chairman for the business membership association BWI Business Partnership Inc. and a principal at Heffner & Weber Cos., a real estate business.

Keeping airlines happy and growing is important to BWI and other airports. Some have stopped practices irksome to airlines, such as charging them more in gate fees when another airline leaves the airport. Others have expanded or improved their terminals.

Dallas-Fort Worth International Airport is undergoing $2.7 billion in capital improvements. The work began before it was known that Delta Air Lines would dismantle its hub at the airport in coming months, but officials say they don't regret the expansion, that they hope to land JetBlue or Southwest.

"Most airports are finding ways to adapt to the ever-changing environment," said Kevin Cox, chief operating officer at Dallas-Fort Worth International. "If you sit on your hands and assume everything will be OK, you'll be in trouble."

BWI agrees and plans to improve the outside condition of the gates that Southwest will leave behind on an older concourse rather than try to sell outdated space to another carrier. That will give BWI more time to find replacements, Dean said.

"Southwest won't be completely out of its space until the end of 2005," he said. "This [gate renovation] project would take about two years to complete."
 
And this hurst the SWA shareholder HOW?

Read the article. SWA plans growth. But it's stretegic. THANK GOD SWA is more about profitibility than just a feaking market-share % number.

I don't see a problem at all with this strategy.

If BWI has a specific problem, it's not because of SWA, IMO.
 
Gates open up all the time. There are economically smart places to put a jet and not as smart. I.E. JBlU pulling out of ATL. Or SWA not going into DFW. Why fight real hard for a profit when you can get a better return without a battle someplace else. Pick the apples off the ground not up in the tree.

Now, LowerIQ explain how SWA will be blamed for an airports demise. I would like you to use examples from the past and correlate it to another place SWA provides service. Especiallly the international part I really want to hear that one. Please provide facts, not insurance man speculation. The reason I say Facts is because so far the only thing you have ever said that I believe is that you sell insurance and have some EMB stock.

Posted by LowerIQ "capacity growth, international traffic, and n/s destinations either stand still or shrink once LUV's plans have matured."
 
I was wondering that too N1atEcon...how SWA stagnates international traffic once it's "plans have matured". But, as usual, I am behind in my reading, and typically WAY out of the loop, so I'm not quite up to speed on how SWA is kicking buttt at it's international destinations.

LoweIQ, I also challenge you to site specific documented evidence of what you claim.

ultrarunner out....

...off to book a trip to an exotic international SWA destination...
 
Read the article gentlemen: "International service is expected to expand even more slowly, despite a $140 million terminal that opened in 1997 to accommodate more overseas flights. Ghana Airways recently was shut down, and Aer Lingus has said it will suspend service in the winter, and possibly longer, shrinking the number of international carriers at BWI to six."

As gate space dwindles it gives US legacy carriers that are both domestic and international no reason to use BWI as an international gateway. Check out UAL, AMR, UAIR, DAL, CA, or NWA. You won't find them running international flights from anyplace that doesn't have a large feed. International carriers by themselves usually like to code share with a domestic carrier before they offer overseas flights. The last time I looked, LUV doesn't code share with anyone.:)
 
lowecur said:
As gate space dwindles it gives US legacy carriers that are both domestic and international no reason to use BWI as an international gateway. Check out UAL, AMR, UAIR, DAL, CA, or NWA. You won't find them running international flights from anyplace that doesn't have a large feed. International carriers by themselves usually like to code share with a domestic carrier before they offer overseas flights. The last time I looked, LUV doesn't code share with anyone.:)
Regardless of WN's presence, none of the US legacies have a hub operation at BWI, so of course they don't use BWI as a gateway. Even if WN only had 50 flights a day at BWI, you still wouldn't see the legacies rushing to add international flights.
 
MedFlyer said:
Regardless of WN's presence, none of the US legacies have a hub operation at BWI, so of course they don't use BWI as a gateway. Even if WN only had 50 flights a day at BWI, you still wouldn't see the legacies rushing to add international flights.
Thanks, MedFlyer. I believe at one point UAIR had a hub operation at BWI. Do you remember if they had overseas flights? How about PHX? I only know of one carrier that operates into PHX on an overseas basis, and that is British Airways. I don't know the history of Sky Harbor, but it wouldn't surprise me if they had more overseas travel prior to the dominance by the LCC's.

In any case, my point was that a monopoly at any airport is not good. The overseas service is just a small portion of the potential problems that are created when one or two carriers dominate an airport. You see these cities building huge terminals for these airlines that want to hub, and all it takes is some financial problems to set them on their ear. Take a look at PIT, STL, and you can bet DFW may not be far behind. No airline should be allowed anymore than 25% of the gate space at any airport. As in investing, diversity is king. Yes, I even have many other stocks besides ERJ. :)
 
I love hub and spoke... Delays, mis-connects, more legs... I really love the service at the Taco Bell in BWI.... sooo friendly !

If an airline is able to 'hold their ground' so be it. Easiest way to protect market share..... Make big dough...

How far is the drive to Dulles ?.... they have alot of International departures last time I checked.... Isnt FlyI going to Europe yet ?

Sorry for the sacarsim in advance... Oh yeh... by the way... American is not going away any time soon in DFW....
 
mnboyev said:
Oh yeh... by the way... American is not going away any time soon in DFW....
DFW could turn into the perfect example of why you don't give airlines a monopoly position. I believe they are in the middle of a $2.7B expansion at DFW. DL is pulling the plug on their hub operation, and AMR has said they will try and fill the gap on those twenty something gates. That's just what both AMR and DFW don't need. AMR is just a stones throw away from Chapt 11. AirTran said they had plans to grow DFW until MDW came on the market. We'll see how that plays out.

I have been worried about B6 and the fact they don't seem to want to bid on MDW. If AirTran pays $87M or more for MDW gates, that will deplete AirTrans cash below $300M. They better hope it works, as $250M is not alot of money with over 20 new planes per year coming on board. You may just see B6 go back into ATL at some point as they build out a network of smaller 190 cities in the NE and SE. I believe AirTran has stated they may shrink ATL some if MDW comes on board. B6 may see a predatory opportunity at ATL in the next few years which could find DL and FL having financial problems. Who knows maybe the two Dave's want to just let natural attrition dictate their future growth.:)
 
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