A New Chapter In US Airline Evolution... Really.
This morning, United Airlines is announcing that they will be entering the Sarasota-Chicago market with 737-800 nonstops to its hub at O'Hare. On first pass, great. Congratulate SRQ and move on.
On the other hand, don't move on. Take a hard look at what this represents.
It's a first - United is jumping into a market (SRQ-Chicago) that Southwest is abandoning
It's more than just a new route. It's a bombshell indication of an emerging paradigm in the economics of air service. It's likely that this is the first time that a legacy carrier has entered a substantial market abandoned by an LCC.
And it wasn't dropped by Southwest because of lack of traffic - but, according to WN, because of the carrier's operational costs. They are in business to make money, and they make business decisions accordingly. It's the main reason that Southwest has prospered for over 40 years. No point in staying at a destination that can't generate dollars to their bottom line.
Background: A New Competitive Paradigm: The LCC "Advantage" Illusory? The accepted lore is that LCCs are using their alleged cost advantages to blow legacy carriers out of markets left and right. The only problem with that fantasy is that the "LCC cost advantage" is often a figment of imagination on the part of financial analysts who wouldn't know a 737 from a vacuum cleaner.
Last month, Southwest Airlines advised Sarasota-Bradenton International Airport that, as part of its merger process with AirTran, it would pull out of the SRQ market in August.
The service being eliminated isn't just some one-flight-per-day drop in the bucket. It encompasses approximately 370,000 annual passengers generating over $47.3 million in revenues. This includes nearly 120,000 local O&D passengers that AirTran is carrying annually to Chicago/MDW, with average load factors in the 80% range, and all-up passenger revenue yields somewhere near 14.5 cents.
But even though MDW is one of Southwest's largest operations, with the potential for significant additional connecting feed traffic on the SRQ-MDW segment, the airline advised that the decision to drop SRQ wasn't even close - the loss factor was, according to WN, clear, unambiguous, and unsustainable with Southwest's cost structure and operating model.
So, Southwest is leaving. And United is moving to replace the gap left in Chicago service. In addition, Delta is also seeing potential in a post-AirTran/Southwest SRQ, too. They just filed schedules for nonstops to LGA. As did JetBlue.
Ponder the implications. It's a new set of competitive economics in the air service business.
This morning, United Airlines is announcing that they will be entering the Sarasota-Chicago market with 737-800 nonstops to its hub at O'Hare. On first pass, great. Congratulate SRQ and move on.
On the other hand, don't move on. Take a hard look at what this represents.
It's a first - United is jumping into a market (SRQ-Chicago) that Southwest is abandoning
It's more than just a new route. It's a bombshell indication of an emerging paradigm in the economics of air service. It's likely that this is the first time that a legacy carrier has entered a substantial market abandoned by an LCC.
And it wasn't dropped by Southwest because of lack of traffic - but, according to WN, because of the carrier's operational costs. They are in business to make money, and they make business decisions accordingly. It's the main reason that Southwest has prospered for over 40 years. No point in staying at a destination that can't generate dollars to their bottom line.
Background: A New Competitive Paradigm: The LCC "Advantage" Illusory? The accepted lore is that LCCs are using their alleged cost advantages to blow legacy carriers out of markets left and right. The only problem with that fantasy is that the "LCC cost advantage" is often a figment of imagination on the part of financial analysts who wouldn't know a 737 from a vacuum cleaner.
Last month, Southwest Airlines advised Sarasota-Bradenton International Airport that, as part of its merger process with AirTran, it would pull out of the SRQ market in August.
The service being eliminated isn't just some one-flight-per-day drop in the bucket. It encompasses approximately 370,000 annual passengers generating over $47.3 million in revenues. This includes nearly 120,000 local O&D passengers that AirTran is carrying annually to Chicago/MDW, with average load factors in the 80% range, and all-up passenger revenue yields somewhere near 14.5 cents.
But even though MDW is one of Southwest's largest operations, with the potential for significant additional connecting feed traffic on the SRQ-MDW segment, the airline advised that the decision to drop SRQ wasn't even close - the loss factor was, according to WN, clear, unambiguous, and unsustainable with Southwest's cost structure and operating model.
So, Southwest is leaving. And United is moving to replace the gap left in Chicago service. In addition, Delta is also seeing potential in a post-AirTran/Southwest SRQ, too. They just filed schedules for nonstops to LGA. As did JetBlue.
Ponder the implications. It's a new set of competitive economics in the air service business.
