Philly's doing great
Southwest plans to add flights, routes
The airline's expansion this fall will give it 41 flights daily and may make it the region's No. 2 carrier.
[size=-1]By Tom Belden[/size]
[size=-1]Inquirer Staff Writer[/size]
Southwest Airlines Inc. is on the move again in its favorite new city, poised today to announce
13 more daily flights from Philadelphia International Airport.
Southwest Airlines' rapid buildup means that,
by the end of the year, the discount airline will likely be the airport's
second-largest carrier in passengers, trailing only US Airways while surpassing American Airlines, Delta Air Lines and United Airlines.
Southwest's new service includes nonstop flights starting Oct. 31 to three cities it doesn't serve now from Philadelphia: Oakland, Calif.; Bradley Airport near Hartford, Conn.; and Jacksonville, Fla., according to airline industry officials who asked not to be identified.
The airline will have additional flights to five cities it already serves from Philadelphia, bringing its total to 41 daily departures, the officials said.
Southwest's latest expansion comes amid a round of industrywide fare cuts that have put even more pressure on older, high-cost airlines while encouraging more bargain-hungry passengers to fly.
Southwest officials say Philadelphia is the best new market the airline has entered, a sign of the pent-up demand for lower fares. The airline sold an average of 75 percent to 80 percent of its available seats from Philadelphia in May, compared with a systemwide average of 74 percent, based on passenger traffic statistics released last week by the airport.
Southwest began serving Philadelphia in two waves, with 14 flights to six cities on May 9, and 14 more flights to seven cities on July 6. Even before today's announcement, that was the most flights the largest of the low-fare carriers had ever offered in a new city.
"Philadelphia has done even better and grown faster than we expected," Gary C. Kelly, Southwest's chief financial officer, said in an interview last month. "It has every sign that it will continue to grow."
Southwest's entry here has added to the financial woes of US Airways Group Inc., Philadelphia's largest carrier for the last 15 years, by forcing it to match the low fares that the discounter offered on routes where the two airlines compete.
On the Philadelphia-Hartford route, Southwest will have introductory fares as low as $29 plus tax one way, compared to $281 plus tax today for the cheapest round-trip ticket on US Airways. The Jacksonville and Oakland routes already have low-fare competition.
At the same time,
by matching the lower fares, traffic has grown for US Airways and other airlines serving Philadelphia, with the number of passengers using the airport this year expected to approach a record 26 million, airport officials have said. US Airways, with 409 daily flights here, carried about 65 percent of the airport's passengers in May.
Southwest carried more than 60,000 passengers in May, when it operated for only 23 days and had only 14 daily flights to six cities. The number of flights will triple by late October, making it likely that Southwest will vault past the 127,000-passenger mark that American, Delta and United each reached in May.
US Airways says it believes that its customers are generally happy with its Philadelphia service but needed a break on the high prices the airline charged before Southwest arrived.
"Customers have told us they want to continue to fly with us," spokesman David Castelveter said. "What they didn't like was our fares."
Bruce R. Lakefield, US Airways president and chief executive officer, told employees last week that the airline might break even in the second quarter. But he said he expected the losses for both the third and the fourth quarters to be comparable to the $177 million the airline lost in the first three months of the year.
US Airways is in discussions with its labor unions, seeking a third round of work rule changes and wage cuts in an effort to reduce its operating costs. Lakefield said that, without cost reductions, US Airways could violate the covenants of a federal loan guarantee it received when it came out of bankruptcy last year, and "could simply run out of steam sometime next year."
The other so-called legacy airlines that predate deregulation of the industry in 1979 - American, Continental Airlines, Delta, Northwest Airlines and United - also are struggling financially because of competition from low-fare carriers and high fuel prices.
Last week, Southwest added to the other carriers' distress - and passengers' joy - by launching a new round of discounts for travel between mid-August and the end of October. Fares will range from $39 to $99 one way, plus tax, for tickets bought 14 days or more in advance.
In short order, the rest of the discounters, including AirTran, America West, ATA, Frontier, JetBlue and Spirit Airlines, had announced similar fare sales, and extended the price cuts through the end of the year.
Southwest's growth may be limited by the number of available gates at the airport. The airline leases four gates in Terminal E, which restricts the number of daily flights it can offer to about 45. Southwest officials have said they would seek additional airport gates as service increases, but all the other gates in Terminal E are leased to Delta and Northwest until 2006.
Besides announcing the additional flights today, Southwest plans to release its earnings for the second quarter, which analysts expect will be the Dallas company's 53d consecutive profitable quarter.
"The addition of Philadelphia to the Southwest network is a great example of the compelling growth opportunities that we believe lie ahead of the carrier," analyst Gary Chase of Lehman Brothers in New York told investors in a report on Southwest this week.