After the merger announcement between Southwest Airlines and Airtran last week, there was quite a bit of speculation on who would be relieved by the announcement and who would be on edge over it.  Conventional wisdom (which includes me) saw this move as relieving Southwest of some burdensome competition in some markets such as in the NorthEast and in Milwaukee.  Airtran competed effectively to drive down pricing with their flights. 

Some have said Delta has nothing to worry about and Frontier has been foolish enough to see this as an improvement for them.  I think Delta needs to worry a lot and Frontier is made weaker from this merger.

In Atlanta, Delta won’t see much change in Atlanta, I agree.  It’s possible that in the regional area near Atlanta, Delta may even do better in the short run.  However, Southwest has something Airtran didn’t:  frequency.  I think that Delta will discover that when Southwest’s capacity for frequency is deployed on traditional Delta / Airtran routes, competition is going to get a bit stiffer.  The truth is, Airtran had many destinations but not always that much frequency.  It’s one reason they were tolerated by many legacy airlines.

However, legacy airlines have generally always defended routes from other carries including LCC carriers by the ability to add frequency.  That’s never worked well against Southwest .  Southwest doesn’t go into a market with the idea of being a small player.  They enter routes where they can deploy reasonable frequency right off the bat and they know how to schedule flights just as well or better than most legacies.  Southwest’s size is already formidable weapon and it got a lot more formidable when the Airtran merger got announced.

Frontier and other LCC carriers (Hi jetBlue!) shouldn’t feel relief either.  It’s that same frequency with an additional weapon that can spell hard days ahead for them, too.  Southwest can compete with anybody’s frequency and I can think of just one LCC in just one area that has the frequency and capability to match what Southwest can ultimately deploy.  jetBlue has that in the New York City area.  But that’s it and Southwest is clearly building momemtum to be a bigger player in the NYC area. 

That additional weapon?  Network.  Yes, Southwest isn’t a traditional hub and spoke carrier but they do know how to make their network work for the consumer.   People aren’t adverse to connections if the price is right and the risk is relatively low.  Southwest has lots of focus cities / hubs to provide network access to destinations that the other LCC carriers just don’t have. 

Frontier has Denver and Milwaukee and is spread thinly in many cases.  While they compete against Southwest in Denver, that’s changing slowly.  They’ll never compete against Southwest in Milwaukee because Southwest is already capable of offering a network of destinations that Frontier can’t begin to approach. 

Southwest has also done something that other LCC carriers have foolishly ignored.  They covered the midwest.  It isn’t sexy territory but it’s territory with lots of industry and commerce and need to get from point a to point b.  It’s an area that appreciates a frugal approach to life and it’s an area with lots of family connections between cities.  It’s also an area that has a strong attraction to the leisure areas that Southwest is strong in such as Florida and Arizona and California. 

And now Southwest will have international capability to those same kinds of attractive leisure destinations in the Caribbean and Mexico.  Frankly, I think Frontier should be very scared of what Southwest can bring to the table because it potentially spells their demise.  I think jetBlue needs to start thinking about how they can grow their network and quite adding flights to the Florida and the Caribbean from the NorthEast. 

jetBlue is also weak in another respect.  They’re building focus operations in cities that are notoriously difficult to operate from in weather.  Their operations can be significantly impacted in New York City, Boston and Baltimore-Washington by the very same storm system.  All three of those are focus cities for them.  Southwest doesn’t have those same weaknesses.  They fly in the same areas and they’ll no doubt grow in those same areas but they continue to manage their risk by operating flights from those areas to other focus cities that are far less likely to be impacted by the same storm system. 

And Atlanta will just add to that capability.  I’m not saying Southwest’s system is perfectly isolated from risk but it is far more insulated from risk than other carriers like jetBlue and even the SuperLegacies. 

Southwest is scarier because it has lots of resources and can operate in a very agile manner.  The LCC’s can’t and the SuperLegacies can only do so much within the limitations of their hub style operations.

Filed under: Airline Service by ajax