Southwest Airlines expands service in New York

By Dow Jones Newswires-Wall Street Journal
Posted March 28 at 6:20 a.m.

Southwest Airlines Co. began offering airline service Sunday in Newark, N.J., a vital cog in the discount carrier’s efforts to expand in the New York-metro market and to attract more business travelers.

The flights at Newark Liberty International Airport — 18 daily by early June — aren’t the carrier’s first in the New York area. But they represent one of the airline’s biggest moves yet to lure more passengers traveling on business. Such passengers fly more frequently and consistently than vacationers, and they generally pay higher fares.

“We’ve got nearly 100 million passengers a year who fly us,” said Bob Jordan, Southwest’s executive vice president of strategy, and a large percentage of them “want to go to New York City, want to go to Newark.”

The current Newark service includes six flights to Chicago and two flights to St. Louis. On June 5, Southwest will add 10 daily flights—to Baltimore, Orlando, Fla., and other cities.

The discount carrier also operates eight flights daily from New York’s LaGuardia Airport and 24 daily flights from MacArthur Airport on Long Island.

Expanding into greater New York isn’t easy. Congested airports with poor, sometimes uncertain, weather threaten on-time arrivals and departures. In a market with five airports, Southwest could struggle to build name-recognition.

Southwest has operated flights at LaGuardia since 2009, and its average arrival delay there of nearly 18 minutes is more than triple the airport’s overall average of around five minutes, according to the Bureau of Transportation Statistics.

According to data calculated by Daniel McKenzie, an analyst for Hudson Securities Inc, the airline has reduced its available seats at MacArthur—some 40 miles east of LaGuardia and an hour-long train ride to Manhattan—by 28 percent over the past three years.

“New York City is an established airline market, so Southwest will have to force [its] way into the marketplace,” said Henry Harteveldt, a travel industry analyst at Forrester Research Inc.

About 40 percent of Southwest’s current passengers are traveling on business, which lags behind the roughly 50 percent-50 percent mix seen at hub-and-spoke carriers like United Continental Holdings Inc. and Delta Air Lines Inc.

Southwest has been moving into larger hubs, such as Boston, Denver and St. Louis, to try to attract more of the business crowd. The airline early this month revamped its frequent-flier program, doling out points based on ticket price and distance traveled and not on the number of flights, to appeal to passengers paying higher fares.

“Southwest needed a much higher revenue base, given that their labor costs were escalating, and the best way to do that was get a higher percentage of business travelers,” said Michael Derchin, an analyst for CRT Capital Group LLC in Stamford, Conn.

The change in the frequent-flier program irked some longtime Southwest fliers, who viewed it as a sign that the airline was starting to resemble the competition. Jordan said the previous frequent-flier program was an influential dissuader with business travelers, as passengers taking longer flights—and spending more on fares—didn’t net more rewards than those flying shorter distances.

Limited capacity in the crowded New York market, however, will force Southwest to remain relatively small in that market. “Ultimately, can you have 30 or 40 flights a day and adequately serve the market? I’d say no,” said Jordan. He added that Southwest will try to add additional slots as they come available.

Still, the airline says it is confident it can build its brand name in the New York area. Southwest will gain more LaGuardia slora — and up to 19 daily flights there — once its merger with AirTran Holdings Inc. is approved by federal antitrust regulators. The companies expect to receive approval in the coming months.

The combined discount airline could help drive down ticket prices at LaGuardia, airline analysts and corporate travel consultants said.

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One comment:

  1. jack (me) March 28 at 9:10 a.m.

    SW has been advertising this for, like about, 4 months.