Expanding Southwest Airlines making presence felt in Denver; Low-cost carrier adds cities, flights, sees more growth ahead

Southwest Airlines is set to launch its biggest expansion in Denver since arriving in the city nearly two years ago.

The Dallas-based carrier on Sunday adds 14 new, daily departures and five additional destinations to its roster here, cementing its position as Denver International Airport's third-largest airline.

And the carrier isn't about to stop there: It also expects to announce more service from DIA "in the weeks to come."

"You will see more growth, and the rates of growth will be similar" to what the airline has done here in the past, said Martin Prichard, a schedule planner for Southwest.

This weekend's expansion - and any future growth - will help Southwest gain more market share in Denver. It also puts added pressure on the carrier's competitors, although Frontier Airlines, in particular, seems to be holding its own against the low-cost juggernaut.

Regardless, the move is a boon to consumers, who are benefiting from increased flying options and cheaper tickets.

Southwest's growth "is helping the community because they are lowering fares and more people are flying, and DIA gleans more revenue from passenger facility charges," said Evergreen aviation consultant Mike Boyd.

As of Sunday, Denver travelers will be able to fly Southwest nonstop to Albuquerque; Amarillo and Austin, Texas; Oklahoma City; and Seattle. The new service also offers passengers one-stop connections to Dallas via Albuquerque, Amarillo and Oklahoma City.

In addition to the new cities, Southwest will add another daily round-trip flight to its existing service between Denver and both Nashville, Tenn., and Salt Lake City.

The move gives Southwest 56 daily departures from Denver to 16 cities.

Planes not as full

Southwest has expanded exponentially since arriving in Denver in January of last year.

Its share of passenger traffic at DIA hit 5 percent during the first eight months of 2007, up from 3 percent for the same period in 2006. It posted a 75 percent spike in passengers during that time, far outpacing the 4.6 percent increase in traffic at DIA.

Some observers say this weekend's expansion could eventually help Southwest capture 7 percent of the market. In addition to attracting more passengers in Colorado, Southwest also will be able to route an increasing number of travelers through Denver via one-stop flights as its network grows.

Still, it hasn't been all roses for the carrier.

Southwest's load factors - which measure occupancy levels on flights - have been significantly lower than its competitors on many Denver routes.

Between Denver and Las Vegas, for instance, its load factor averaged 68.3 percent for the 12-month period ended in June, according to data provided by The Boyd Group. That compares with 83 percent for both United and Frontier. Its load factor between Denver and Chicago averaged 70 percent for the period, vs. 74 percent for Frontier and 82 percent for United.

Consultant Boyd also says Southwest is struggling to penetrate the Denver market, pointing to Frontier's strong traffic numbers and continued growth.

And the carrier hasn't gained market share as quickly in Denver as in some of its other newer cities.

In Philadelphia, Southwest managed to capture 10 percent of the market during its first year in the city. It grabbed a 13 percent share in Pittsburgh and a 9 percent share in Fort Myers, Fla., according to airport traffic numbers.

Low-cost bellwether

But Southwest shrugs off such concerns.

The carrier's average load factor across its system is typically lower than that of most airlines, and it can afford to carry fewer people on each plane because its costs are among the lowest in the industry.

And just because Frontier continues to grow doesn't mean Southwest isn't penetrating the market. Southwest actually helps its competitors attract more passengers, as those airlines lower their fares to compete, stimulating more traffic. Fares between Denver and Salt Lake City dropped by 41 percent since it arrived here, for example, while overall passenger traffic on the route jumped nearly 50 percent, the carrier said.

Southwest also says it has a higher percentage of passengers - when compared with the number of available seats it offers - who originate in Denver than United or Frontier.

"We are happy with our revenue performance, and our traffic is growing a lot," Prichard said. "We're seeing great increases, and we think that's encouraging."

Although it hasn't captured as much of the market as in other new cities, Denver is a different beast. Frontier and United already were competing aggressively here, meaning it was a tougher market to penetrate than those with just one dominant carrier.

"Denver is one of the few places where there was already a concentration of low-cost service," said Ron Kuhlmann, a transportation consultant with the firm Unisys. "This may be the future in terms of where the industry is going, where a lot of the low-cost guys for the first time are in competition with each other. This could be a bellwether."