Carriers Increasingly Picky About Where They Fly

Choosing routes is a complex, time-consuming task that ultimately boils down to figuring out which flights will be profitable.

So carriers access a bevy of data that help paint a picture of demand, looking at how many flights serve the route as well as how many seats that represents, how full the planes are and how much other airlines are charging.

Part of the process involves determining how much connecting traffic new service will generate. If United wants to add a daily flight from Denver to Las Vegas, it looks not only at how many passengers might fly that route but also at how many travelers it might be able to get to fly from, say, Washington, D.C., to Las Vegas, with a connection in Denver.

"We look at what the specific demand is between nonstop points, essentially how much demand there is in the local market," Knight said. "But we're also looking to maximize our overall network."

Connecting traffic was a key consideration for Southwest when it was determining which cities to serve from Denver.

The carrier, which launched service at Denver International Airport in January, settled on Las Vegas, Phoenix and Chicago - three of its largest hubs. By flying to Phoenix and Las Vegas, Southwest can connect Denver passengers to its other hubs on the West Coast. By flying to Chicago, it can connect them to its markets on the East Coast.

"Profitability is a primary factor," said Lee Lipton, who works in strategic planning at Southwest. "But we're also looking at which markets we think will generate the most traffic and how well they will provide connectivity into the rest of our system."

Competition is another huge factor. Typically, the more airlines that serve a route, the harder it is to make a profit on it. That's one of the reasons airlines are struggling to make money now. Fares have remained low because of intense competition across the United States.

While that's good news for consumers, it's been difficult for airlines to raise airfares enough to cover the rising cost of jet fuel.

Frontier doesn't think it can charge enough money for fares to Boston to make a profit in part because United, US Airways and low-cost carrier JetBlue already serve the market. The competition from Denver to Calgary, however, is a bit different. United and Air Canada both offer nonstop service between the cities, but Frontier has a lower cost structure than those airlines and can charge less.

Along the same lines, Southwest - the nation's largest low-cost carrier - felt it could lower fares in Denver and attract more passengers here in general, despite competition from United and Frontier.

In some cases, competitive issues can trump profitability. Airlines, particularly larger ones, sometimes start service or flood a competitive route with flights knowing that it's unlikely the additions will make money. Their goal: maintain or increase market share.

"Airlines have a market-share mentality," Hamlin said. "Competition is a very powerful force. For some airlines, it might make sense to take a short-term loss to get a long-term gain."

American Airlines, for example, recently added some to compete with Southwest. The carrier said the new service won't necessarily be profitable but called it a necessary move to keep passengers from flying its rival.

Competitive forces and customer needs also can force an airline to consider adding unprofitable flights. Airlines often have several underperforming flights on popular routes but keep them so they can provide a breadth of options throughout the day.

"We need to have a flight that leaves at that time to be relevant to business travelers," Happ said. "You've got to have flights that give you a span of coverage there or you're going to be marginalized."

A host of other factors help airlines determine whether or not they can make profits on a given route.

Airport costs, for example, can lure or deter carriers to a particular area. Take Southwest, which left Denver 20 years ago because it felt the fees to operate here were too high. In recent years, Denver International Airport has been able to reduce the amount it charges airlines, a key reason behind Southwest's decision to return.

Airlines also are limited by the number of gates they have at a particular airport. And then there's the tough-to-master issue of timing. Airlines typically order new planes well in advance and plan accordingly for growth.

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