D/FW Officials Feel the Sting of Multiple Airline Rejections

To officials at Dallas/Fort Worth Airport, Thursday's announcement that Southwest Airlines will begin service in Denver is the latest in a series of frustrating rebukes from low-fare airlines.

Last week, JetBlue Airways said it would launch its first flights in Texas -- but at Austin's Bergstrom Airport, not D/FW.

Then AirTran Airways said it was suspending one of its high-profile D/FW routes, two daily flights to Los Angeles Airport, because of high fuel costs.

Now, after months of saying that D/FW doesn't fit its business model, Southwest executives said they will begin flights at Denver Airport, which D/FW officials say has many similarities to D/FW.

"D/FW stands ready with 22 available gates and $22 million in incentives," said Joe Lopano, D/FW's executive vice president of marketing and revenue management.

"And yet they chose to walk past it and go to a congested, expensive hub that's controlled by United and Frontier."

Southwest's decision to fly to Denver surprised many in the airline industry.

For years, the airline has said Denver's airport is too expensive for its lean business model.

And competition is likely to be fierce. United Airlines operates a hub there, as does low-fare carrier Frontier Airlines, and both are expected to battle hard to protect their turf.

"Southwest is taking on two entrenched carriers that have low costs and a full-service product," said Mike Boyd, an airline industry consultant with the Boyd Group of Evergreen, Colo. "And it is not a cheap airport."

But Southwest executives said the time is right to return to Denver. Southwest ended service in that city 20 years ago.

"We've been concerned about the costs in the past, but they've done a remarkable job in bringing costs down," said Gary Kelly, Southwest's chief executive, during a conference call.

"It's now a highly regarded, very efficient airport."

D/FW officials, who have been running billboards and ads in North Texas urging Southwest to begin long-haul service at D/FW, say their airport is a more sensible choice for the airline.

According to Lopano, airline costs are significantly higher at Denver than at D/FW.

And the airports' records of flight delays are about equal.

Similarly, Lopano said, although D/FW is the home of American Airlines' fortress hub, which is a challenge for competitors, Denver is just as challenging with its United and Frontier hubs.

Southwest's decision to provide service at Denver Airport proves "beyond any doubt" that the airline could operate successfully at D/FW if it wished, he said.

"If you can compete against a dog that big, you can compete with any dog," Lopano said.

"All of the excuses they've given in the past just don't hold water."

Kelly countered that the two airports are "apples and oranges." He said United's Denver hub handles about 400 daily flights, compared with more than 800 by American at D/FW.

And he said Denver fits well into Southwest's Western route network, which includes a strong presence in Phoenix, Las Vegas and California.

Most importantly, Kelly said, Denver does not have an alternative airport, unlike North Texas, which also has Dallas Love Field.

"We don't serve Denver at all right now, but we do serve North Texas from Love Field," he said.

"We're already in the market."

But Southwest can only serve cities in Texas, neighboring states, and Mississippi, Kansas and Alabama from Love because of the Wright Amendment. The Senate approved a measure Thursday to add Missouri to the states that can be served from Love Field.

For more than a year, Southwest executives have lobbied to have the 1979 law overturned, arguing that long-haul service from Love would reduce fares at both airports and boost the local economy.

D/FW officials, as well as American executives, have strongly opposed the effort, arguing that a repeal would damage the larger airport.

American has threatened to move scores of flights to Love to compete if the amendment is lifted. The airline says that would weaken its D/FW service considerably and the regional economy would suffer.

American spokesman Tim Wagner said the Denver decision is "a little strange." But he added that Denver has clearly benefited from having a single airport.

"It's a good example of a city recognizing that competition between airports is a negative thing," he said.

Regardless of the challenges that Southwest will face in Denver, some analysts opined that the airline's competitors are the ones most at risk.

Michael Linenberg, a Merrill Lynch airline analyst, downgraded his rating on Frontier stock from buy to sell soon after the Southwest announcement.

"The entry of Southwest plus United's expected emergence from bankruptcy in spring 2006 could represent a formidable competitive challenge for Frontier," he wrote in a report to investors. He noted that more than 90 percent of Frontier's flights go through Denver.

Investors dumped Frontier's stock (ticker: FRNT) Thursday on the news. The stock fell $3.08 per share, or nearly 29 percent, to close at $7.68 per share.

Southwest shares ( LUV) also dipped, although the drop was much smaller. Shares were down 51 cents, or about 3 percent, finishing at $15.07 per share.

"Denver is a market that makes sense for us," Kelly said. "We're very excited about being there."

IN THE KNOW A tale of two airports

Southwest Airlines is launching new service at Denver Airport while continuing to refuse to fly from Dallas/Fort Worth Airport.

D/FW Denver
On-time arrivals (1) 81% 82%
Total departures (2) 27,000 18,000
Hub market share (3) 84% 74%

1 January - August 2005

2 August 2005

3 American Airlines and American Eagle operate hubs at D/FW. United Airlines, United Express, Ted and Frontier Airlines operate hubs at Denver.

SOURCES: D/FW Airport, Denver Airport, U.S. Department of Transportation

IN THE KNOW A tale of two airports

Southwest Airlines is launching new service at Denver Airport while continuing to refuse to fly from Dallas/Fort Worth Airport.

D/FW Denver
On-time arrivals (1) 81% 82%
Total departures (2) 27,000 18,000
Hub market share (3) 84% 74%

1 January - August 2005

2 August 2005

3 American Airlines and American Eagle operate hubs at D/FW. United Airlines, United Express, Ted and Frontier Airlines operate hubs at Denver.

SOURCES: D/FW Airport, Denver Airport, U.S. Department of Transportation

Fort Worth Star Telegram


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