The Southwest Effect: Fares Fall, Flights Soar in Philadelphia, Pa.

A year ago, some predicted that the arrival of discount giant Southwest Airlines in Philadelphia would save the region hundreds of millions of dollars in airfare.

If anything, they missed the mark. By one calculation based on average fares, the low-fare era ushered into Philadelphia by the Dallas-based carrier has helped save travelers about $1.2 billion on an annual basis.

Southwest, which launched its service last May with 14 daily flights to six cities, now has 50 flights a day to 17 cities, making it the second-largest carrier in Philadelphia after US Airways. But Southwest's influence goes far beyond its 6.5 percent Philadelphia market share, as it forces US Airways and others to slash many of their own fares to stay competitive.

Average one-way fares in Philadelphia, which had been declining moderately, plummeted 26 percent last year, to $125 from $170 in 2003, according to airport officials. With around 28 million arrivals and departures a year, that indicates annual savings of about $1.26 billion.

Southwest isn't the only low-fare carrier shaking up Philadelphia. Denver-based Frontier Airlines entered the market last year with bargains on east-west fares, and AirTran Airways, based in Orlando, Fla., is in expansion mode.

The competitive onslaught helped send US Airways into bankruptcy protection even as it protected its turf by cutting fares and increasing its Philadelphia flights from 405 a day last summer to 495 a day now.

Last month, Barry Hale brought about 15 employees to Voorhees for a sales and management seminar, saving a "couple thousand" dollars by flying Southwest, primarily from New England.

The arrival of the discount carrier "made us more mobile," said Hale, president and owner of Hale Trailer Brake & Wheel, which sells and services truck-trailers.

Southwest has helped boost tourism for the region, bringing budget-conscious travelers from cities all along the Southwest route map. Fares between Raleigh/Durham, N.C., and Philadelphia have dropped 74 percent since Southwest entered the market in July, while fares between Chicago Midway Airport and Philadelphia are down 46 percent.

The new competition "provides more options at reasonable prices," said Penn Valley resident Art Valentine, a vice president of a Bala Cynwyd company who flies three or four times a month. Sometimes, he takes Southwest to Raleigh/Durham, then drives to Charlotte, saving money over a Philadelphia-Charlotte flight on US Airways.

Last year, low fares and a strong economy helped drive traffic to a record 28.5 million passengers at the Philadelphia airport. The previous passenger record was set at the tail end of the dot-com boom in 2000, with 24.9 million passengers. Concessions and parking revenue soared as well.

Jeff Shull, chief of staff at the airport, said yesterday that concession revenue surpassed $1 million for the first time on the E concourse in March - more than double the revenue from last March, before Southwest began service. The E concourse handles most of Southwest's passengers.

The airport plans to add concession space by 2007, particularly for "grab-and-go" meals that Southwest passengers want, Shull said.

Southwest's low fares have threatened the existence of US Airways, the region's largest carrier, which filed for bankruptcy protection in September.

US Airways, with more than 5,000 employees in the Philadelphia region, is in talks with America West Airlines, the eighth-largest U.S. carrier, about a potential merger that would help give US Airways the money it needs to emerge from bankruptcy.

Although weakened, US Airways remains formidable at Philadelphia International, with 65.5 percent of the market, including its Express commuter service.

To pay for the fare cuts, US Airways has reduced its operating costs by 25 percent, in large part by using bankruptcy to force employees to make deep concessions in pay and benefits.