Southwest Goes to Denver

The Wall Street Journal has a front page story this morning about Southwest Airlines (LUV) entering the Denver market. Whenever Southwest enters a new market, its competitors cut and run.
Not this time.

Frontier Chief Executive Jeffery Potter caught wind of Southwest’s move the night before the announcement, he recalls. Mr. Potter knew that other airlines, including Alaska Airlines, had successfully competed against Southwest in some cities, and felt reassured that Frontier compared favorably to those airlines, he says.
Southwest has a near-mythic reputation in the industry as an airline that usually can’t be beat. Airlines far bigger than Frontier, including US Airways Group, had decided to cut back service to cities that Southwest entered.
Mr. Potter stayed late at his office composing a letter to rally his employees. “We are not about to cower or back away,” Mr. Potter wrote, assuring his employees that “not everything you have heard about Southwest is necessarily true.”
In an interview, Mr. Potter argued that fliers will prefer Frontier’s extras, such as more legroom in its seats and personal television screens that offer programs and onboard movies for a fee. He maintained that fliers are turned off by Southwest’s first-come-first-serve seating, which sometimes results in long lines of passengers waiting to board.
“Pricing is Southwest’s big advantage,” notes Frontier spokesman Joseph Hodas. “Take that away, and what do they have?” Frontier immediately matched Southwest’s introductory Denver fares, and Mr. Potter maintains the airline can make money at the lower prices.

The article includes an interesting table. Including fuel costs, Southwest is a bit cheaper than Frontier. Excluding fuel costs, Frontier is cheaper.

Posted by on November 29th, 2005 at 5:07 am

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