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When the 9/11 terrorist attacks led to a stricter, slower airport security process at U.S. airports, short-distance flying lost much of its appeal for airlines. Now, Southwest Airlines believes the time is right to once again bulk up its short-haul network.
From June 2017 through this June, Southwest added 3,000 daily one-way seats in the intra-California market, where it is testing its new short-haul strategy. The carrier has also changed its fare structure on close-in intra-California bookings, offering more midtier prices in the $100 to $200 range one-way on purchases made a week to two weeks out, Southwest chief revenue officer Andrew Watterson said in an interview.
The result, the carrier said, was an increase in intra-California traffic by 3,200 passengers per day over those 12 months, coupled with a load factor improvement of 2.4%.
“We are thrilled. It worked much better than we expected,” Watterson said.
U.S. short-haul flying, which Southwest defines as routes of less than 500 miles, took a steep dive in the immediate aftermath of 9/11. According to Samuel Engel, an aviation analyst for the consulting firm ICF, U.S. airlines overall saw a 10% drop in passengers from 2000 through 2002. But on flights of less than 500 miles, the drop was 20%. For flights under 200 miles, the drop was 36%.
The reason for that decline was straightforward. With the onset of tighter screening, passengers needed to arrive at airports much earlier than they had to prior to 9/11. For some short-haul flights, Engel noted, people used to show up as late as 20 minutes before their flight. Suddenly, arrival times moved to an hour early and beyond. That fundamentally changed the cost/benefit analysis of taking extra time to drive versus paying the cost of a short flight.
“What was going to save you two hours, was only going to save you one hour,” Engel said.
Watterson said the Great Recession of 2008 and 2009, coupled with the surging fuel prices that followed, dealt a further blow to Southwest’s short-haul schedule. But today’s improved economy, coupled with the advent of ride-sharing and the growth of TSA PreCheck, have changed that equation. According to the TSA, in August, 94% of PreCheck members waited less than 5 minutes at security, meaning that the airport experience has gotten quicker for many frequent travelers.
Watterson said Southwest would like to diversify its short-haul expansion into other regions, including the East Coast, Florida, Texas and the Midwest, though no time frame has been set.
“We are still working through California, understanding what is the biggest driver; what do customers want in terms of increased feed,” he said.
Southwest hasn’t been alone in increasing intra-California flying. Indeed, while Southwest remains the dominant carrier on such routes, United and Alaska have both grown their intra-California seat count at a faster percentage rate than Southwest in recent years.
Since 2015, Southwest has increased its annual intra-California capacity by 1.98 million seats, or 13.3%, according to the airline analytics company OAG. United’s seat count is up 1.36 million, or 26%, in that time. And since Alaska acquired Virgin America in 2016, the intra-California seat count for the combined carriers has gone up by 956,000, or 36%, according to OAG.
United spokesman Madhu Unnikrishnan said the emphasis for the airline isn’t on bulking up short-haul flying. Rather, United is taking advantage of the strong California market by connecting more small destinations to its hubs in San Francisco and Los Angeles as well as to hubs outside California. United has also increased the average size of aircraft.
In an email, Alaska spokeswoman Oriana Branon said her airline’s intra-California buildup is a response to overall growth in the intra-California market.
That dynamic has analyst Brett Snyder, who writes the Cranky Flier blog, skeptical about the real reason for Southwest’s intra-California buildup.
“The way I look at it is that it’s a competitive response,” he said. “Maybe it’s internally driven, but someone sparked them to take this move.”
Alaska’s buildup, in particular, is likely a concern for Southwest since the carriers compete directly on more routes than Southwest and United do, Snyder said. He cited intra-California routes that don’t touch either Los Angeles or San Francisco, such as San Diego-Sacramento and San Diego-San Jose.
Engel said there could indeed be opportunity for renewed growth in U.S. short-haul flying, and he noted that on a per-mile basis, ticket prices tend to be higher on short flights than on longer ones.
“I think Southwest is right to look at markets that maybe have less price-sensitive demand and may be underserved. It makes sense,” he said. “But my point is there may be some opportunity, but it is a small part of the travel system.”
Source: travelweekly.com
