Entry of airline into GSP market should lower fares, boost options
MAY 21, 2010 9:13 a.m. (0)
Airfares plummeted at the Minneapolis-St. Paul International Airport last year.
The average round-trip ticket price flying out of the Twin Cities was $321.54 during the third quarter of 2009, nearly $151 less than the year before.
The nearly 32 percent drop in prices, the second-highest year-to-year decrease in the country, coincided with Southwest Airlines’ entry into the Minnesota market.
It’s called the Southwest effect.
“Prices went down across the board,” said Patrick Hogan, the airport’s public affairs director. “Southwest was certainly good for this community.”
Upstate officials expect the same to happen at the Greenville-Spartanburg International Airport when Southwest begins service some time in the next year.
Southwest surprised local officials last week when it announced it would serve GSP within the next year without any government incentives. It will also serve Charleston.
Columbia-area senators had blocked a $15 million incentive bill to entice low-cost carriers to the state. They were attempting to get $10 million added to the bill for the Columbia Metropolitan Airport, which had already been spurned by Southwest, to use to draw a discount air carrier.
Upstate officials had been working to secure a compromise as late as the morning of Southwest’s announcement.
While some may think Southwest Airlines’ entry into a market may hurt the airlines already there, the opposite is often true.
“When there’s a new entry into a market, all airlines are going to have to match the prices. Some people will fly the new airline, while others prefer to stick with one of the other airlines because of frequent flyer programs,” Hogan said. “The size of the pie increases. More people are able to fly because of the lower prices. While an airline may not make as much money per passenger, it should have more passengers.”
Some airlines added destinations, while none have dropped flights in the 14 months since Southwest entered the market, Hogan said.
Southwest serves 68 cities in 35 states and is the largest U.S. carrier, based on domestic passengers. Based in Dallas, Southwest operates more than 3,200 flights a day, according to the company.
Southwest will start serving Panama City Beach, Fla., on Sunday when the new Northwest Florida Beaches International Airport opens. But ticket prices there have already dropped in anticipation.
Dave Edwards, executive director at GSP, said he expects Southwest’s arrival to have a positive affect on the other airlines at the airport. About two-thirds of potential customers fly from Atlanta or Charlotte because of cheaper fares.
“I think in the long term it will result in a greater total number of passengers flying from GSP,” he said. “I think if the current carriers will just compete, they’ll be fine. That doesn’t mean rock-bottom fares, just competitive fares.”
Delta and US Airways serve smaller cities in the Midwest, markets Southwestern is unlikely to enter. Edwards said he expects the current carriers at GSP – Allegiant, American, Continental, United, Delta and U.S. Airways – to respond to Southwest’s entrance by reducing fares, adding cities or both.
Tyri Squyres, vice president of marketing and sales for Allegiant, said her airline will be “definitely paying attention.”
She said Allegiant, a low-fare carrier which came to the Upstate in 2006 and offers flights to Orlando and Tampa, has no plans to change anything its doing at GSP.
“Our fares can’t get much lower,” she said.
American, which serves GSP through American Eagle, will compete vigorously with Southwest, said Tim Smith, spokesman.
“Obviously, we compete against Southwest and a lot of other airlines right now,” he said. “We will continue to compete vigorously with other airlines in all markets and we will there.”
He would not say whether American Eagle is considering lowering fares at GSP, which have some of the highest average daily fares in the nation. He said one advantage of flying American Eagle is passengers have 765 daily departures from its hub in Dallas-Fort Worth.
Edwards said GSP provides nonstop service to 15 of the top 20 destinations in the country. Las Vegas, Hartford, Conn., Boston, Denver and Los Angeles are the cities missing, he said.
When asked if Southwestern will fill some of the gaps, Edwards said, “We hope so.”
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