What is Virgin America Thinking With Its New Dallas to Austin Route?

I know I wasn’t the only one scratching my head last week when Virgin America announced it would use its precious gate space at Dallas/Love Field to fly to Austin. It seems crazy, right? It probably is, but there has to be some method to this madness.

Virgin America has 2 of the 20 gates at Love Field and is running 8 flights per day on each gate. It had previously said it would add a couple of flights to Chicago/O’Hare, but apparently it has changed its mind. Instead, Virgin America will start 5 daily flights between Love and Austin on April 28.

The only other airline in the Love – Austin market is Southwest with double that number of flights. This is an old school Southwest market. In fact, the airline has been there since the year I was born (1977). It’s only three hours by road though, and last year a luxury bus service started up as well. Let’s also not forget the 14 daily flights each way operated by American from DFW.

With that background, why would Virgin America want to enter this market? The most obvious reason is operational. A short haul market like this helps Virgin America increase gate utilization in Dallas. One of the flights can arrive early in the morning and then turn around. Another can arrive late in the day and turnaround. Those are times when the gates are least utilized now. Airplanes on short flights also tend to be able to turn around quickly (less mess in the cabin, fewer checked bags, etc). Oh, and it helps if you won’t have a lot of people on them either….

That’s the argument for short haul, but why Austin? Well, Austin has more people in the target Virgin America demographic than any other city in the area. But more importantly, it’s the only place nearby where Virgin America already flies, and that makes it easier.

Operationally, this sounds great. Of course, you never fly a route due to operational capabilities. That’s a recipe for disaster. On the commercial side, is there any way this makes sense? Well, um, let’s see.

The Love to Austin market is one that has shrunk dramatically over the last few years. Then again, that’s been the case in a lot of short haul markets. According to masFlight, passenger numbers peaked in the second quarter of 2006 (when American also flew the route from Love) with 130,130 people flying nonstop. In the third quarter of 2013, passenger numbers had plunged to only 71,920, a 45 percent drop.

At the same time, fares skyrocketed. Take a look.

Dallas Austin Average Fare

Could CEO David Cush be right? Is this just “a monopoly route that has long suffered high fares“? Is there room for someone to come in and create the “Southwest effect” at Southwest’s expense?

Eh, probably not.

Maybe if Spirit came in with rock bottom fares and the costs to match, then it would be a different story, but even that would be a tough sell when the drive is only 3 hours. And anyway, Virgin America isn’t Spirit. If it’s hoping to pry higher dollar traffic from Southwest on this route, good luck.

I can only assume the primary target market will be the Austin techie traveler who loves Virgin America and all its gadgets. But Virgin America has very little other utility in Austin with only two flights to San Francisco. Plus, people don’t care about bells and whistles on short haul flights. They care about frequent flights, and Virgin America can’t provide that the same way Southwest can.

Short haul business markets are tough since frequency makes such a huge difference. Virgin America learned that the hard way, now having 9 a day in LA to San Francisco. It started much smaller than that. In Dallas to Austin, it can never have the frequency unless it wants to cut other markets. There just isn’t gate space for growth. (It apparently declined to even try for the gates United leased to Southwest.)

Can Virgin America just win on price? If you think Southwest will just sit there and let Virgin shoot it out of the sky for a lousy $39, you’re wrong. (Actually, the $39 fare was just an intro sale, but it looks like the lowest selling fare is around $69 right now and Southwest is matching.)

The only saving grace here is the low cost of oil. Even with that, it’s hard for me to understand how this is going to be a great market for Virgin America.

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