Southwest Takes a Hit in Orange County As The Battle For California Heats Up

Delta, Southwest

So this voice recognition software in Google Docs isn’t bad, but it has still slowed me down a lot. To help speed things up, I’m going to hold off on my usual photos for a couple weeks while I recover from the broken finger.


We’ve heard a lot about how airlines are all fighting to win a piece of California lately. There’s American and Delta ramping up in LA, United building its empire in San Francisco, Southwest touting its secondary city coverage, and of course Alaska trying to take over Virgin America so it can grow its presence. Now all this increased demand in California is causing some interesting side effects. According to an article in the Orange County Business Journal, airlines in Orange County want to fly a lot more than they have previously. There isn’t room for everyone and that means someone has to lose. In this case, that loser is Southwest.

Orange County has a convoluted system where it allocates a certain number of seats to each airline that flies to the airport every year. In order to reach its maximum cap of 10.8 million passengers (next year), the airlines are able to request what they want. Then the airport divvies up the seats. This year the airport allocated 12.76 million seats. For next year it’s going to be 12.74 million. The assumption, of course, is that not every seat will be filled. By allocating that many, the end result will hopefully be just under 10.8 million passengers as allowed.

Over the last couple of decades, Southwest has become THE airline of Orange County. Other airlines used to do a lot more flying but they continued to cut back, instead focusing on Los Angeles. And every time another airline cut back, Southwest kept growing. It grew even further when it took over AirTran and its international service down to Mexico.

But all those years of shrinking have finally come to an end, and other airlines are looking to ramp up. In particular, Alaska, Delta, and United have all asked for more seats this year. Alaska wants 19 percent more up to 1.62 million. Delta wants 33 percent more up to 1.57 million. And United wants 18 percent more of to 1.99 million.

Why? Well, think about Alaska. Alaska used to be happy just flying to its hubs in Portland and Seattle. Over the last 2 years, it’s added Puerto Vallarta and Cabo San Lucas. It’s also added Reno, Santa Rosa, and San Jose. Undoubtedly Alaska is looking to do more in Orange County just as it’s done in places like San Jose and San Diego. It’s part of Alaska’s plan to blanket California.

Why is Delta interested? Well, the airline has a newfound love for Las Vegas. And it is planning to start flights from Orange County, so clearly the additional seat allocation will help. As for United, well I have no idea. But if I were a betting man, I’d say that it’s probably more about using larger aircraft on existing flights. I don’t really know about that one.

The upshot here is that for all these airlines to be able to add service, somebody has to lose. And Southwest is the one that’s going to be hurt, assuming the county board of supervisors approves next week as expected. This year Southwest has 6.04 million seats allocated to it. For next year it wanted an extra 500,000 seats. Instead, it will lose nearly a million with only 5.1 million. That’s a whole lot of loss.

This isn’t about an airport picking and choosing which airlines win. It’s just following the rules. More importantly, this is a small example of just how things are going to go as the fight for California heats up. I’m looking forward to more low fares in my backyard.

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34 comments on “Southwest Takes a Hit in Orange County As The Battle For California Heats Up

  1. I love the convenience of SNA when going to see clients in Anaheim but alas my constant problem with the LA area is only LAX has flight frequency from airports east of the rockies. More often than not if I have to connect it’s better to just fly into LAX and deal with the drive. I wish that there was a real competitor to LAX in the region for domestic flights, and how you divvy up available seats at SNA isn’t going to do it.

  2. SNA is an interesting airport. I believe it has the shortest runway in the U.S. among airports that handle mainline commercial jet traffic. There are also noise restrictions, forcing jets to throttle back shortly after takeoff. Like many of the second tier airports in the LA region, I find SNA to be a charming throwback. It is certainly convenient and hassle free, especially when visiting Orange County. In many ways, it is the perfect WN airport.

    How exactly is the allocation set?

  3. Thanks for the article Brett
    It appears that Alaska Delta and United are all interested in Orange County because it gives them a larger presence in the Los Angeles area. Orange County is the second largest and second most valuable airport in the Los Angeles metro area behind LAX. Orange County is an airport where most of the carriers except for Southwest have a fairly similar size. Correct me if I’m wrong but I believe Alaska and Delta also gained additional slots at Long Beach airport
    Perhaps you can explain the slot allocation process and why Southwest has lost in order for other carriers to grow but I thought Southwest was using slots that no one else wanted to use with the understanding they might have to give them back.
    As for Delta and Las Vegas, I don’t think there’s any strong interest that they have in Las Vegas but that they are developing a larger presence in the western US. Las Vegas just happens to be a large high volume market where it’s easy for them to put in a small amount of capacity and still get relatively decent yields; with LUV as the largest carrier in many markets in the west, average fares are not necessarily low. Delta’s strategy system-wide is that it can compete very actively against low cost carriers and be in some cases the only global carrier.
    Praying for a good result from surgery for you today

    1. Tim – Regarding Long Beach, Alaska pulled out years ago and seems to have no interest in serving the airport currently. Delta did get additional slots, however, it’s just using them to upgauge its existing Salt Lake flights from CRJ-700s (which used commuter slots) to CRJ-900s. So it’s not really growing much there.

      I don’t understand that Orange County slot allocation process fully, but I do think you’re right. Southwest used these overflow slots that others didn’t want. Now that they want them, it would have to give them back. At least that’s how I understand it.

      As for Las Vegas, Delta has been very interested. In recent memory, it’s added flights to San Jose, to San Diego, and now Orange County. There might have been more but I don’t recall. In addition it’s running a whole bunch of charters for CES. Even Long Beach is getting flights around then.

      Surgery went well!

      1. Glad to hear that the surgery went well

        I know that Delta has added flights from several cities to LAS. I am just saying that I don’t think they are trying to build a west coast version of RDU but rather that LAS is one of the largest west coast markets. Service to LAS helps round out DL’s presence to its 3 western hubs. I may be wrong but I don’t think DL will add a bunch of additional markets. Yes they do have quite a one or two week operation including Tokyo nonstops due to CES

          1. CES is the CONSUMER ELECTRONICS SHOW, one of (if not THE) largest trade shows in the world. It takes place each year in January in Las Vegas.

            1. Just to amplify on Brett’s comment about Delta’s additional flights during the CES, they are adding approx. 30 more flights/day with 4000 more seats/day each way to AUS, BOS, BUR, CDG, FLL, LGB,MCI,MCO,NRT, PDX,RDU, OAK, RDU, SNA, YVR, and YYZ – all of which are not normally flown in January 2017 outside of the CES.

      2. Brett, one note about DL @ LGB. Not sure if you noticed, but it is operating 1 of 4 SLC trips with a B717 right now. If you recall, when we were there to celebrate WN’s inaugural from OAK on June 5, a B717 was sitting at Gate 3 (I believe that was the first ever scheduled B717 flight @ LGB, where the planes were built). I asked one of the DL Gate Agents what that was about. He was there from DTW helping the LGB team work the mainline flight for the few days it was in the schedule. He said it was going away but was told it would be back in the fall. I didn’t believe it at the time. But, sure enough, it’s flying!! So, DL actually did more than initially intended when it was awarded the two additional Air Carrier slots. If only AA would do the same. ;-)

        1. Bryant – Interesting! I hadn’t noticed that. Of course, they had a couple slots that could have worked for the 717 anyway. They’ve just upgauged more. I must admit I’m puzzled. Seems like way too much capacity in that market…

  4. VX used to fly SFO-SNA and from what I heard it was a route that did well, but they chose to re-allocated aircraft to build other markets. I wouldn’t be at all surprised is the combined VX/AS re-established that route.

  5. As someone who flies with almost everyone but Southwest, I have to come to SWA’s defense here. Why would an agency want to bend over a business who has invested heavily in a market? At one time we used to have 3 airlines at one time or another serve Carlsbad (AA, HP and UA) only to see all of them abandon us – now we have none. The lesson here is that OC shouldn’t spurn Southwest as the day may come someday where they will wish they had an airline so eager to provide frequent and reliable service. Although I would bet their rules are in place to enhance competition this just shows how things can get mucked up when government interferes too much with free enterprise.

    1. Greg,
      Actually I think that Orange County’s approach is quite equitable. They understand that there is enough demand to fill all of the slots they have available. Rather than allow one airline to dominate the airport, they ensure that a certain number of slots are available to any carriers on an annual basis. As I understand it, Southwest can use the unrequested slots on a temporary basis. No airport wants to be dominated by a single airline. Even with the reduced number of slots, Southwest will still have almost half of the available seats at Orange County.

      In contrast Dallas Love Field does not have or at least practice a viable mechanism to ensure that competition is enhanced. Southwest operates over 90% of the flights at Love Field. Without getting into a debate about DFW and DAL, this is why we see lawsuits between Delta and Southwest.

      I believe Orange County’s plan is more equitable. There will never be a shortage of airlines that want to serve Orange County

      MC
      I believe that the Orange County regulations encourage more flights within the limits of the airport on smaller aircraft spread among several airlines rather than a few flights on large aircraft by a single airline. Hopefully Brett can confirm if that is true but that is my understanding of the way the system works in OC.

      1. Just to clarify the DAL situation, this is a huge problem caused by the city that could cost the city of Dallas $1 bil. You are very correct when you say, “In contrast Dallas Love Field does not have or at least practice a viable mechanism to ensure that competition is enhanced.” The problems is the city is required to do just that. The city, as apart of its AIP grant obligations, must have a “Competition Plan” and during their past updates the city has been asked directly if Delta would be accommodated in the new terminal. Every time the city has unequivocally responded “Yes.” The FAA has undertaken a formal investigation into the city’s AIP obligations and a ruling is overdue. If the ruling goes against the city, the city will lose further AIP grants and will have to pay the government back for AIP grants it did not qualify to receive. Additionally the airport can no longer receive Passenger Facility Charges (PFC) that are now added to every ticket from DAL. In the event DAL does not make any corrections, if the city is found in violation, these penalties can easily add up to $1 bil or more.

        1. One of the appeals judges in Houston said the DL/WN/City of Dallas case has all the markings of Pontius Pilate who couldn’t make a decision and wanted someone else to do so regarding Jesus Christ.

          The FAA needs to rule but that probably won’t be the end of the case.

          The City of Dallas and WN both know that losing the AIP funds would force DAL costs thru the roof and render it unusable as a competitive airport in Dallas.

          Further, even if Delta gained the space for the 14 flights it asked for in its last accommodation request, WN would have plenty of space to continue to grow based on the current usage at gate 15 (I think that is the gate in question)

          A ruling for DL would set no precedent allowing any other airline to add service because no other airline met the accommodation requirements which weren’t waived by the WA or WARA.

          the case is all about holding out to slow the inevitable DL growth at DAL and WN’s loss of market position.

          SNA and every other US airport isn’t about to end up with the same legal mess which is already costing the City of Dallas plenty in legal fees

  6. A little confused, I know Southwest like’s their mini fortresses and serve market’s they think will pay off for them….the major’s mainly fly to their massive hub’s and a few side market’s….it sounds like Southwest won’t be getting any new slot’s but the other’s will? The major’s are able to use larger plane’s that out seat Southwest so their capacity can be a lot more than Southwest, does plane size have anything to do with determining who will get new flight’s? Is it that the new slot’s available will be given to airline’s that will offer service to new cities….or are the slots given to airline’s to use as they see fit….

          1. Wish DAL could use that formula or a similar form of it to create real competition, Southwest with 90 percent of traffic due to the fact they have most of the gate’s, isn’t right….can another airline add service to DAL now, no…..City of Dallas is to blame for the mess, DFW can hold it’s own….DFW has 1 airport in the area where LAX has SNA, BUR etc

    1. Yes, I do like WN and fly them at least once a year but they are no longer the plucky upstart and I for one am a bit tired of them driving the competition out of certain markets with their blanketing approach.

      Yet as a resident of STL, it is nice for them to run a mini-not-hub out of here which means I can get decent fares just about anywhere in the US.

  7. Perhaps WN saw this coming at SNA and the (sudden) interest in LGB. WN has been very creative in using slots at LGB, using provisional slots to start LGB-LAS, nearly doubling their presence after just three months. In their schedule through JAN 31, WN shows LGB-LAS service Sun-2 flts, Mon-0 flts, Tue-2 flts, Wed-2 flts, Thu-0 flts, Fri-0 flts, Sat-3 flts, using vacant slots by other carriers. For February, WN shows 3 LAS SAT only, 2 LAS SUN only. Also for February, WN shows SAT/SUN DEN flights.

  8. It’s rare that Southwest is the loser in these kinds of fights, but with such a large market share at SNA already, I guess they had the most to lose. I remember when America West had flights within California from SNA. So did Alaska (which they have recently re-started). Glad to see the extra competition.

  9. Gosh – for someone who lives east of LA – I wish an airline or 2 would show some love for Ontario Airport.

    1. I don’t believe the decision by ONT to remove Los Angeles from its name is going to do anything to help your plea for airline love to better serve the airport. Shortsighted move, in my opinion. Hope I’m proven wrong!

  10. why does the airport decide the seats to be given to ?? airlines and esp the passengers PAY the TAXXXXX!! they should have a saytoo!!!!

    DOTTI

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