Southwest Adds Chicago’s O’Hare and Houston’s Intercontinental… But Why?

Southwest

Southwest used to be an airline that added dots in the Continental US to its route map at a torrid pace, but that hasn’t happened in a long time. After the AirTran merger settled, Southwest’s new cities focused on flying over the water — think the Caribbean, Mexico, and most recently, Hawai’i. Since 2014, in fact, only two dots have been added within the lower 48: Cincinnati (to replace AirTran’s Dayton) and Long Beach. Then the pandemic hit, and Southwest started going into overdrive once again.

This year, Southwest has added a pair of ski resorts in Hayden/Steamboat Springs and Montrose/Telluride. It added heavy leisure destinations in Miami and Palm Springs. Now it’s adding two more, and these look different. Chicago/O’Hare and Houston/Intercontinental will join — or in Houston’s case, rejoin after a 15 year hiatus — the list of Southwest airports in the first half of next year.

This is Different Than Miami

O’Hare and Intercontinental are obviously completely different than Steamboat, Montrose, and Palm Springs, but on the surface there are some similarities to Miami. These airports are all the primary airports serving each metro area. Southwest, meanwhile, has long had a major presence at the secondary airports in each.

According to 2019 Cirium schedule data, Southwest’s largest operation by seats was Chicago/Midway airport with more than 12 million on 218+ daily departures. Hobby was ranked seventh with nearly 9 million seats on 159 daily departures. Fort Lauderdale was sixteenth with nearly 4.5 million seats on almost 80 daily departures. That is where the similarities end.

South Florida is much more of a destination compared to the other two. In fact, turning to Cirium once again for 2019 DOT O&D data — it’s like an addiction that I just can’t (and don’t want to) quit — you get this chart:

2019 Domestic Southwest Passenger Behavior by City

Data via Cirium

Compared to the others, Fort Lauderdale has a much lower percentage of connecting traffic and a much lower percentage of people starting their trips from South Florida. In other words, Fort Lauderdale is a destination that thrives off the inbound traffic strength of Southwest’s network. (And by the way, including international traffic doesn’t change any of the underlying points.)

In that context, Southwest knows that there is leisure demand and not much business demand right now. Why not take a swing at Miami and get people who want to go there from around the Southwest network? Maybe it works, maybe it doesn’t. But it doesn’t require much of a local effort to make it work.

Chicago and Houston are completely different. Because of the connecting traffic, they can serve more cities with more frequencies from their big Midway and Hobby operations respectively. That combined with the solid local base makes those ideal hub airports, even if Southwest doesn’t technically have hubs.

Intercontinental and O’Hare won’t have connecting traffic, so they will have to rely on local traffic alone. I have a hard time believing that most tourist traffic inbound to those cities really cares which airport they use. Midway and Hobby are more convenient to the center of town anyway. And those who live in Chicago and Houston who find north side airports more convenient aren’t going to flock to Southwest in droves when American and United have much more robust schedules with far more destinations.

That means this will rely on inbound business travel, those visiting family and relatives, and the few north-siders who are just looking for something cheap and convenient. Is there really enough of that to support this?

We do need to remember that Southwest recently turned on full participation with the Amadeus and Travelport GDSs. The airline is making a business play, and serving multiple airports in a single metro area might help. Or it might not. There are different views.

Flipping the Script on Secondary Airports

Delta and Southwest seem to be in the same camp. They like to serve multiple airports in a region. Delta serves DFW and Love Field, O’Hare and Midway, Intercontinental and Hobby, and plenty more in the LA, San Francisco, and New York metro areas. It sees value in blanketing a metro area where it doesn’t have a monopoly position. The airport flexibility helps give it a leg up on fighting for the traffic that’s not loyal to one of the big guys in each area.

Delta, however, doesn’t feel that way in its dominant hubs. It wasn’t interested in serving Paine Field in Seattle, and it fought against a second airport even existing in Atlanta. It pulled out of Worcester (MA) this year and got rid of Providence service through the winter. Sure it serves multiple airports in New York and LA but those are much more fragmented markets with massive levels of competition.

Southwest is going in the opposite direction. It is pulling out of secondary airports in places like New York (where it ended Newark service) but it’s bulking up in cities where it has a dominant position in the other airport already.

Then there’s United and American which have walked away from secondary airports more often than not. Neither serve Dallas/Love Field or Oakland anymore. United isn’t in Long Beach and opted not to go to Paine Field despite saying it would fly there originally. [Updated: It was Southwest backed out of flying to Paine, not United.] It also hasn’t served Midway since Ted was there in 2006, and it’s not in Hobby either. It’s just a difference of strategy.

An Oakland vs San Francisco Dynamic

To try to understand what works for Southwest, we need to look at parallels, and perhaps the closest is what Southwest has done in San Francisco. Oakland is a massive operation for the airline, but it also returned to SFO back in 2007. That was right when Virgin America started flying, which I assume was not a coincidence. Unfortunately, there’s a lot of noise here thanks to the Great Recession, but still…

Southwest Oakland/San Francisco Flight Operations

Data via Cirium

You can see Oakland coming down significantly in 2008, but that was the Great Recession so it’s no surprise. You can also see that in the last few years, Oakland has grown flights and destinations once again while SFO has remained relatively flat.

Today in the pandemic world, SFO has flights to Burbank, Chicago/Midway, Denver, Las Vegas, LAX, Phoenix, and San Diego. In other words, it looks like a lot like a secondary airport in LA (Burbank, Ontario, etc) or elsewhere while Oakland remains the primary. But SFO has struggled in the shadow of its bigger brother in the East Bay in most respects, including fares…

2019 Southwest Average Fare

Data via Cirium

Is this the model for Houston and Chicago? It doesn’t look like a particularly attractive one. Then again, we have to remember that the bar these days is pretty low.

Don’t Raise the Bar

Think about the state of the domestic industry right now. Traffic is slowly creeping back up, but it is well below where it was a year ago. A full recovery is years away. For some airlines, that’s just part of doing business, and the furloughs have started flowing, but that’s not how Southwest likes to operate. It values its people highly, and it doesn’t want to lay them off if it can be avoided. It has excess airplanes with a whole lot of MAX aircraft that are likely to start coming in soon. At the same time, the airline will lose massive amounts of money in the near future, so if it loses a little more on a calculated bet, it’s no big deal.

With that backdrop, it’s no surprise to see Southwest trying something new. At O’Hare and Intercontinental, gates have likely freed up as airlines have scaled back. Southwest does already have a large following in both cities, so it can probably pull somewhat better from the locals than it otherwise might. And it will likely have solid connectivity to the rest of the network, making it easier to fill airplanes with inbound travelers.

The routes won’t start until next year, and Southwest must be hoping there will be some kind of corporate recovery by then. It has worked toward capturing more of that managed corporate travel, and having at least a presence at these airports may help. If this all adds up to even a breakeven operation, that’s probably a victory.

Right now, airlines — well, except for Delta — are trying all kinds of things to see what works. Southwest has been particularly aggressive, and it can afford to do so. I’m far from convinced these airports will work out well, but I can understand giving them a try. There’s almost nothing to lose.

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49 comments on “Southwest Adds Chicago’s O’Hare and Houston’s Intercontinental… But Why?

  1. Cranky, anyone from Chicago’s north and northwest suburbs as well as Kenosha County would have to have their head’s examined to drive to and from Midway.

    1. This. I live in Northbrook, IL. MDW has to be a lot cheaper, I really need flexibility on WN, or I’m going from my office straight to a flight to go to MDW. Otherwise it’s an hour plus with traffic versus 20 minutes. I’ve flown WN out of MKE instead of MDW.

      Yet, when I have boarded those cheaper WN flights to FLL/TPA at school breaks, I see people I know from our suburb! So imagine the pent up demand up here for WN at ORD. My wife jumped for joy when she heard the news. It will work with flights to focus cities and sunshine destinations. Perhaps BNA when bachelorettes resume, too.

    2. Angry Bob – Anyone who lives in Kenosha and drives to O’Hare to fly Southwest should have their head examined for not just going to Milwaukee.

      1. You’re wrong, Cranky. I live in the middle of Kenosha County and it takes 45-50 minutes (without traffic, which is most of the time) to get to ORD from here, while MKE is 40 minutes. The closer you are to I-94, the lower the travel time to each. Believe me, I have a lot of practice.

        Since ORD offers more nonstop destinations than MKE (unless you’re talking MCO, PHX, FLL, or CUN), then ORD is a good choice for business travel especially. Plenty of people from Kenosha use ORD, just as a lot of people from the north suburbs of Chicago use MKE (for vacations usually). Main drawbacks to ORD are the unpredictable security wait times (though that’s mitigated by PreCheck) and the expensive parking.

        1. stogieguy7 – No, I’m not wrong. I didn’t say anyone driving to O’Hare should have their heads examined, but anyone driving to O’Hare to fly Southwest should. O’Hare is not going to be some massive operation for Southwest. It will probably serve the same cities that Southwest serves from Milwaukee, give or take. So driving to O’Hare would be insane if you can get the same basic thing from Milwaukee. Driving to O’Hare to get better options on United or American? That makes sense.

          1. Perhaps. Although I probably would fly WN out of ORD if the service matches what I need. Have always liked WN.

            It all depends on where they decide to offer service from ORD (and how often). WN (even pre-Covid) has cut back somewhat from MKE, which is why I haven’t flown from that airport in nearly 2 years. No question that it’s a low stress airport versus ORD, but the offerings are somewhat limited. Used to drive to MDW to catch nonstops all the time, as opposed to a MKE-DEN-DSM or MKE-HOU-BHM routing.

            WN may tailor their service from ORD differently than they have from MKE.

    3. When I lived near Libertyville, I used to drive to MDW all the time because my former employer had a SWABIZ deal and we had to fly WN. I’d purposely book horrible early-morning flights because I had to be at MDW prior to 5:45 am to avoid the horror that traffic on the Stevenson represents. Doing that, it was a 45 minute drive; hit traffic wrong and it can be 2-2.5 hours. Loved the airline, hated that drive. MDW is great for people who go/live downtown or from certain suburbs. But for a majority of residents in the region, it’s sucks to get to.

      I’ve since moved into Kenosha County (still work based in IL) and fly UA now – from ORD. From here, I can be at ORD in 45 minutes (yes, I can). MDW is a solid 75 minutes, but can take hours. It’s now out of consideration. And as easy as MKE is to use, the flight offerings are basically to hubs or cheesehead vacation faves, so limited for business. The one WN flight I used a lot (MKE-MSP) was dropped. If WN has a reasonable presence at ORD, they could have me back again. Until then, I’m with UA. Can’t imagine that my experience is unique in this area.

  2. Very curious moves indeed. OAK to SFO is somewhat comparable to BWI / DCA & Dulles. WN has continued to ramp up BWI while remaining flat or reducing the other two. Pre covid, BWI was the #2 airport in their entire network behind MDW – not sure, but perhaps it still is. MDW is about as close to fortress monopoly as you can get. I think it remains their primary Chicago area airport even as they dabble at O’Hare.

    1. Came here to say this. In this area, BWI is definitely the MDW equivalent but they’ve managed to make a very successful run at DCA in ac relatively short time.

      At DCA, they arrived in July 2012 and surprisingly became the second largest carrier at the airport by mid 2018. As of December 2019, they had a 15.8% market share, holding steady year over year (15.9% in December 2018). Of course much of this was fueled by slot divestitures, first by the DL/US DCA/LGA slot swap then by the AA/US merger. But give Southwest credit, they managed to get the majority of the slots and utilize them whereas others (Spirit) actually walked away from slots.

      But IAD is the ORD and IAH equivalent and WN has been flailing around there aimlessly since 2006. In December 2018, they had a 2.4% market share, dropping to 1.8% in December 2019. With a 68% share in BWI and catapulting to #2 status at DCA, I would guess it’s only optics that keep the IAD station alive.

      ORD and IAH are very similar to IAD in both relative location to the downtown area and being dominated by other carriers. My best guess is that they think there are (a) enough WN loyalists in each metro area that might prefer these airports to MDW and HOU and (b) enough travelers who won’t go to those airports who aren’t already sworn UA or AA devotees. Only the latter provides new passengers, however, as the former is just poaching passengers from themselves.

      Doesn’t make sense to me but in this environment pretty much anything goes… until it doesn’t! I’m go on the record as predicting Dulles like success for these two additions.

  3. The southwest approach of dominating a secondary airport in a large metropolis has resulted in the southwest airport always having lower fare levels compared to the primary airport. Nothing is more apparent to this than Texas. DFW generates significantly higher fares than DAL despite the fact that DAL is more conveniently located for people living in Dallas. This is apparent when you compare AS’s numbers to west coast from DFW/DAL and also DL’s numbers to ATL. Also, B6 gave up on HOU’s lower cost and moved to IAH because of HOU’s lower fare levels.

    As the larger airport become the dominant airport in the metro area, I think people from out of town just automatically chose the more well known airport to fly to. So, WN had been missing out on people flying into Houston and Chicago area and only looking at IAH and ORD. From that context, it makes sense for WN to serve the primary airport out of their largest stations. WN really doesn’t do well in competitive airports where they don’t have much presence, since people don’t bother searching their website for the best fares.

    Based on their struggles at SFO, I think WN has learnt that it should stick with destinations where it dominates on the other end. The few times where it tried to move away from that approach (like PDX & ONT) have all ended up in disasters. Even among the routes they’ve kept around like SFO-LAX/LAS, the numbers are just terrible.

    So, I see them just going with the usual safe stuff like ORD-BWI/DEN/DAL/HOU/PHX and IAH-BWI/DAL/MDW/PHX/DEN

  4. Your average fare comparison should have included the average local domestic fare for AA and UA from ORD, IAH and even MIA compared to WN’s average fare from MDW, HOU, and FLL and it would be clear why WN is adding service to each of those airports.
    Given that WN typically flies to the largest metros – even if they fly to secondary airports on one end – they will tap into some of the largest air travel markets in the US, even on a reduced basis.

    and part 2 of “why did they do it” is because AA and UA have been very reluctant to add back capacity where they competitively have not had to do so. Given that AA and UA will have no choice but to add back capacity to avoid giving up significant share to WN, they are forcing AA and UA to compete aggressively which will push yields down for AA and UA; that dynamic will be all the more important at ORD.

    This is the most significant covid-inspired strategic shift WRT the airline industry.

    1. It’s so interesting how each carrier is responding to Covid-19. As you explained yesterday, Delta is going all-out to defend its hubs from “leakage” and “spillage” to the other carriers. This defensive posture totally contrasts the offensive position Southwest has taken. So, in this regard, Delta is much more prey than predator, which negates your words yesterday that Delta is more like Southwest than it is like American and United. The fact is that AA and UA are simply more vulnerable than Delta, so Southwest will feed there first. At some future point, Delta will gain international share from both American and United and some domestic business travel as well. Ultimately, that should ensure Delta doesn’t go bankrupt…again. Of course, the short-term remains problematic for Delta. Consider this: this morning, Delta revealed that it failed to meet BOTH earnings-per-share AND revenue projections in the 3rd quarter. On the brighter side, cash burn for the quarter is down to $18 million a day and daily TSA passenger counts are inching up, despite this typically being a trough in yearly passenger demand. However, the hundreds of millions more in annual interest payments Delta will face compared to Southwest combined with the evaporation of $800 million a year in profit from change fees will keep Delta on the ropes for a while. All of this begs the question: What will the Big 3 do if they are forced to drop their sacred checked baggage fees??? Once that final dam is breached, and we are once again comparing apples to apples across the Big 4, let’s see who has the lowest fares, the highest Net Promoter scores, the fewest DOT complaints, and the highest profits.

      1. Thank you for the pleasant discussion. I will not belabor the discussion about DL because this article is about WN and its actions in AA and UA hubs.
        Delta built a strong network before covid and they are benefitting from that now. DL does not need to open large airports it did not serve before which is what WN is now doing. DL is gaining share in its own hubs as other carriers pull back and DL is also gaining share in major markets such as LAX and BOS also where other carriers are pulling back; DL’s gains there are at the expense of other carriers while they are increasing their share in their own hubs.
        The DOT just released 2nd quarter O&D data and it shows that AA and WN’s original strategy of throwing capacity into markets significantly depressed yields compared to DL and UA which were slower to return capacity.
        DL has now accelerated capacity growth but will likely end up w/ at least industry average yields.
        And the reason WN is adding capacity to AA and UA hubs and why B6 is growing in EWR and LAX is because they see opportunities to grow where other carriers have not restored capacity. DL has pursued the same strategy over the years and is doing it again now.
        DL and WN’s capacity restorations are more alike than either are to other carriers; both are also blocking middle seats.
        DL and WN are both positioned to gain share but they are doing it in different markets because both had different networks before covid.
        The key theme specific to this article is that WN is adding service to AA and UA’s top hubs because those are have a number of the industry’s top markets. WN already served DL’s hubs because most are in single airport cities. WN’s share of the metro areas where AA and UA have hubs is most certainly going to grow while that will not be the case in DL markets.
        No airline is going to reach their financial targets because recovery is so much slower. Delta in fact did beat Wall Street analyst expectations for EPS and missed on revenue. The combination of those two statistics says volumes about how airline recovery is playing out and how DL is positioned.
        Kevin,
        You can google my name and any of the big 4 airline names and you will figure out where I write.

        1. Please be factual. Delta was expected to lose $2.96 per share in the quarter. Instead, they lost $3.30 per share. That’s over 11% off projections, which, by analyst standards, is a BIG miss.

          1. This article is about WN’s plans, not DAL’s earnings. There are abundant resources available on other sites to confirm what DAL reported vs. what you think they were supposed to report.
            At this hour, DAL stock is down less than other airlines including AAL which was downgraded. LUV is flat in line with broader indices.

        2. B6 is growing in EWR and LAX because those are markets it has always wanted to grow. WN is growing in AA & UA hubs because it’s already large in those markets.

          it’s not a secret that DL’s core hubs are more insulated from outside competition than any of the hubs outside of DFW/CLT. UA’s hubs are the lease insulated from outside competition.

          Keep in mind that even though DL has shown more capacity/flights, those are also with capacity capped aircraft. It’s not an exact comparison with what AA/UA are flying. And on top of that, airlines have not made their final cuts. DL still has a 67% capacity schedule out there vs 57 to 58% for sep/Oct. It’s unlikely to go up that much.

          And even your statement about growing at LAX/BOS needs to be taken with an astrisks. They are only bringing back LAX faster than UA/AA in Sep/Oct. For October, the LCCs have brought back capacity faster or are running more flights than pre-pandemic at LAX. And at BOS, it’s possible they had 1 month where they were running more of their pre-pandemic capacity than JetBlue. That was definitely not the case for all of the spring/summer or November. In fact, DL made a statement about how weak their NYC/BOS bookings are.

          1. FC,
            DL provided capacity guidance for the 4th quarter on its earnings call today and its published October and November schedules are very much in line with that guidance. There simply will not be a large scale pulldown of November. December won’t be dramatically different.

            I did not say that DL has overtaken B6 in BOS; I have said repeatedly that DL’s relative capacity share in all of its key markets is unchanged except in LAX where it has surpassed AA as the largest carrier.

            B6 is still a very small player in LAX and you seem to forget that they used to operate a lot more capacity on their transcons that aren’t there today; they are simply operating to more destinations, shifting capacity from other CA airports to LAX, but their overall capacity has not changed much. Their LAX ASMs are still down like everyone else except NK. And DL’s growth throughout deregulation has come primarily at the expense of AA and UA and that is very likely to play out in the near term as well. DL’s ASM share of LAX for Nov is at 19% compared to 11% a year ago. AA and UA are each offering ~ 60% of the seats that DL is offering. When what was the #1 and #3 carrier in capacity cuts back as dramatically as they have at LAX, it isn’t a surprise that previous #2 DL will be much larger. And the difference in the amount of capacity that DL has added back far exceeds the difference in LF caps between DL and AA and UA.

            The capacity share percentages in NYC are unchanged; DL still has the most seats and flights while UA has more ASMs. There are simply more empty seats on flights to/from NYC than from other markets even with deeper capacity cuts by all carriers.

            DL reported a 41% load factor, far below its previous 60% cap which I believe is now (or on its way to up to 75%. Load factor caps at DAL and LUV serve as revenue management tools to reduce the number of seats for sale per flight and to shift price sensitive demand to less full flights.
            UA even without LF caps is expected to report a 48% LF.

            DL execs said they expect their LF caps to come off in the first half of 2021; they are using them to push up yields but they are not going to push decent revenue out the door by holding onto LF caps too long.

            and again, the key point relevant to this discussion is that WN has flown to DL hubs for years – and maintains a low double digit marketshare.
            In the ORD/MDW, IAH/HOU and DFW/DAL combined markets, WN had between 21 and 28% share of the local O&D market, even considering how much international traffic AA and UA carry from their hubs which WN doesn’t compete for. WN’s market share in the combined MIA/FLL/PBI market is comparable to what it has in ATL and yet it is certain that WN’s share will climb closer to 20% within a couple years.

            WN already is twice as large or more in AA and UA’s midcontinent hub metros without even serving their hub airports; when you factor in that WN will add service in many of the top markets from ORD, MIA, and IAH, the impact to AA and UA will be extraordinarily profound – and it will only impact DL insomuch as AA and UA will be focused far more on defending their domestic networks which will benefit DL in the international marketplace.

            1. I think your overall point about WN is valid. They are attacking AA/UA hubs and eating into their market share. Although, they have added some routes to ATL/DTW/MSP recently. Similarly, JetBlue is going after mostly UA hubs. Same with ULCCs. That really just points to this pandemic affecting carriers differently. I think DL will be the largest single carrier in LAX. I’ve said this several times before. They should focus on building back LAX first on the west Coast. OW and *A partners are much stronger at LAX. So DL would need to be quite a bit larger than AA/UA to actually be the dominant carrier in LA. Your market share figure is misleading, since much of their market share growth is due to cuts from international carriers. Instead, they are bringing back capacity at SEA even faster than LAX.

              As for Delta, their guidance seems to point to 57 to 58% pre-pandemic capacity level for Nov/Dec. That’s what they had for Sep/Oct. I also expect that to be their capacity level until probably March. They will most likely just increase the number of seat offered by removing cap.

              So, I’d expect another cut from them in their coastal hubs. Especially NYC. That’s why I’d suggest that you wait a couple of more weeks before making conclusions about their market share in these places.

              They said that NYC/BOS bookings are 20% of normal level. Which is really low when you consider that actual revenue would end up being even lower than 20% of normal level. Keep in mind that JetBlue has said their current daily revenue is already at 30 to 35% of normal level. So, they are capturing a larger portion of booking revenue from Northeast than they did before. That’s a level DL projects to reach for Q4 system wide. Does that mean DL is suddenly losing pricing power in NYC? I don’t think so. I think it just points to the business and international LH market coming back much slower than leisure markets that JetBlue dominates in. It may take many years before DL’s traditionally strong NYC market comes back. That’s why they said recently.

              So, what does that mean for their lucrative LGA slots? They have over 260 slot pairs there and they are currently running 1/4 of their regular capacity. There are a lot of LCCs like WN and NK that are salivating at those slots. DL is upgauging it’s fleet. That makes running the same number of flight in LGA even harder.

              What does that mean for their JFK slots? Are they going to try to keep that by connecting everyone through JFK?

            2. These comments are veering far from WN and their plans so I will address them briefly.

              Of course capacity at LAX is down because international carriers are down – but DL and Skyteam partners are also down and will add back. The primary difference is still AA and UA’s much lower re-addition of capacity compared to DL and LCCs. One can’t logically choose to argue that LCCs benefit from adding back capacity and apply the same principle to DL.

              As for NYC revenue, we will find out when the DOT releases 3rd and 4rd quarter revenue. For the 2nd quarter, AA and B6 did increase their NYC local market passenger share at DL and UA’s expense but AA and B6′ yields fell much faster so that all 4 of the big NYC players ended up with revenues down about the same amount. AA decided it wasn’t worth fighting for such a small amount of revenue – just as at LAX – and have reduced its capacity faster while DL and UA have restored capacity; in UA’s case, B6 already added a bunch of markets from EWR that will be there for UA to compete against long-term. There has been no competitive incursion by other carriers into LGA and JFK and DL’s relative seat and flight share is the same as it was pre-covid for the big 3 NYC airports – #1, followed by UA and then B6.
              Just as on the west coast, B6 is spreading out the capacity it flew over more routes but its capacity is still down. At some point, theoretically, B6 should be larger than it was relative to DL and UA but that has not happened yet.

              And bringing the discussion back to WN, I have said multiple times that I believe LGA and JFK slot controls will be relaxed, largely because AA will not use the slots at has, it wants to trade some to B6, and there are carriers that want to get into both airports including WN which is focused solely on LGA in NYC.

              I believe DL will use whatever slots it has or maintain its share if slot restrictions are relaxed and might try to fly more flights if slot restrictions are relaxed.

              Just as in LAX and in other markets, DL’s growth will come from AA or UA more than from other low cost carriers. DL and WN both growing stronger will be the theme throughout the industry.

              I agree with your comments about why AA and UA are seeing WN expand in their markets and the same for B6 at EWR.

              I also agree w/ Kevin’s comment. The airline industry is free market based as a result of deregulation. The Feds confused that fact by shoveling money to all airlines in grants and partial loans and then to nearly all of the industry except for DL and WN in CARES Act loans. Carriers aren’t going to sit on the sidelines in markets because one carrier has employees on furlough or have or have not taken government loans.

              WN is being the most aggressive in opening new stations at major airports to expand its presence but B6 is doing it as well. Other carriers will shrink from top markets and DL is best positioned to pick up share in markets where AA and UA are not re-adding capacity.

              One final note, DL specifically noted its restoration of capacity at SLC – the highest percentage of a major hub – as possible because of the strong demand to Mountain/West states that logically flow over SLC as well as because of the new facilities. DEN and SLC compete for most of the same flow east-west flow traffic and DL will likely be larger than covid in that market and that does impact other carriers.

  5. Hi Cranky, great post as always. A small correction – UA continues to serve Paine Field, even during the pandemic. DEN-PAE has remained daily in October. In February, UA announced SFO-PAE was ending in March. I am guessing this announcement is what you are remembering as UA pulling out of PAE.

    Thanks again for your insight.

    1. Which made sense because I think Alaska was flying PAE-SFO too. And all the locals are going to choose Alaska. Denver provides nice connecting opportunities though and ICBW but I don’t think Alaska was flying that so they’d get the O&D too.

    2. S – Doh, my brain got scrambled on that one. I was actually referring to Southwest which said it was going to fly to Paine and then backed out.
      I’ve updated the post.

  6. What about looking at the infrastructure at each airport? IAH has the longer runways to support bigger, heavier (with fuel) aircraft. Could WN be angling to use IAH has a launch point to Hawaii using 737MAX? While HOU has Customs and Immigration, IAH has a larger facility. Could IAH be angling to increase South America traffic? When the International Terminal at HOU was built, didn’t UA have the City add provisions to prevent the maximum use of the new facility?

    One thing that may be good from all of this, is that the City of Houston will finally need to look at its own infrastructure and get a dedicated public transit system between the airports and downtown.

    1. HeightsDrinker – I think we can safely say Southwest has no plans to fly to Hawai’i from Houston. I don’t think it would work commercially, but operationally it’s definitely not going to fly. The 737 MAX 8 has a published range of 3,550nm. Houston to Honolulu is 3,400nm. When you factor in that the manufacturer always pads the range number AND the fact you need a whole lot of extra fuel for the long Pacific crossing with no alternates, there’s no way that airplane could make it.

      I also can’t imagine this would be a play for more South America flying.
      Southwest would lose the power of its Hobby hub to connect into that service if it moved it to Intercontinental.

  7. I’m sure WN would have also considered DFW if it weren’t for that pesky agreement that requires them to give up gates on a 1:1 basis between now and 2025.

    Or maybe that’s a reasonable consideration now?

    With traffic down, WN might be able to afford to put a couple gates on the market in order to capture market share at DFW. Aside from DL, nobody has shown a lot of interest in DAL, and with business traffic in the dumper, maybe their appetite for that isn’t as high as it was a year ago.

    1. I don’t think you could pry DAL gates out of WN with a crowbar. They will not give up gates there in any circumstance especially with the DL issues continually unresolved.

  8. With the City of Chicago planning on demolishing O’Hare’s Terminal 2 for the new international terminal where will Southwest find gates?

  9. T5 (Concourse M) has an eastern extension being built. This is where DL is going to relocate from T2-Concourse E.

    T3-Concourse L have some Cats & Dogs as does T5-Concourse M. Gates in T5-Concourse M are all “Common Gates” currently and some Cats & Dogs are there too.

    The planned demo of T2 and two new satellite concourse near UA are now apparently on HOLD. Stay tuned.

    Alaska & Jet Blue now have gates at T3-Concourse G instead of T3-Concourse L

  10. I wonder whether Southwest will update their website to allow customers to search for fares to all airports within a city. Otherwise, you’d need two separate tabs open to search for fares/schedules to both MDW and ORD. This was always a pain back when they were in both EWR and LGA, and there wasn’t a NYC-all search option. I never understood why WN made this so difficult.

  11. It should be noted that WN likes to serve multiple airports in a region – and does it well for the most part. Take the LA basin – they are quite strong at LAX, but the dominant carrier at SNA, BUR, and ONT (and even SAN). Same for San Francisco Bay. While their SFO operation is not as robust, they are at OAK, SJC, and SMF. It makes sense to grab a little market share now that the other carriers are not operating fortress hubs of thousands of flight banks. Plus, Southwest has the goodwill that every time it enters an airport – the local media seems to trip over itself with excitement. And yes, the major airports have their own local markets. Travel is down at the moment, but the spill off the major airports is at least something to latch onto. The secondary airports don’t have as much opportunity for growth because WN already controls those airports for the most part.

  12. I’ll be curious to see if WN’s move into ORD affects MKE volumes. I’m also curious to see how (or if) it affects traffic at MSN and RFD.

      1. Well, a higher percentage of MHT’s traffic comes from MA than IL residents going to MKE. Milwaukee is a decent sized market on its own, and many of those who would fly from N IL via MKE tended to do so because they found it easier/cheaper than ORD. These are often leisure travelers. So, I’d tend to disagree with you about having much impact on MKE. Most MKE flyers are still from the Milwaukee area (a decent sized market unto itself) and points north. That said, I agree that it could damage MKE’s goals of traffic growth from the Chicago suburbs.

        Also, unlike the case with BOS-MHT-PVD, WN already has a large investment at MDW which I seriously doubt they are planning to dismantle or move to ORD. The ORD service would be supplemental. Given this, their offerings at ORD probably won’t be much more extensive than what they have at MKE. So, different scenario than what happened with MHT (or PVD).

  13. Did I miss what cities WN plans to serve from ORD and IAH? Seems to me this is a direct shot at UA loyalists in both cities. As someone who has used all 4 airports as a destination at least a few times in my past I can’t think of a situation where it was ever decided that I use an airport based on it’s relative location in that city. It was always a product of where I was coming from and flight schedules. If my trip was to Galveston or Conroe, yeah sure, that’d maybe make me think differently where to fly. Same for WI or IN, but for anything in the general city center or perimeter loop, yeah, I’m not going to sweat which airport – especially if it adds a layover. All for more options at these airports but not sure how anyone living outside of those two cities will gain.

  14. The addition of ORD and IAH is two-fold:

    1. Exploiting the weakness’s of UA and AA
    2. Blocking the continued expansion of NK and F9

    WN is going after AA in MIA, PHX and now ORD; and UA at ORD & DEN.

    This angers me because those airlines are laying off staff and these moves just exasperate the crisis.
    Meanwhile WN has cut non-union employees pay by 10% and instituted a pay freeze. They are also threatening
    To furlough their union members starting Jan 1st if they don’t agree to pay cuts.

    Make no mistake, this will be a blood bath for all carriers at IAH & ORD, including WN, and I’m pissed!

    1. I agree – This is a DICK move by Southwest.

      IMO they are gate grabbing to block Frontier and Spirit. Southwest is THE most aggressive airport gate hoarder in the US.

      Why aren’t the other majors more like them?

      1. @FC :

        wanna remind us how amazingly swell has DL’s previously low debt levels work out for them in Q3 earnings ? $6.86 bn pre-tax GAAP loss ? And if i’m reading their Q3 balance sheet correctly, DL’s debt levels have zoomed far past that of UA.

        or u wanna pretend pandemic isn’t real so u can claim how restructuring charges aren’t relevant at all to one’s balance sheet and earnings ?

        1. Do you realize that UA’s fleet is now 1.5 years older than Delta’s and the gap will only widen as Delta retires aircraft? Given that there is only a 5 year difference in average fleet age between American and United (the two extremes in age of the big 4), a 1.5 year difference is significant.

          New airplanes cost money but they also have the potential to generate substantial cost advantages – if used right. Given that Delta will have ZERO 777s in its fleet while United still has scores – even if inactive – there is a huge difference in fuel efficiency that Delta will have on its longest flights. Delta’s A330-300s, the backbone of Delta’s transatlantic fleet offers the lowest operating costs per ASM of any widebody aircraft, including newer 787s due to lower ownership costs.

          AA’s problem w/ new aircraft is not that it doesn’t have the technology but that it has too much debt that it can’t service. Delta’s interest expense is lower than United’s even with Delta’s higher debt. Look at the financial statements yourself.

          And Delta’s debt includes self-financing of several expensive airport projects that UA is simply not doing. Again, look at the debt charts for both airlines.

          It should be concerning that UA is not taking restructuring charges when they have hundreds of aircraft parked, the oldest fleet, and hundreds of new aircraft on order. They cannot possibly use all of the aircraft they have and will have and will be paying much higher fleet expenses as a result, including for new aircraft even as old aircraft are secured by debt; those older aircraft can only leave the fleet when UA can pay off the debt. A very bad position.

          And the other large part of Delta’s restructuring in this quarter was employee separation charges. Delta offered a much more generous program, got far more volunteers to voluntarily retire and separate from the company than any other airline, and thus had higher charges. They have not furloughed any employees as a result – so far.

          And in reality the chances are much higher than AA will struggle, benefiting both DL and UA and the rest of the industry because of AA’s size.

          As for WN’s previous attempt to serve EWR, I would be very careful about comparing WN performance in a city with the highest local market revenue and most concentrated hub in a metro area where WN is weak to smaller metro areas where no carrier controls as much of the market as UA does at EWR. Do you realize that WN already has a 20+ plus passenger share of the local Houston and Chicago combined airport markets while WN has never had more than a small single digit share in NYC.

          WN is a very well run company. They are not going to repeat the same mistakes over and over. They have learned from why they didn’t succeed at IAH before and they know why they didn’t succeed at EWR. Given that ORD Is a much more fragmented hub, WN has a hub at MDW, and AA and UA both have enormous competitive challenges in other hub airports, the chances are quite high that WN’s latest round of legacy hub additions will do well.

    2. Angers you? Look around! Norwegian, Air AsiaX, Spirit, Frontier, Allegiant, RyanAir, EasyJet, the list goes own! There is a new business model in the industry. It really irritates that the government wants spend my money to keep a dying business model going! Darwinism applies to business too!

      WN sees new opportunities at MIA, ORD, and IAH the legacies should be ready…competition is good!

    3. @Jack R :

      wanna tell us again how amazingly swell did it work out for WN trying to exploit UA’s weakness at EWR ?

  15. According to the Chicago Department of Aviation (CDOA), Southwest Airlines will use “Common Use Gates” for their Operations at ORD. No Airlines at ORD have given up or plan to give up gates for Southwest’s Operations per a Chicago Tribune Article.

    T5-Concourse M Gates are all “Common Use” from last report

  16. As I commented somewhere else, WN entering MIA is just adding more costs to their operation. One number that I am not sure in the factoring of FLL is the elimination of Cruise traffic since Covid-19 has entered our lives. When I worked for SuperShuttle in South Florida, there were many people that came out of the Port of Miami that used our service to get to FLL to fly WN as well as Port Everglades (right next door). Many airlines in South Florida as well as other airports that serve other cruise ports are missing a lot of traffic and will take longer to recover until people feel safe to cruise again.

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