Expect fares to drop 20 percent to 30 percent on some routes next year when Southwest Airlines begins flying out of Newark Liberty International Airport, analysts said.
Southwest will taxi to a Newark runway for the first time next March after United and Continental airlines agreed to give up takeoff and landing slots so regulators would approve their merger.
The Justice Department concluded its review of the merger last Friday — the same day the airlines agreed to lease slots to Southwest.
The move will bring another discount carrier to the region, joining JetBlue and AirTran, and provide more competition for the behemoths of the industry, Delta Air Lines and United, following its merger with Continental.
“Fares are so much higher at Newark compared with JFK or LaGuardia,” said George Hobica, president of Airfarewatchdog.com, a travel website. “Continental has had a stranglehold on its huge megahub. I would expect fares will drop 20 percent or more when Southwest comes in.”
Air fares at Philadelphia and John F. Kennedy international airports dropped precipitously when discounters entered those markets in the past decade. JetBlue launched service out of JFK in February 2000. Southwest Airlines launched service out of Philadelphia in May 2004.
Ticket prices on flights to Boston dropped 40 percent after Southwest entered the Philadelphia market and put pressure on USAirways, Hobica said.
The airline also has brought down fares in the Denver market against competitors United Airlines and Frontier Airlines, according to Tom Parsons, chief executive of Bestfares.com.
“Denver has been dirt cheap because Southwest is making it cheap,” Parsons said.
Ticket prices at Newark Liberty are still the highest in the region because Continental Airlines dominates that airport, controlling more than 70 percent of the flights.
Southwest will likely make a big marketing push when it first comes to Newark with 18 daily flights, and fares could drop between 25 percent and 30 percent, said Gabe Saglie, senior travel editor of Travelzoo, a travel website.
“Southwest will try to create buzz by putting in some good fares,” Saglie said.
Competing airlines say: Bring it.
Continental, the No. 1 carrier in the New York market, has “been effectively competing with Southwest and other low-cost carriers in the New York market for years, and will continue to do so,” said spokeswoman Julie King.
Delta, the No. 2 carrier in the region, already offers 33 flights out of Newark, including a non-stop to Amsterdam, and is expanding its presence at JFK, according to spokeswoman Heather Faulkner.
“We have a large operation at JFK, JetBlue’s home, so we’re very familiar with competing with other (low-cost carriers) in their key markets,” she said.
“As to whether or not we’ll match fares, we constantly evaluate our fares against those of our competitors and if we see an opportunity to maximize revenue by adjusting our fares, we’ll certainly consider that.”
Not all fares will go down. Travelers should expect some transcontinental fares out of Newark to rise after United and Continental merge on Oct. 1 because they will no longer compete against each other, according to Saglie.
“Fares from Newark to San Francisco and Los Angeles will be the first that could be earmarked for a bump,” Saglie said.
As for Southwest, passengers will have to get used to how the discounter operates. There are no assigned seats, so customers choose their seat once on board.
However, passengers can pay $10 each way to board the aircraft earlier, according to Whitney Eichinger, a Southwest spokeswoman. By paying $25 each way, business travelers can board with the first 15 passengers, she said, as well as receive a reward credit and a free drink. Passengers can also change flights without penalty, which appeals to business travelers.
For years, Southwest’s only presence in the metropolitan area was MacArthur Airport on Long Island, with the bulk of flights to Florida cities.
The airline launched service last summer from LaGuardia, though service is limited to Baltimore and Chicago’s Midway Airport.
Dallas-based Southwest isn’t saying which cities it will fly to from Newark.
But the Chicago business market is an obvious choice, analysts said. “By going to Chicago, you’ll also be able to connect to Minneapolis, Omaha, and Des Moines,” Parsons said.
Other potential destinations include St. Louis, Denver, Baltimore, Orlando and Houston or San Antonio.
The airline has grown successfully by flying short routes into secondary markets, according to Christopher Staab, head of conferences at Airline Information, which plans conferences for the international aviation industry.
However, that model is changing because Southwest is serving bigger airports and apparently has its eye on foreign destinations, Staab said.
For example, Southwest plans to cooperate with Mexican carrier Volaris for flights between California and Mexico, he said.
“This may begin in 2011, effectively making Southwest an international airline,” he said. “There are also rumors that longer-term Southwest may consider flying its own planes to foreign destinations — a huge departure from its business model. We don’t know what airports it might choose to fly from or to internationally as of yet.”
Analysts predict Southwest will serve the Caribbean, Central America and Mexico.