Southwest’s effect on fares may be muted at Logan

Since Southwest Airlines said in April that it would begin flying from Logan International Airport to Baltimore and Chicago, average fares on those routes have dropped 38 and 20 percent, respectively.

Since Southwest Airlines said in April that it would begin flying from Logan International Airport to Baltimore and Chicago, average fares on those routes have dropped 38 and 20 percent, respectively. Nice discounts, yes, but not as good as theyโ€™ve been in the past.

In what has been dubbed the โ€œSouthwest effect,โ€™โ€™ the Dallas low-fare carrier historically has cut average ticket prices in half and doubled the number of travelers when it enters a new market. But itโ€™s a different world now: Instead of the smaller, underserved airports it used to target, Southwest is entering major cites, where other discount airlines such as AirTran Airways and JetBlue Airways have already slashed prices. And with fares already low because of the recession, itโ€™s that much more difficult for Southwest to bring prices down further.

โ€œItโ€™s not going to be the cakewalk that Southwest is used to having,โ€™โ€™ said Henry H. Harteveldt, principal airline analyst for Forrester Research Inc.

To be sure, the Southwest effect is in play at Logan, where the airline plans to begin service Aug. 16. After Southwest said it would fly to Baltimore for $49 each way, JetBlue added a $39 route to Baltimore starting in September. Then Southwest dropped its fares to match. AirTran also offers the $39 fare.

Meanwhile, Delta Air Lines exited the Boston-Baltimore route ahead of the new price competition.

โ€œItโ€™s a battle between low-cost carriers,โ€™โ€™ said Anne Banas, executive editor of the Charlestown-based travel website SmarterTravel.com, โ€œwhich is great for Bostonians.โ€™โ€™

But several factors are keeping Southwest from having the huge impact of years past at Logan.

Logan has no dominant carrier, for one, making it a more competitive market than โ€œhubโ€™โ€™ cities that big airlines establish as a central place through which to route flights, like New York for JetBlue and Minneapolis/St. Paul International Airport for Northwest Airlines. When Southwest said it would start flying from Minneapolis to Chicago in March, for instance, average round-trip fares on that route plummeted about 66 percent.

โ€œI think youโ€™re going to see the market share in Boston stay pretty much the same,โ€™โ€™ said Edward Freni, director of aviation at Logan.

And there may not be many new passengers coming to the market, some analysts say.

โ€œIโ€™m not expecting to see the enormous pop that was associated with the so-called Southwest effect,โ€™โ€™ Forresterโ€™s Harteveldt said.

Another reason the Southwest effect probably wonโ€™t be as marked in Boston is that low-cost carriers JetBlue and AirTran have already brought down fares. Indeed, after AirTran started flying from Boston to Baltimore in 2001, fares dropped by 58 percent compared with the year before, and the number of daily passenger almost tripled, said Kevin Healy, AirTranโ€™s senior vice president of marketing and planning.

And when JetBlue started up in Boston five years ago, fares dropped between 15 and 21 percent for the first full year on the airlineโ€™s four new routes, said JetBlue spokesman Sebastian White. JetBlue is now Loganโ€™s biggest carrier.

The result? โ€œYouโ€™ve already had a Southwest effect before Southwest got there,โ€™โ€™ said Michael Boyd, an aviation consultant based in Evergreen, Colo.

For its part, Southwest is sticking to its strategy, said Steve Sisneros, Southwestโ€™s properties manager, even though airline officials know that Boston presents some challenges. But the airline is still proceeding cautiously: Southwest is cutting some โ€œunproductive flightsโ€™โ€™ from other cities, he said, including several in Manchester, N.H., and Providence, R.I., which will allow it to expand into Boston and elsewhere without adding new aircraft.

โ€œWeโ€™re definitely aware that weโ€™re entering a market that already has some low fares,โ€™โ€™ Sisneros said.

Nevertheless, some airline analysts expect Southwest to be good for Boston. The airline has more than just low fares in its favor. In a survey conducted last fall by SmarterTravel.com, Southwest came out on top in nine of 13 domestic airline categories, including value, customer service, price, routes and availability, on-time service, and cleanest cabin.

Logan is also relatively close to two airports that Southwest already serves – airports that have lured travelers away from Logan. The airlineโ€™s entry into Boston could bring those passengers back. โ€œLogan will recapture some proportion of the people who are driving to Providence and Manchester now,โ€™โ€™ said Peter Belobaba, director of MITโ€™s global airline industry program.

Greg Rosenblatt, a dentist from Melrose, used to drive to Manchester so he could fly Southwest. โ€œIโ€™m very happy to hear that theyโ€™re coming to Logan,โ€™โ€™ he said. โ€œIt seems like things go very smoothly when I fly on Southwest.โ€™โ€™

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Avatar of Linda Hohnholz

Linda Hohnholz

Editor in chief for eTurboNews based in the eTN HQ.

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