Southwest’s chances for Atlanta came close

By Kelly Yamanouchi

The Atlanta Journal-Constitution

In the airline industry, Atlanta is a world leader by multiple measures. Hartsfield-Jackson International Airport is the world’s busiest airport, and Atlanta is home to Delta Air Lines , the world’s largest airline through its merger with Northwest. Delta also operates the world’s largest single-airline hub at Hartsfield-Jackson.

But for all of that, Atlanta still isn’t served by the airline that carries the most domestic passengers in the United States – Southwest , which is also the nation’s largest low-cost carrier.

Southwest’s absence became more conspicuous when the Dallas-based carrier tried to buy Denver-based Frontier Airlines earlier this month. The deal that would have poised Southwest to finally enter Atlanta by taking over Frontier’s Denver-Atlanta route. But Southwest lost out to Republic Airways in the bankruptcy auction for Frontier, and Atlanta travelers were left wondering what might have been – just as they were when previous rumors of Southwest’s arrival proved false.

For much of its history, Southwest avoided large hub airports where costs were higher and delays more frequent. By the time it started serving them, the stiff competition between two strong carriers in Atlanta – Delta and AirTran Airways – left little room for a third competitor to wedge its way in and grow.

Moreover, Southwest has “had bigger fish to fry” as it expanded into the northeast and elsewhere, said KKC Aviation Consulting partner Stuart Klaskin.

Delta, along with merger partner Northwest Airlines and Delta Connection carriers, handles about 75 percent of traffic at Hartsfield-Jackson, while AirTran handles about 18 percent, based on May 2009 passenger data from the airport.

In the most recent federal airfare report, Atlanta had the 29th-highest average domestic fares among the busiest 100 airports in the country based on first quarter fares, and above the national average.

Back in 2000, Delta’s then-CEO Leo Mullin called Southwest “the most dangerous competition we face” – even without any Atlanta flights. He noted that Southwest was “expanding into East Coast markets, overflying Delta’s traditional hubs and extending low-fare competition, especially to Florida,” where Delta had a large concentration of traffic.

Some industry experts still expect Southwest to try to enter the Atlanta market, though when and how remains unclear. The Atlanta flights picked up from Frontier would have been incidental to Southwest’s acquisition of the carrier as a whole.

Southwest did not respond to requests for comment on how Atlanta might fit into future plans.

As a primarily “point-to-point” carrier, Southwest does not have a traditional hub-and-spoke network. For a long time its executives seemed to not mind if travelers couldn’t easily get from one point to another on its planes – unless the airline could make money flying that route.

Hub-and-spoke airlines tended to justify routes based on how much traffic they brought into the larger system.

The strategy led Southwest to focus on secondary airports , drawing passengers away from larger cities nearby. The closest Southwest market to Atlanta, for instance, is Birmingham, and over the years some Atlanta travelers have driven or taken vans to the Alabama city to catch low-cost flights.

But in the past six years, Southwest has started going into large airports including Philadelphia, Denver, San Francisco and Minneapolis-St. Paul. Earlier this month Southwest launched flights to Boston’s Logan International. The company also recently struck partnerships with airlines in Canada and Mexico.

Now, Atlanta and Charlotte are glaring deficiencies in Southwest’s route map, said airline consultant Darryl Jenkins.

“So I think all of us have assumed for a long time that sooner or later they’d do something to get a presence there.”

One challenge is a lack of unused gates at Hartsfield-Jackson. “There’s not a lot of room at the inn,” aviation analyst and consultant George Hamlin said. But airlines can negotiate to sublease gate space from other airlines or get partial use of a gate.

Southwest often starts small and negotiates for more gates to expand. Because it keeps costs low through economies of scale in its use of assets and facilities, “they don’t want to be in a city for one route,” Hamlin said. Southwest typically aims to eventually become the No. 1 or No. 2 carrier in the market, he said. “That’s not going to be easy in Atlanta.”

While Atlanta travelers and civic leaders pined for more competition during the 1990s, when Delta largely owned the market in the wake of Eastern Airlines’ collapse, such talk has diminished since AirTran’s growth into a sizable rival.

Still, Klaskin raised the possibility that Southwest may yet try to enter the Atlanta market through acquisition -- naming AirTran as a potential target.

AirTran chief executive Bob Fornaro in the past has not voiced interest in combining with another carrier, but has declined to rule it out completely. “We’d have to consider anything on its own merits,” he has said.

If Southwest enters Atlanta independently, it could provoke a long, costly fight with both Delta and AirTran.

But at some point, Klaskin said, Southwest will have “sort of ticked off all the low-hanging fruit.” He predicted that, “by process of elimination,” Southwest could enter Atlanta in the “relatively near future.”

How we got the story

The AJC interviewed airline industry experts, reviewed analyst reports on Southwest Airlines, researched archived articles on Southwest and Atlanta, and analyzed plans for a study on a second airport.

The AJC also reviewed Southwest’s corporate information, fare data from the U.S. Department of Transportation and traffic data from Hartsfield-Jackson and the U.S. Bureau of Transportation Statistics.

Source: Southwest Airlines Co.