Discount airlines see an opening in Atlanta

Rising fares in Atlanta spelled one thing to discount airlines Spirit and Frontier: Opportunity.

After Southwest Airlines acquired AirTran Airways and its Atlanta hub in 2011, it dismantled AirTran’s operation and cut flights, reducing competition against heavyweight Delta Air Lines. Fares went up.

“There’s a lot of frustration in Atlanta with Delta and Southwest,” said Chris McGinnis, editor of TravelSkills.com. “The market is ripe for a true low-cost carrier.”

Enter Spirit and Frontier, which in recent weeks each announced plans to add routes out of Hartsfield-Jackson International. Spirit is boosting its destinations from six to 15, while Frontier this year will add 10 new cities, up from six.

They will still command only a tiny market share at the world’s busiest airport, but their moves show how Southwest’s strategy of shrinking the old AirTran operation opened a door for new skirmishes in the market.

That could benefit travelers who want more competition.

The two biggest carriers in Atlanta are signaling their intention to hold their ground: Southwest last month launched an effort to attract more local travelers with a new advertising campaign and companion pass offer. Delta has been promoting its hometown carrier status and long-standing relationship with Atlanta.

Bare fares

The ultra-low-cost carriers — so named for their low internal costs versus bigger airlines — bring a different, bargain-basement style of service. They tout low fares, and low frills. If you want to check bags, put a roll-aboard in the overhead bin or have a soft drink on board, it will cost extra.

Their presence at Hartsfield-Jackson is creating a greater variety of airlines, ranging from Delta’s full-service global presence, Southwest’s open seating and free checked bags model, and Spirit and Frontier’s bare-bones discount option.

The discount carriers target leisure travelers on a budget, and are less attractive to those accustomed to full-service airlines.

“There are people who will find it perfectly acceptable … in exchange for a very low price,” said Port Washington, N.Y.-based airline consultant Bob Mann. “There are others who don’t really understand what they’re buying, get on the airplane and are appalled by it, and never do it again.”

Spirit, now the fastest-growing U.S. airline, is eager to manage expectations.

“We’re not an airline for everybody,” spokesman Paul Berry said, adding that Spirit attracts some customers who previously could not afford to fly.

Others can afford to fly any airline, he said, but: “They fly us, and then stay at the Ritz when they get to where they’re going.”

“Our planes are full, and that’s a good indicator to us that many customers in Atlanta love our low fares and are willing to make the trade-offs that come with that,” Berry said.

Those who travel for work may also find the once-daily flights on many Spirit and Frontier routes to be less convenient. A business traveler may want multiple options of flights per day so they can depart and arrive at the right time, or hop a different flight the same day when necessary.

“One (daily) flight is a pretty scary prospect in case the flight doesn’t operate and you have to wait until the next day,” McGinnis said.

Price competition

Traveler Ron Kurtz of Alpharetta said he shops for good fares, but is willing to pay more to “not have to subject myself to the limited service and limited space that Spirit offers.”

Still, “I feel very strongly that the only way to protect the consumer is through competition,” Kurtz said. “I would welcome any introduction of new competition to this market.”

Spirit, Frontier and similar carriers typically enter a new market with eye-catching introductory fares like $49 or $99 one-way. After that their fare range is usually below what a big carrier would charge if unchallenged, but when they arrive the big carrier will typically make some seats available at matching fares – thus dropping the average cost on the route.

How widespread the effects of fare competition will be remains to be seen. Delta and its partners still control some 83 percent of the market share in Atlanta, based on last year’s traffic figures. Frontier and Spirit combined made up less than 1.5 percent of the market in 2014.

With only one daily flight added by each carrier on their new routes, “It barely puts a dent in the market,” McGinnis said, adding fares will decline some on competing routes, “but they won’t come down a whole lot.”

Asked who Spirit and Frontier would be most likely to steal market share from in Atlanta, he answered: “Greyhound.”

Still, the national challenge from carriers like Spirit prompted Delta to create a fare category called “basic economy” with no advanced seat reservations and no flight changes allowed. However, that fare may not necessarily be any lower than the old lowest fare on a route.

This month Delta expanded the basic economy fare across its network, and now offers the basic economy fare on more than 75 routes from Atlanta.

Gate space available

The expansion of ultra-low-cost carriers is enabled by new gate vacancies in Atlanta. Southwest and United are both pulling out of Atlanta’s Concourse D. Southwest has consolidating onto Concourse C, while United is consolidating onto Concourse T.

That frees up 15 gates on Concourse D, according to Hartsfield-Jackson.

Southwest “pulling back service opened up the gates and enabled the opportunity for us to expand,” Frontier president Barry Biffle said.

Spirit and Frontier are each getting two gates on D, the airport said, but it’s still being decided how many gates will go to Delta or be available for other carriers.

How much Frontier can grow “will be entirely dependent on how much gate access we can get,” Biffle said.

Discount carriers sometimes leave markets as quickly as they arrive.

Startup PeoplExpress last year suspended service three months after launching operations, while startup Vision Airlines launched flights from Atlanta in 2010 before pulling out in 2012. In 2003 JetBlue tried serving Atlanta but left six months later.

Spirit and Frontier have “thrown a lot against the wall” in Atlanta, McGinnis said. “I’m sure there will be shakeout after a period of time.… They just kind of go in and out and see what works and what doesn’t.

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