Southwest Airlines Invades Atlanta

For years, travelers have wondered when Southwest Airlines would add Atlanta to its growing national route map.

The day has finally come. The Dallas-based discounter, widely credited with forcing traditional carriers to hold down fares and costs, launches its first flights from Hartsfield-Jackson International Airport today, bringing its open seating and free checked bags policy.

 

It is a bittersweet milestone in some respects. Southwest’s arrival comes only through its buyout — and gradual elimination over the next year or two — of AirTran Airways, the market’s scrappy No. 2 for the past 18 years.

 

Southwest launches 15 daily flights from Atlanta today, with routes to Austin, Baltimore/Washington, Denver, Houston Hobby and Chicago Midway. For now, AirTran will continue flying with about 170 daily flights from Atlanta. Later this year, Southwest will begin gradually absorbing AirTran jets into its own fleet.

 

The loss of AirTran is bemoaned by some travelers who valued AirTran’s business class and assigned seats, both of which will disappear when planes convert to Southwest’s all-coach setup with no seat assignments.

 

But Southwest has a much bigger national network than AirTran, offering some new options for Atlanta travelers.

 

Atlanta had been in Southwest’s sights for some time. Customers — particularly lucrative business travelers — had been asking for Southwest to fly to Atlanta.

 

As the largest metropolitan area without Southwest service, not to mention the home of the world’s busiest airport, Atlanta was a glaring gap in the Southwest route map.

 

“People have always wanted Southwest to come here,” said Chris McGinnis, editor of The Ticket, a newsletter for travelers.

 

Southwest wasn’t ready in 1991 when Hartsfield-Jackson had a gaping hole left by Eastern Airlines’ demise. By the time its growth made a move into Atlanta more logical, AirTran and its forerunner, ValuJet, had filled that gap and most of Eastern’s space at the airport.

 

Southwest could have tried to carve out some gate space and hustle its way into the hearts and minds of Atlanta travelers with just a handful of flights and destinations, going up against dominant Delta Air Lines and AirTran. But that task is daunting: Delta operates some 1,000 flights a day out of its Atlanta hub, while AirTran had more than 200.

 

Other rivals that fly to Hartsfield-Jackson use the route more to feed their own hubs than to make a serious dent in the Atlanta market. But Southwest doesn’t operate under the traditional hub concept.

 

Its efforts to gain market share starting with just a few routes might have sparked a major fare war in which it would be at a disadvantage, said Port Washington, N.Y.-based airline consultant Bob Mann.

 

If Southwest had tried to simply come in on its own as a third competitor, it would have been “great for the Atlanta traveling public,” but “far bloodier” for the airlines, Mann said.

 

Coming into the market by buying out AirTran, on the other hand, allows Southwest to “eliminate the idea of having a three-carrier battle for [market] share,” Mann said.

 

For much of its history, Southwest avoided major hub airports. But as its network grew over the past 15 years, it entered many and Atlanta stood out as a hole.

 

“The major market that we don’t touch domestically that our business customers in particular want is Atlanta,” chief executive Gary Kelly said in late 2010, when the AirTran deal was announced. The acquisition, he said, “is very clearly a strategic move for us to fill that gap.”

 

McGinnis thinks fares will “remain much the same” in many markets where AirTran already flies, while they could go down in new markets Southwest enters not flown by AirTran.

 

Because Southwest controls AirTran and will eventually displace AirTran service, “that explains why you wouldn’t expect to get the so-called Southwest effect in this sort of transaction, because Southwest is acquiring an operator who has already done that for the market,” Mann said.

 

AirTran “has already been the low-fare leader in the market for a very long period of time,” he said.

 

Southwest plans to dismantle AirTran’s connecting hub, transform it into an operation focusing on people traveling to and from Atlanta and connect Atlanta to many of the cities already in the Southwest route network across the country. It will step into AirTran’s shoes with a stronger financial standing and the freedom to gradually expand the Southwest brand and gain customers, while leaning on the existing AirTran operation and customer base.

 

Rodman & Renshaw analyst Daniel McKenzie said in a note to investors that there are no signs of a market share battle in Atlanta between Delta and Southwest.

 

In fact, Southwest is shrinking flight capacity in the second quarter in markets where it competes against Delta, including in Dallas, Denver, Las Vegas and Los Angeles, according to McKenzie.

 

After a difficult year with high fuel costs and economic uncertainty, both airlines are “striving for better returns in 2012,” and “getting Atlanta right is crucial to hitting overall return objectives.” Throughout their route networks, Southwest and Delta have both been increasing fares to boost revenue in the last year.

 

The launch of Southwest service is “kind of historic for Atlanta,” Mann said, “but this is a story that’s going to unfold for a couple of years.”