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Southwest flying high in Denver

Consumers benefit as market share grows

By Chris Walsh, Rocky Mountain News (Contact)

Published November 21, 2008 at 12:05 a.m.

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Southwest Airlines has nearly doubled its market share at Denver International Airport this year, fueled by the addition of new flights and cutbacks by its competitors.

The Dallas-based carrier, which arrived at DIA in early 2006, has captured 10 percent of the market for four consecutive months, according to the latest airport traffic data. That compares with a 5.3 percent share for all of last year.

Southwest's emergence as a major player in Denver has shifted the airline landscape, making DIA one of the nation's most competitive airports. That's benefiting consumers, helping keep fares at reasonable levels even as prices rise dramatically across the country.

Southwest's market share this year through September stands at 8.5 percent, and it likely will gain an even bigger slice going forward after adding 20 flights and two new cities several weeks ago.

"This growth in share really reflects the materialization of some of our new markets and flights," said Chris Mainz, a spokesman for the carrier. "It's really helping us win more local customers."

The carrier now has about 115 nonstop departures in Denver to 32 cities, up from 58 flights to 16 cities at the beginning of the year.

But its growth pace almost certainly will slow next year.

The carrier is facing the same financial pressures as all other airlines and has said it might not expand at all in 2009. In fact, Southwest will eliminate three flights in Denver in January as part of a much broader move to cut capacity - at least temporarily - during the slow winter months.

Southwest officials still deem Denver a "focus city," saying the company could reallocate planes from underperforming routes if it finds additional opportunities here.

"I certainly wouldn't expect to see the same type of growth in Denver next year as we've had" in 2008, Mainz said. "But we still have the ability to grow and add flights where it makes sense. Hopefully, we'll be able to add modest service here and there."

The carrier's growth - and its ability to put downward pressure on fares - has helped generate more airline traffic at DIA in general.

Southwest also has been able to capitalize on the struggles of other airlines in Denver.

United - DIA's largest carrier - has been shrinking its presence in Denver for years. It accelerated that trend in 2008 as oil prices soared over the summer. As a result, its market share through September has dipped to 48.5 percent, compared with 56.6 percent last year.

"My perception is that United has ceded some of the domestic market share in Denver to Southwest as part of its overall global strategy," said Florida-based airline consultant Stuart Klaskin. "United has essentially said they're just going to not vigorously compete for that largely price-sensitive part of the market in Denver."

Frontier, Denver's second-largest airline, is selling planes and scaling back as it reorganizes in bankruptcy protection. That has created opportunities for Southwest to expand.

But Frontier has posted an increase in average market share this year despite Southwest's growth. Even though Frontier is cutting mainline flights, it's been able to siphon off some of United's customers. It's also benefiting from a 3.6 percent increase in overall traffic at DIA.

"As we've said all along, Southwest isn't taking market share away from us in Denver," said Frontier spokesman Steve Snyder. "We're still very comfortable that we compete with them very well here. They are taking market share at the expense of other airlines, and to a certain extent they made the market bigger."

It's hard to predict how the market will shape up next year, given the uncertainties surrounding everything from travel demand to the economy to oil prices.

Observers say it's still unclear whether all three carriers will be able to compete in Denver going forward.

"I don't think there's any hub situation where a third large carrier typically does well," said Bob Mann, a New York-based industry consultant. "The question is who becomes that third carrier in Denver. I don't think we have an answer yet."

Carrier gains steadily at DIA

Southwest Airlines' market share in Denver

* 2006: 3.3 percent

* 2007: 5.3 percent

* 2008*: 8.5 percent

Growth in its market share has picked up significantly in recent months as it has added new flights in Denver

* January: 6.6 percent

* February: 6.6 percent

* March: 6.6 percent

* April: 6.7 percent

* May: 8.3 percent

* June: 9.9 percent

* July: 10.1 percent

* August: 10 percent

* September: 10.3 percent

Primary competitors in city

* United Airlines has been losing market share for years, and the trend has continued in 2008 as the carrier cuts flights.

* 2007: 56.6 percent

* 2008*: 48.5 percent

* Frontier Airlines, on the other hand, has been gaining market share for years and continues to do so in 2008. Its market share through September is up 3 percentage points vs. its total for 2007. That could change in coming months, however, as the carrier pares capacity.

* 2007: 22.7 percent

* 2008*: 25.7 percent

Comments

  • November 30, 2008

    3:33 a.m.

    Suggest removal

    SteveM writes:

    (a) It's funny how the 'experts' say that 3 airlines competing at one airport doesn't work, meanwhile saying that competition is the key to low fares. Huh?
    (b) The City Council owes it to UAL and F9 to back-charge SWA for it's fair share of the Airport costs it failed to have to pay by leaving Denver and then returning after the fees were lowered saving them hundreds of millions of dollars. What they did is outrageous. Until they pay their fare share, I urge a boycott of SWA. If it were not for the willingness of United and Frontier to stick it out during the high cost years, there would be no DIA and there would have been no competitive fares. It makes me sick to my stomach that the City did not require them to pay their fare share upon returning to the airport. The fools that approved their return thought it would be so great for the city to have SWA here, when, in fact, it has hurt OUR HOMETOWN AIRLINE FRONTIER (Southwest is based in TEXAS!!!!!!!) and United which realistically paid the brunt of the cost of the Airport. Frontier has cut thousands of local jobs. Southwest has been hiring tons of Texans. Is that what we want? The City Council has some explaining to do!!!!!!!!!!!!!!!!!!