Austin-Bergstrom International Airport

Southwest Airlines presses to improve its fortunes in Atlanta by officially de-hubbing in Nov-2013

Southwest Airlines aims to realise its goal of dismantling AirTran’s hub in Atlanta in Nov-2013 as a means to bolster local passengers at the airport in the hopes of improving Atlanta’s performance. The declaration that Atlanta will officially become a point-to-point operation completes efforts by Southwest to eliminate unprofitable flow-through routes and concentrate on areas where it, along with AirTran, has relative strength.

After completing its acquisition of AirTran in May-2011, Southwest set its sights on network optimisation between the two carriers. The exercise essentially resulted in many small markets being eliminated from AirTran’s network and Southwest’s determination that Atlanta would perform more effectively in the combined network through the adoption of Southwest’s point-to-point route management strategy.

Virgin America plans rapid route expansion in 1H2013 even as capacity growth slows

Virgin America is launching several new routes from its bases in San Francisco and Los Angeles in 1H2013 even as it cuts its annual growth rate from an annual average of 28% during the last three years to the mid-single digits during 2013 and takes delivery of just a single aircraft during the year. The routes are reflective of the airline’s network strategy during the last couple of years that entails inaugurating a mix of business and leisure markets that have ample existing service. Virgin America’s network tactics have been called into question during the last few years as profitability continues to elude the carrier; and it is not certain that the new routes it is introducing in 2013 will bring the airline closer to its first full-year profit.

New routes introduced by the carrier beginning in Apr-2013 and continuing through Jun-2013 are largely well-served by Virgin America’s main rivals United and American along with low-fare carriers JetBlue and Southwest. One of Virgin America’s most interesting moves is its entry into the crowded Los Angeles-San Jose market. It is an interesting experiment for the carrier as San Jose Norman Mineta Airport is just 49km away from its largest base and headquarters in San Francisco, from which Virgin America offers numerous daily flights to Los Angeles. With so many carriers already serving the short-haul market, it is uncertain if Virgin America can steal or stimulate enough traffic on the route to achieve sustained profitability.

Southwest Airlines plots course to meet previously missed ROIC targets

Southwest Airlines plans to aggressively grow its return on invested capital (ROIC) by 8 ppts in 2013 to 15%, driven by USD1.1 billion in revenue gains derived from schedule adjustments, new ancillary fees and an improved revenue management system. The carrier must close a wide gap in order to meet its goal after recording a 7% ROIC for the 12M ending in Sep-2012, and admitting it fell short of an original 15% target for 2012. But Southwest management is confident that 2013 is the year it will attain its often-cited return goals as it seeks to contain unit cost growth and capture USD400 million in estimated synergies from its acquisition of AirTran.

Carrier executives are tempering some of the confidence they are exuding about meeting ROIC goals with a cautious declaration that there is no guarantee that 15% returns will be displayed in the airline’s year-end 2013 results.

Southwest CEO Gary Kelly told investors in late Dec-2012 “it is not a promise, but we’re sharing with you our plan”. Previously Southwest has struck a cautious tone for 2013 as its operating profit during 3Q2012 plummeted USD174 million to USD51 million.

Southwest continues New York-Nashville push as Baltimore sees further cuts

Southwest Airlines plans to add additional flights from the New York region to Nashville, Tennessee beginning in Mar-2013 through new service from Newark Liberty International Airport. As a consequence, Baltimore Washington International Airport (BWI) is losing service currently operated by Southwest from Newark. The Newark-BWI cuts follow the elimination of service from New York LaGuardia to BWI in Jan-2013. Once the changes are complete, Southwest’s service from the New York metro area to BWI will consist of flights from Islip Long Island MacArthur airport.

Another element of the carrier’s planned network tweaks for the Northern Hemisphere spring schedule is the launch of Southwest-branded flights from Branson, Missouri, a small privately-owned airport where Southwest’s subsidiary AirTran is the dominant carrier. Southwest’s decision in Jan-2012 to retain Branson in the overall combined network of the two carriers was somewhat of a surprise, given Southwest’s decision to eliminate several underperforming small markets from AirTran’s network.

US carriers gain access to their strongholds through new Washington National slot allocation

Four US carriers have won rights to launch flights from slot-controlled Washington Reagan National Airport to serve markets where they are dominant or have a strong presence. Southwest Airlines and Virgin America are gaining access to National for the first time, while JetBlue will expand its blossoming presence at the airport. The new services should usher in some fare rationalisation in those markets as the carriers seek to challenge United’s dominance in the Washington market from its hub at Dulles International Airport, which is about 56km from National.

US lawmakers in the latest FAA Reauthorisation bill signed into law earlier this year included a provision freeing up four outside perimeter (beyond 2,011km) slot pairs for new entrant or limited incumbent carriers at National, which is located only about 6km from the US capitol. Carriers already having an ability to operate flights outside the perimeter were also allowed to trade in a single pair of inside perimeter slots for new outside perimeter service. A slot pair consists of one take-off and one landing slot.

World airports report encouraging 1Q2010 traffic trends, though volcano effect expected in April

Worldwide passenger traffic rose by 7.6% in Mar-2010 year-on-year and by 6.1% for the first quarter, according to the latest figures from Airports Council International (ACI). The freight resurgence continued, with a 25.6% rise in total volumes in Mar-2010, led by a 32.4% surge in international freight, while domestic volumes rose 14.6%.