Baltimore/Washington International Airport

Southwest continues de-hubbing Atlanta as ROIC targets start to look murky

Southwest Airlines continues to refine the combined operations it has with AirTran in Atlanta as part of its overall strategy to put less emphasis on Atlanta as a connection point and more focus on creating a rolling schedule in the market that is more reflective of its other top focus cities.

All of the efforts that are designed to reach fruition in Nov-2013 are being undertaken to improve the overall performance of Atlanta in the combined AirTran-Southwest network as the integration of the two carriers continues.

But in the short-term Southwest is battling some revenue weakness as unit revenues during 1Q2013 increased just roughly 2% and fell 4% to 5% during Apr-2013. Some of the weakness in Apr-2013 resulted from the timing of the Easter holiday and system slowdowns triggered by budget cuts in the US. Moving forward, Southwest believes it should post unit revenue improvements during the last two months of 2Q2013, with the momentum continuing throughout the rest of the year.

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.

Spirit Airlines' network legacy market expansion continues as financial performance remains solid

Executives at Spirit Airlines believe the airline’s favourable financial performance during 4Q2012 and full year 2012 demonstrates the soundness of the carrier’s business model built on offering a comparatively lower base fare and garnering a large portion of ancillary revenue from various add-on products. At the moment the carrier holds a solid outlook for 2013, reflected by its planned supply expansion of roughly 22%. The carrier continues to move into legacy and low-cost stronghold markets in the continental US as part of its larger strategy to diversify from the lower-yielding south Florida market. Beginning in Feb-2013 and continuing over the year Spirit is introducing additional flights from Baltimore, Detroit, Denver, Houston, Minneapolis and Philadelphia.

A USD25 million hit to its revenue, resulting from operational disruptions from “superstorm” Sandy that struck the US east coast in Oct-2012, triggered an 18% drop in Spirit’s 4Q2012 profits year-over-year to USD20 million. Spirit has a large presence in Atlantic City, New Jersey, which chief marketing officer Barry Biffle stated was the epicentre of the storm. Spirit is the only carrier serving the airport, and presently (18-Feb-2013 to 24-Feb-2013) operates flights to Fort Lauderdale, Fort Myers, West Palm Beach, Orlando and Tampa, Florida and to Myrtle Beach, South Carolina.

Southwest gives Memphis a tiny shot in the arm through new AirTran service

Memphis International Airport is getting a small boost during 2H2013 when Southwest, through its AirTran subsidiary, adds service to Baltimore, Chicago Midway and Orlando in Aug-2013. The new service being introduced by AirTran could possibly help combat the airport’s declining traffic stemming from Delta’s ongoing pull-down of its Memphis hub. AirTran is not directly replacing service to the smaller markets Delta is pulling down in Memphis, but Southwest appears ready to make a larger commitment to the airport as it works to usher in its own branded flights from Memphis later in 2013.

At the same time, Southwest appears to be eliminating some marginal markets from its network as the busy travel season in the US winds down, including the first route cut from Greenville/Spartanburg, South Carolina, a market Southwest inaugurated in Mar-2011. One of the initial markets from Greenville – Orlando, Florida – is being cut during 2H2013. Southwest is also taking over service operated by AirTran in Grand Rapids, Michigan, and adding its own branded flights to some of its larger markets.

Southwest’s latest network revamp features short-haul cuts and tweaks at LaGuardia

Southwest Airlines during winter 2013 plans to cut flights in five short-haul markets with high levels of connecting passengers and reshuffle its operations at New York LaGuardia, launching service to Nashville, Tennessee and adding flights to Chicago Midway as it cuts daily service to Baltimore. The carrier’s logic behind its changes at LaGuardia is to bolster customer access to its network in the western US.

The network adjustments the carrier has outlined for its winter schedule largely focus on Southwest-operated services, and do not appear to alter many flights operated by its subsidiary AirTran, which Southwest acquired in May-2011. AirTran tweaks include converting Atlanta-Phoenix service to Southwest-branded service and the seasonal elimination of service from Buffalo to Tampa Bay and Chicago Midway to Fort Myers. Southwest also plans to convert AirTran flights from Milwaukee to New Orleans in Feb-2012 ahead of the Mardi Gras holiday.

Window for targeted launch continues to shrink for latest iteration of People Express

Ambitious plans by upstart People Express for a late summer launch appear to be fading as the airline is still awaiting requisite US government approvals to inaugurate flights from Newport News-Williamsburg International Airport. The delay comes despite the carrier's management having extensive airline experience, which should lead to understanding the intricacies and complexities of gaining certification in order to start business. People Express’s vice-chairman William Stockbridge was involved in the launch of the original carrier and served as CEO of defunct trans-Atlantic business carrier Maxjet. The missed launch date means People Express will likely debut after the high season for travel in the US, creating an immediate challenge as its operations get underway during a period of weaker demand with a business model that has a long path to tread in order to gain credibility and achieve profitability.

The latest version of People Express made its official marketing splash in Feb-2012 after starting its pre-launch business period with USD5 million in capital, which the airline felt was adequate to cover expenses associated with that phase of its business. At the time it unveiled its plans, the carrier stated its goal was to inaugurate flights during the late summer of 2012.