JetBlue’s Intersting Newark Move

Published
by
Dan Webb
on September 1, 2010
in JetBlue
. 0 Comments

Yesterday, JetBlue announced that they would launch four daily flights from Boston to Newark, starting in early May. It’s an interesting move, considering that the airline’s current service is only to leisure destinations, with five dailies to Orlando, three to Lauderdale, and one each to West Palm, Fort Myers, and Tampa.

The timing of the launch and the announcement certainly would make one think that the move is motivated by Southwest’s announcement that it will be coming to Newark next year. I do wonder if Southwest has looked at the market. While doing Boston – NYC would be difficult out of LaGuardia with only eight slots – it does have more flexibility at Newark with 18.

Either way, I like what JetBlue’s doing here – just look at this data from the Consumer Air Fare Report (Table 1A) for the first quarter of this year:

Basically the same amount of passengers as JFK at fares that are 165% higher. Nice.  Lots of Continental’s passengers  on its BOS-EWR flights are connecting, but for those who are traveling between the two cities the airline is making a killing.

So what does this do to JetBlue’s existing service? Well, right now the airline has eight flights to JFK, but when Newark starts there will only be six, so that shrinks a bit.

But I’m interested in how JetBlue does here. It seems they can really stimulate demand, but Continental sports a much more robust schedule here, too.

I am also wondering where the Newark slots are coming from. Is the Florida service getting trimmed down? Or is JetBlue acquiring them in another way? No official comment from JetBlue on that front yet.

Note: JetBlue’s press release reported a DOT number of $280 for EWR. Not exactly sure where it’s coming from, but for consistency’s sake I’m using the number from the report.

Guest Post: Thoughts on Mexicana

Published
by
Dan Webb
on August 31, 2010
in Uncategorized
. 6 Comments

My friend Courtney’s back with another guest post – this time on Mexicana:

With the soap-opera that has been Mexican aviation over the past few months, (heck, past few years) it’s time to gain some perspective on exactly what the shutdown of Mexicana means. Of course there’s still the talk of a resurrection of the airline, but I’m not holding my breath. There’s simply far too much owed to far too many people, including several of the lessors who are extremely anxious to get their airplanes back. So we’ll work on the assumption Mexicana will not be here mañana.

Up until Saturday, Mexicana was the oldest operating airline in Mexico, and fourth oldest airline in the world behind Avianca, KLM, and Qantas.To say there’s a bit of history and national pride behind the airline would be a bit of an understatement. What I want to look at is exactly what kind of world will we live in post-Mexicana. Since enough has been said, or typed, on this subject, I think I’ll let the pictures do the talking this time. Below are three analyses that struck me as showing the significance of the situation to Mexico.

One Quarter of the Capacity, Gone

Mexicana represents 26% of all seats within, into, or out of Mexico. To better illustrate the gravity of this, 26% of the US market would equate to removing Delta and Jetblue and Airtran…Let that sink in for a bit. I suppose you could say the overcapacity problem in Mexico is pretty much solved (if “solved” is even the right word).

On the fleet side, you see what the loss of the F100’s, 717’s, and 319’s does to the market. There is now quite a gap in the 70-130 seat guage, while the 150-seaters are dominated by the LCC’s Interjet, Volaris, and Viva Aerobus (pronounced ‘Air-o-booce’).

Twenty Unserved Markets

Yikes. There are some major markets on here. MEX-DEN, ORD-MTY, GDL-ACA, MEX-Canada? GDL-ACA is a major route within Mexico that will most likely be filled by the LCC’s, Interjet, Volaris, or Viva Aerobus in short order. United will have dibs on DEN-MEX, and Air Canada will be able to add Vancouver, Calgary, or Montreal at their leisure. ORD-MTY is an interesting one as American could fill it to preserve oneworld presence, but have Dallas. United could add the dot to their map, but with Continental in Houston, the ORD connection becomes a bit redundant.

All told, this is a major even in Mexican aviation. Will the airline be brought back? Who knows? I’ve seen a lot crazier things happen in Mexico.

Courtney is the co-creator of the Airplane Geeks Podcast, founder of AirlineEmpires.net, currently works for a commercial aircraft OEM, and is a self-proclaimed stud muffin. You can contact him through the Things in the Sky contact link or on Twitter @miller22.

Southwest Heads to Newark

Published
by
Dan Webb
on August 30, 2010
in Southwest
. 5 Comments

One would usually expect a Friday afternoon in August to be a pretty slow time for news, and in most cases, that’s right. But last week it was a different story when the Department of Justice announced that it was signing off on the Continental-United deal.

But that itself wasn’t the big news – it’s just one of the steps that needs to be completed. What’s more interesting is what they had to do to get it happen – and that’s transferring over 18 Newark slots to Southwest through a permanent lease. Assuming everything goes according to plan, Southwest can start service there this March.

Why 18? It seems arbitrary. But if I’m reading my timetables right that’s the number of departures United has from Newark. So, essentially, Southwest is a replacement for competition from United that would be lost in the merger anyway.

My guess is United and Continental learned from the slot swap here. US Airways and Delta tried to spread their divestiture among a few carriers, and the DOT/DOJ weren’t the biggest fans. And the DOJ likes this deal, since it took care of their anti-trust concerns. (What other carriers think is probably a very different story.)

But this seems like a great deal for Southwest. They’ve wanted to grow in New York, and they’ve said that prices for LaGuardia slots have been too high. 18 slots gives a lot more flexibility than their 8 at LGA, and they probably got a sweet deal since Continental and United wanted to get any anti-trust concerns out of the way quickly.

The announcement only strengthens the case for Southwest to acquire 737-800s – though for that happen Southwest needs to get a new agreement with its flight attendants negotiated and ratified in three months.

So what destinations will Southwest serve here? The airline’s launches at Minneapolis and Boston shed some light, I think – Southwest will hook up Newark to its hubs focus cities that provide access to the rest of the network. Chicago Midway and Baltimore are gimmes, I think. Denver and Phoenix would provide good connectivity out West. I’m also thinking Houston or St. Louis, which would allow Southwest to provide one-stop Dallas service while it waits for Wright to go away in 2014.

Meanwhile, maybe it’s just me – but I’m finding Southwest a little hypocritical here. I mean, the deal sounds like Southwest was approached last week and offered a permanent lease on the 18 slots pairs, and took it.

Earlier this year, Southwest had some very different things to say about slot divestitures when they were blocked out of the slot swap compromise, and was railing against Delta and US Airways having any influence over who got any divested slots.

The airline said in an April government filing that “a cash-only auction process, without influence by the selling carriers, was the only way to ensure that divested slots would be put to their highest and best use for the benefit of the public.”

It seems that when the carriers divesting slots at an airport want to give them to Southwest, then it’s okay for those carriers to have influence.

I realize we’re talking about two different deals here, but the contract in rhetoric is very interesting.

Anyway – I call this is a smart move for all parties involved.

Delta Builds Up Raleigh

Published
by
Dan Webb
on August 26, 2010
in Delta
. 0 Comments

Yesterday we saw an interesting move from Delta, with the carrier announcing that it will beef up its regional operations at Raleigh starting on November 1. It’s an interesting move that’s…dare I say it…”Southwest-y.”

Southwest has done well moving in to a city that American abandons and then building up a mini-hub (ahem, focus city). The two biggest examples are probably Nashville and St. Louis. Not that Southwest hasn’t benefited from American cutting down Raleigh, but I’d argue that the other two cities saw more aggressive growth.

For example, I took a look at the T100 segment data for May and calculated market share in terms of percentage of total departing seats from those three airports. Southwest had 58.1% share at Nashville, 46.8% at St. Louis, and 25.5% at Raleigh. And plus Raleigh’s market share is more evenly spread than Nashville and St. Louis.

But back to my main point. American basically killed off the final remnants of its Raleigh hub when it announced its cornerstone strategy last year, where the carrier said it would focus on Chicago, Dallas, Los Angeles, New York, and Miami. Nowadays the only two non-cornerstone routes are ERJs to Washington-National ( high yield and slots there are valuable) and the 767 flight to Heathrow. (I don’t know for sure, but I’ve always heard that corporate traffic from glaxosmithkline makes the route work.)

So American ended flights to Columbus, Hartford, and St. Louis. Delta is picking those up and throwing CRJs (and one E-175 to Hartford) on those routes. The only competition is one Southwest flight to St. Louis. This makes sense. While Southwest has been able to pick up American’s dropped routes in the past, it can’t with regional routes. Delta can.

One would assume since American held on to these for awhile, they were high-performing. Just for the heck of it, I looked at markets in the DOT DB1B* database with over 5,000 departing passengers (from RDU) in the first quarter. If I did my math right, Hartford and Columbus come in at #10 and #11, respectively. St. Louis is #17.

Meanwhile, Delta’s adding two more Boston flights, for a total of five. American’s dropping its five daily (during the week) Eagle flights in a couple of weeks, so that makes sense. And even with Delta’s boost capacity will be down so that helps yields.

Delta’s also reinstating Orlando and Tampa service, which was cut back in 2008. Delta is competing with Southwest here, but my guess yields are pretty high to justify a few more CRJs.

Also, Delta says it will be adding a fifth Minneapolis flight, and it’s already added a second JFK.

So an interesting move from Delta here. But I think it’s very smart by building up this operation with some of the higher-yielding routes where it’s unlikely anyone will try to compete with them. What I will find more interesting is if Delta decides to expand its Raleigh network even more.

*Just a couple of quick notes on DB1B. When I say 5,000 passengers, I mean more than 500 in the data set since it’s a 10% sample. Also, it’s not uncommon to scrub out the very low fares in DB1B to remove award tickets, etc. Generally, I don’t do that, and did not in this case, either. If anyone wants to see how I calculated yields, shoot me an e-mail.

Horizon Changes Course

Published
by
Dan Webb
on August 24, 2010
in Horizon
. 4 Comments

When Alaska Air Group was discussing its earnings last month, Glenn Johnson, the newly-appointed president of regional carrier Horizon Air, shared his vision for the airline to help it reach its goal of a 10% return on invested capital (ROIC).

It appears that Johnson isn’t wasting any time on making some of the moves he mentioned during the call.

For one, Horizon has decided to outsource all of its heavy maintenance on the Q400 fleet, a move that is expected to save $3 million per year. Now, a carrier outsourcing maintenance is nothing new, but it shows Horizon management means business. (On the bright side, none of the 109 workers affected by the move were laid off and instead took an early retirement package or found employment elsewhere at Horizon or the outsourcing company.)

A bigger move is that Horizon is switching to an all-capacity purchase agreement (CPA) model. CPA flying made up 57% of Horizon’s capacity in July. Under this set-up, Alaska covers all of Horizon’s operating costs (including fuel) and then provides a predetermined profit margin to boot. The rest of Horizon’s network is “brand” flying. Here Horizon is flying at-risk – they keep all the revenues but pay all of their costs, and they’ll get some extra revenue under a pro-rate agreement if someone connects to Alaska mainline.

So why go CPA? It provides Horizon with a much more predictable revenues. I doubt this will change the airline’s route network a whole bunch, since Alaska and Horizon’s route planning functions have already been combined. And financially, this probably won’t change the results of Alaska Air Group in aggregate all that much as it’s just moving some items between Alaska and Horizon.

But going all-CPA makes Horizon more of a traditional regional carrier. And something that would even further that is the future of the Horizon brand name – something that the airline has said publicly is up for debate. Most regional carriers just adopt the branding of the mainline partner – the operator of the flight is only mentioned occasionally.

Meanwhile, Horizon operates in its own colors and has its own special offerings – like free beer and wine.

So it seems that Horizon is headed down the path to be like any other regional carrier – but the brand decision is what really defines the airline’s future. Either way, Horizon will be a regional carrier focused on safe and reliable flights, but its name could become much more hidden from passengers.

A Fee I Actually Like

Published
by
Dan Webb
on August 23, 2010
in Martinair
. 3 Comments

To say ancillary revenue has been a theme over the past couple of years would be an understatement. I’m all for unbundlling, but some fee ideas aren’t that creative. For example – American’s new “Express Seats” scheme isn’t all that original, plus I think the price makes it a rip-off. (Yeah, US Airways does the same thing as American with Choice Seats but they’re cheaper.)

So during my normal surfing of the interwebs this weekend I found myself on Martinair’s website, and saw a new fee they had introduced this past June – an empty seat fee. For $70 or €50 paid at check-in, you can guarantee that the seat next to you will be empty.

I think it goes without saying that everyone loves empty seats. Whenever I fly Southwest I try to sit in “secret first class” – rows 13-17. Some frequent Southwest fliers have figured out that this is where one will most likely find an empty middle.

This seems to be a win-win here. Passengers get more personal space, and Martinair gets more revenue. Since one can only pay this fee upon check-in, which starts four hours before departure, the chances of a bunch of empty seats getting sold are pretty slim, so why not get some extra revenue?

Kudos to Martinair for thinking outside the box here.

US Airways’ New FastPath on BOS-PHL

Published
by
Dan Webb
on August 19, 2010
in Southwest and US Airways
. 2 Comments

Earlier this week on Twitter I saw that US Airways had a new product for its passengers between Boston and Philadelphia called FastPath. What does that mean?

Well, this route all of a sudden looks a lot more like a Shuttle flight.

In terms of schedule – the route was already there with plenty of frequencies during the day. Right now, US Airways basically has hourly service in each direction, and a quick check of schedules indicates 16 flights each way during the week.

But now US Airways is adding some perks commonly found for the Shuttle. BOS-PHL flights will now depart from one set of gates at either airport that the airline says is close to security. Flights now have dedicated check-in lines and baggage claims.

And here’s one perk that is not found on US Airways shuttle – priority security line access for everyone – not just elites or first class passengers. That’s nice.

So why is US Airways doing this? I have to think Southwest is the reason – they started up on the route in June with five daily flights and just bumped it up to eight, so US Airways now has to fight to keep customers.

But I do like how US Airways is thinking here. All to often the response to an LCC entering a market is lowering fares, and maybe tossing out some bonus miles, so it’s nice to see something creative.

And the moves do make sense to me – especially the security lines. At Boston, Southwest has a pretty sweet deal over in Terminal E. That’s the international terminal so it’s pretty quiet until the afternoon. Plus, Southwest basically has its own security checkpoint, as most long-haul passengers use a larger one at the other end of the terminal.

I have less experience with Philadelphia, but the security checkpoint that Southwest uses, which wast part of the new Terminal D/E connector, is very nice. The last time I went through a US airways checkpoint at Philadelphia, the experience was fine, but the facility just isn’t as nice.

As always – let’s see how it all shakes out. But I really like what US Airways is doing here. It will be interesting if we’ll see any response from Southwest here.

Alaska Doubles Up LA – Mexico City

Published
by
Dan Webb
on August 18, 2010
in Alaska
. 0 Comments

I first heard Alaska was boosting it’s LA – Mexico City service last week from the always-informative Airline Route blog, and I wanted to share a couple of thoughts. The airline will be adding a second daily flight beginning this October.

I decided to ask Alaska about this move. They said when they launched this route back in 2005, they had two flights, but dropped the second in 2007.

So what’s changed? I was told that demand has been improving due to a stronger economy and that the whole swine flu crisis has now blown over.

I decided to look at the T100 data for the route – the latest month available was February so I compared that to 2009. And as you can see, a boost in traffic really helped loads, with flat capacity. (The only reason I can think of for the 30 seat capacity difference is that Alaska has two 737-800 configurations.)

I was also wondering if Mexicana’s financial troubles had anything to do with the move. Alaska tells me that it does help create an opportunity, but it wasn’t one of the primary reasons since that situation is very much in flux right now.

Right now, Mexicana is scheduled to operate 30 weekly flights from Los Angeles to Mexico City, which is eight less than in July.

So this seems like a good move – expanding as a route that is seeing better performance while taking advantage of a competitor’s weakness.

Plus, this looks great from a utilization perspective – the outbound operates as a redeye and returns to LAX the next morning, and I suspect the aircraft wouldn’t just been sitting otherwise.

US Airways Re-Trenches in New York

Published
by
Dan Webb
on August 17, 2010
in US Airways
. 0 Comments

I’ll be brief on this topic, as Cranky Flier really hit the nail on the head this morning.

Basically, US Airways is adding some new regional routes out of LaGuardia on October 31. Some are new, and some, like Harrisburg, are re-starts. A very interesting addition is Washington Dulles. Naturally United flies this route a whole bunch. But US Airways has its partnership with United, and has also built up its own codeshares with foreign carrriers, with Dulles as a connection point.

Interestingly enough, that’s the same day Delta ramps up operations at Washington National with slots that the airline said it had leased to other carriers. US Airways also says the LaGuardia slots for the new flights used to be leased out. Neither airline has specified the other carriers, but I think it’s pretty safe to guess here.

It’s interesting to see that the two carriers are now competing with each other more aggressively, now that the slot swap is stuck in the court system.

As a friend mentioned to me – in a weird way, the airlines are giving the DOT exactly what the regulatory agency was hoping for by denying the slot swap deal – enhanced competition.

Either way – I think US Airways’ move yesterday makes more sense than Delta building up a focus city at DCA. At least US Airways has a large LaGuardia operation they’re working with. At least the station is profitable now – during the airline’s earnings call management said RASM was up 36% year-over-year. LGA had pretty low margins, but it is at least now contributing to the bottom line.

Guest Post: SkyWest and ExpressJet

Published
by
Dan Webb
on August 16, 2010
in Expressjet and SkyWest
. 2 Comments

Well, here’s another guest post from my friend Courtney – this time he shares his thoughts on SkyWest/ExpressJet, which are a bit different from mine:

I almost didn’t post this week because so many people were covering the Skywest acquisition of ExpressJet and, wouldn’t you know it, that was what I wanted to blog about. I finally decided to throw caution to the wind and post my verbose rendition of what it means now that Skywest has an accepted offer to acquire ExpressJet.

The deal makes a ton of financial sense, but strategically we’ve been focusing on the wrong things. The intrinsic value of XJT is about $150-$180 million and Skywest paid about $133. Heck, they offered $180 two years ago with a crappier CPA agreement, and ExpressJet turned them down. They’ve got about $70 million cash that can be applied directly back to the investment. I’m surprised Warren Buffet didn’t jump on ExpressJet at those prices. Why didn’t he? He’s too smart to touch an airline, but I digress. With all of the lawsuits out from the ExpressJet shareholders, I would expect the purchase price to rise North of the current offer.

I’m surprised Warren Buffet didn’t jump on ExpressJet at those prices.

So financially, this immediately makes sense, but the strategy behind it is where the interesting stuff starts to poke it’s head out of the woodwork. First of all, this isn’t consolidation. I read articles about how the airlines are consolidating, and while it’s technically true, there is no real consolidation going on. These are CPA agreements, not competing airlines in charge of their own network. Nothing will change. The overhead savings on a 250 aircraft fleet is infinitesimal and shouldn’t even be counted. So that leaves 696 aircraft when you count Skywest and ExpressJet separately, and 696 aircraft when they’re together.

Photo Credit: ExpressJet

So what are Skywest’s plans with ExpressJet? Beyond the actual intrinsic value Skywest was able to extract from ExpressJet, there’s very little, what I would call intrinsic strategic value. A mixing of terms, I know but bear with me. ExpressJet, in their current strategy, has very little value other than a declining future. The reason? The 50-seater is dead. Skywest might as well have bought a dealer lot full of Edsel’s.

The 50-seater is dead. Skywest might as well have bought a dealer lot full of Edsel’s.

So Skywest gets to diversify their operations, which they don’t really get to do because diversifying between two companies who become the same company is exactly the opposite of diversifying. A saying comes to mind about a whole lot of eggs and one basket. Assuming the UA/CO merger goes through, which is all but a foregone conclusion, Skywest will have exactly the same number of partners it has today. As for bargaining power, perhaps. But I would suggest lessons learned by airlines such as Delta during the Comair strike have taught the industry to not let any one carrier have too much power. Besides, the regional industry is a commodity. Considering that the remaining financially solvent competitors to Skywest all have solid operations, the only thing left is price, and Pinnacle or Trans-States can compete just as easily on price as Skywest can.

Of course there will also be one less competitor, which is convenient, but let’s be honest: when has ExpressJet really ever competed against Skywest? Ok, they won the 22 50-seaters at United, but again…50-seaters. They’ve no experience nor ability to successfully compete where Skywest sees it’s future; in the 70+ seat categories. ExpressJet has effectively competed with Skywest on new aircraft CPA’s as successfully as Skybus. Ok, I retract that. Nobody should ever be compared to Skybus, and ExpressJet is one of the best run airlines around, but competitively, you get the hyperbole.

I’m convinced the negotiations to make this deal happen didn’t take place between Skywest and ExpressJet, rather Skywest and Continental.

All that being said, there is value in ExpressJet’s remaining 50-seat CPA with Continental, which Skywest will be able to extract, but that’s only guaranteed to end. So exactly where is this “extrinsic strategic value” I’m alluding to? I’m convinced the negotiations to make this deal happen didn’t take place between Skywest and ExpressJet, rather Skywest and Continental. from Aviation Week:

“SkyWest has reached a 10-year deal with Continental, ExpressJet’s biggest regional partner, to operate 206 aircraft. Continental is either the head-lessee or the owner of these aircraft, and the deal allows Continental to drop aircraft as their leases expire. But SkyWest has retained replacement rights for those aircraft, Rich said.”

Aha! This is better than removing a competitor, it’s removing all competitors. They essentially have exclusive rights to upgrade ExpressJet to 70-seaters, should it become available. Scope clause negotiations aside, Continental wants and needs 70′s. Skywest has guaranteed they’ll have first stab at replacing a 206 aircraft fleet. Does that mean 206 70-seaters, I don’t know, but if it’s half, or even a quarter of that, it makes a whole lot of sense for Skywest, especially when you consider Continental is on the hook for the 145 leases, not Skywest. We have a technical term for this in the industry: “cha-ching.”

Did Skywest just lay the Queen of Spades on Trans-States’ MRJ LOI?

What does this mean in a merged United world? The details of the new CPA are of course confidential, but I would have to think it becomes interesting when New United brings on more 70′s. If ExpressJet 145′s happen to be leaving the property at the same time then are any new 70′s replacement aircraft? If so, does that exclude Trans-States? Me thinks it might. Besides, Trans-States won’t be replacing any 50-seaters at new United. They don’t have any. Which begs the next question. Did Skywest just lay the Queen of Spades on Trans-States’ MRJ LOI?

So let’s review the new competitive landscape. Skywest has exclusive 50-seat replacement rights at Continental. Trans-States can bid on current United replacement flying (of which Skywest now flies 100%), but not much else. Pinnacle has the Q400, which has been quite a boon for them, but the question still remains whether that will be considered ExpressJet replacement flying in the future, in which case it appears Skywest might have first crack. Republic is out of the game. Nobody’s going to sign a cost-plus CPA with a direct competitor, especially United with Denver. That leaves Mesa (probably sold off to the highest bidder. Skywest?), Air Wisconsin (completely out of the 70-seat competition), and… well…that’s about it.

We shouldn’t be surprised after the deal they got from Delta in 2005 with ASA.

What’s next? There are three airlines publicly up for sale: Mesa, American Eagle, and Comair. Mesa’s up a creek, which poses a Skywest-esque opportunity. Eagle would finally diversify their customer base to the three legacies up from two. As for Comair, Skywest CFO Rich has expressed interest. Again, the deal won’t be Comair, it’ll be the renegotiated CPA with Delta. Watch that one closely.

I would consider the ExpressJet deal a coup. The perceived value of the deal is not the true value, and no surprise, Skywest is again the winner. We shouldn’t be surprised after the deal they got from Delta in 2005 with ASA.

United breaks guitars, American kills puppies, and Skywest stages airline coups. Sounds about right.

Courtney is the co-creator of the Airplane Geeks Podcast, founder of AirlineEmpires.net, currently works for a commercial aircraft OEM, and is a self-proclaimed stud muffin. You can contact him through the Things in the Sky contact link.

On Southwest and the 737-800

Published
by
Dan Webb
on August 13, 2010
in Southwest
. 2 Comments

Today on the company’s blog, Southwest Airlines COO Mike Van de Ven announced that the carrier was examining the addition of the Boeing 737-800 to its fleet.

First, it’s nice to see something public from the company on this topic, as it’s something that has been rumored, discussed, and argued ad nauseam for years.

So here’s what we know – Southwest has to make a decision by December 1 if they want to start taking deliveries in the beginning of 2012. If Southwest does decide on the -800, it will not be through new orders so to speak – the carrier will convert existing 737-700 delivery slots.

While no seating configuration has been set, the -800 will obviously have a higher capacity, which could work on some high-demand routes. And, as Van de Ven mentions – has the potential of reducing the carrier’s unit costs. (A rule of thumb is that stretches of base models are more efficient.)

Van de Ven says that “the -800 can also give Southwest scheduling flexibility by allowing for additional capacity in high-demand, slot-controlled, or gate-restricted markets.”

So LaGuardia is an obvious choice here. Southwest has also expressed interest in serving National in Washington. But I see this as a play for Love Field when the Wright Amendment restrictions go away in 2014. While the airport is not slot controlled – the compromise reached prohibits caps the number of gates at the airport to 20.

Today’s announcement is very interesting when one considers the fact that Southwest announced a new 737 delivery schedule when it released its second quarter earnings. The carrier exercised 25 options to become firm orders, converted six 2014 purchase rights to options, and moved two options to 2013 from 2015, and one from 2016 to 2014.

So let’s look at the firm orders – we now see two big increases – 2012, when the -800s become first available, and in 2014 when Love Field opens up.

And if we look at firm orders and options combined - we can see that Southwest has built in more flexibility in 2014.

So that’s interesting.

But of course  - the addition of a new fleet type for Southwest is always interesting. But a move within the 737 family is not unprecedented – for example Southwest has both the -300 and -500 classics.   So since the -700 and -800 are both 737NGs, there’s a lot of commonality.

But -800 does add a crew scheduling issue – a fourth flight attendant, an issue raised by Gary Kelly when Cranky Flier, Johnny Jet, and I had the chance to sit down with him at NBTA last year. That would add some extra complexity to the system, considering that every Southwest flight has three flight attendants, and would require an upgrade to some IT systems.

From a fleet perspective – Southwest has said they would like more efficient narrowbodies – though it has not expressed a preference in terms of a re-engined aircraft or a clean-sheet design. But it appears the airline is not willing to wait all that long for a larger aircraft.

Anyway – a very interesting announcement. Let’s see how it goes.

Post edited at 12:29 to reflect that the -500 was not the first -200 replacement.