Yesterday, Philadelphia’s new Terminal E extension opened, which will be used for Southwest (they’re leaving their Terminal D gates). First, that’s great news for PHL. E really needed help. But, anyway, Southwest used the event to announce new service to Boston five times a day with an introductory $59 fare. Of course, that’s not great news for US Airways.
Man, this brings back memories to when Southwest started Philadelphia service from Providence. As soon as that happened, I remember getting a postcard from US Airways announcing its new $29 “GoFares” on the routes, which was conveniently the same fare as Southwest. As a result of that fare war, O&D passengers (those going between PVD-PHL as the origin and destination) increased greatly. I think the same thing could happen here. Let’s take a look at the market – the table shows the average fare, average yield, the biggest carrier, that carrier’s market share, and the average fare for that carrier.
So, both Providence and Manchester have more O&D passengers than Boston, despite the fact that there’s more capacity to PHL from Boston, and I have to think that a good number of those passengers could be avoiding the higher fares in Boston. I mean, look at the yields that US Airways is getting out of Boston!
But, that gravy train seems to be coming to an end. Take a look at the coach fare for the week before Southwest arrives, and then look for the week after, when US Airways is matching Southwest.
While Southwest’s entrance will certainly have a negative effect on US Airways’ financial performance on these routes, US Airways still has a strong advantage over Southwest in the schedule department. In the summer, US basically has hourly service with sixteen departures a day. Plus, I think the E190 is the perfect aircraft for US Airways in the market to support such frequent service. But, I’m sure Southwest will do fine on this one – they will certainly pick up O&D passengers but PHL service opens up additional connecting opportunities as well. And even though Southwest’s schedule might not be as great as US Airways’, the latter’s yields are going to take a serious beating here.
The low fares here (from both carriers) will certainly stimulate the market, taking away passengers from PVD/MHT, Acela, and possibly driving as well.
Southwest seems to be doing well in Boston so far – consider the 81% load factor in November and the 89% load factor the month before that. Southwest has slowly been growing the station – boosting service to Midway and Baltimore while adding service to St. Louis and Denver. The airline will also be adding a third gate in Boston to support the new service.
Anyway, this one will be fun to watch.
Yes, US has more flights and will be able to carry more bodies but the yield numbers are going to hurt. A LOT. If I’m reading the numbers above correctly it looks like the 408 daily O/D passengers that US carries used to generate about $135,000 daily for US. If the average fare drops to around $100, which seems likely, that would cut the revenue US takes in by about $90,000 a day. Annualized that is a loss of nearly $35MM. That’s a HUGE chunk of change to be faced with losing as any company, much less one that hasn’t had profits in a while.
Ouch. Good news for passengers though.
When they decrease fares up there does that mean they increase fares for us in CLT? That’s what it seems like!
I was looking for next week and a connecting flight to PIT on CO, DL, or FL ranged from $215 to $300 but a direct on US was $770. I can’t justify that to my company