Wednesday, November 18, 2009

Southwest vs Delta

I think SW sees a no-lose opportunity to carve a piece out of Delta.

The easiest way for it to work is if Delta does not respond with serious fare reductions, especially at Northwest FL Regional (VPS). If SW gets half of the present VPS traffic in addition to a large share of PFN's, SW will be well within the revenue guaranteed by JOE, and the TDC subsidy adds some to the momentum.

If Delta is willing to bleed, say, $30 million a year for 2 years (double JOE's subsidy), it will be up to JOE/SW to decide how long all 3 (Delta, JOE, and perhaps SW in the 3rd year) will bleed. Delta did this to AirTran in Tallahassee, but AirTran was losing its own money, is not as big as Southwest, and it was head-to-head to Atlanta. An interesting move for Delta would be to cut back to only feeding the international traffic from Beaches airport, and seek its own subsidy to slash fares at VPS or just slash them anyway. I predict a more selective fare war, with Delta responding just enough to keep its shrinking feeder service breaking even. Either way, travelers will get lower domestic fares.

Southwest is not really a super-low-fare airline any more, but until fares settle down there will be great bargains, and long-term the fares should be 30% less. Then, it will be Mr. Market who decides if Beaches can provide Southwest volume at those fares.

in reference to: Southwest, TDC inks pact in Dallas | panama, city, beach - Business - The News Herald (view on Google Sidewiki)

No comments:

Post a Comment