America West and Southwest enjoying success in the Valley by different means - East Valley Tribune: Business

America West and Southwest enjoying success in the Valley by different means

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Posted: Sunday, January 16, 2005 7:06 am | Updated: 7:18 am, Fri Oct 7, 2011.

Southwest and America West have always kept on eye on each other, only ticket prices didn’t show it.

While Southwest Airlines was flying for peanuts in the 1980s and 1990s, America West Airlines decided it would stretch its wings and take passengers on jumbo jets to exotic places like Nagoya, Japan, and Honolulu. The hometown airline thought of itself more like a Northwest than a Southwest.

But the competition between the two changed dramatically nearly three years ago when America West lowered its fares, and, like the rest of the industry, began operating more like Southwest.

The result has been two relatively healthy airlines who are neck-and-neck when it comes to the number of daily departures from the Valley to the major cities in the United States. And while the duo dominates the market here and in Las Vegas (the battle results in low fares for local travelers) they have comfortably distinguished themselves so both continue to grow.

"The two models are in many ways different, but I think both airlines have sort of hunkered down to what works for them," said Michael Boyd of the Boyd Group, a Coloradobased airline consulting group. "This is not a zero sum game. And Phoenix is making out like a bandit on the deal."

Wall Street airlines analyst Ray Neidle said the two have learned to live with each other.

"Their markets are slightly different," said Neidle, who works for Calyon Securities in New York. "America West probably has a little bit longer length of haul, they have assigned seating and the two classes, whereas Southwest has their unique type of product. The two seem to be able to co-exist."

At Phoenix Sky Harbor International Airport, the two airlines controlled about 75 percent of the market in November, the latest numbers available. Southwest flew 28 percent of the airport’s passengers while America West had 38 percent. If America West Express regional jets are factored, the Tempe airline’s share of passengers rises to 48 percent.

America West Express is operated by east Phoenixbased Mesa Airlines. The company maintains and flies the planes while America West is responsible for scheduling.

America West offers 196 daily nonstop departures on what it calls in "mainlines," routes to large cities. If America West Express flights are counted, the company says it has 315 daily departures to 93 nonstop destinations.

Southwest, based in Dallas, says it has 190 nonstop flights a day to 40 destinations.

Southwest’s numbers show that during the second quarter of 2004, it had 6.1 million passengers, or 36 percent of those that began and ended their trip in the Valley, 10 percent more than America West.

"Those are the numbers we use because those are the numbers that are applicable to us," said Marilee McInnis, a Southwest spokeswoman, adding the airline doesn’t use Sky Harbor as a hub like America West. "Just somebody getting on plane there is not going to work for our purposes. We want to know who is beginning and ending their trip in Phoenix. Those are our passengers."

Scott Kirby, America West executive vice president of sales and marketing, says the carrier has probably grown a little faster than Southwest in Phoenix thanks to the addition of some mainline routes and regional routes offered by Mesa.

"But most of that growth has been in non-Southwest markets," he said. "We’ve added a number of new destinations from Phoenix, particularly international destinations. The competitive dynamic is it’s been pretty stable for the last decade."

The dead heat on mainline flights hasn’t always been the case, Kirby said.

"We use to have more mainline flights in Phoenix and fewer jets, he said. "Mesa flies on Mesa jets, but when we look at it . . . we add those two together because from our perspective those are America West flights," Kirby said. "They say America West on the side. We’re responsible for them from a customer service prospective, from pricing, from schedules, they’re all part of our frequent flier network."

America West has an advantage over Southwest in serving big business destinations like Boston, New York, Washington D.C., Atlanta, Dallas/Fort Worth and Minneapolis, Kirby said. While the company has pulled back some on its transcontinental flights from San Francisco to the East Coast, it still has regular service from Los Angeles to the big East Coast markets.

Boyd said America West’s haughty culture of the past is over thanks to current management.

"They made mistakes," he said."They’re not making mistakes now. They’ve got a wider feed system than Southwest. They’re not going to have the feed traffic, for example, that America West gets from Flagstaff or Fresno."

And he says the company has done a good job adding Mexican destinations, as well as Costa Rica.

"They understand Mexico is not just for getting suntans," Boyd said. "Mexico also is a major industrial center and there’s traffic there that Southwest just is never going to get.

The battle between Southwest and America West has been good for consumers because tickets have come down to as little as $29 or $39 on way on routes where both fly, said Deb Ostreicher, Sky Harbor spokeswoman.

"They are doing very well, both in Phoenix and other cities," she said. The airport is in the midst of constructing an $63 million, eight gate concourse in Terminal 4 for Southwest.

"It’s both to accommodate their growth as well as America West’s growth," Ostreicher said. "At the moment, they’re sharing some concourse areas.

Kirby said Phoenix is one of four cities where two low-cost carriers dominate the market. The others include Las Vegas, where Southwest has 195 flights a day and America West has 115.

Southwest and AirTran Airways have sizeable operations in Baltimore and at Midway Airport in Chicago, Southwest battles it out with ATA Airlines, Kirby said.

The only real skirmish of late between Southwest and America West was over ATA’s assets. America West decided not to bid for the bankrupt low-cost flier saying it would have been too costly.

Southwest took a halfdozen of ATA’s gates at Midway and announced a codesharing agreement between the two that will allow Southwest to book its passengers on ATA’s planes, including those headed for Hawaii.

Boyd said both carriers are positioned well for the future despite an industry mired in debt thanks to overcapacity and high fuel prices.

From 2001 through 2003, the airline industry collectively lost $23.2 billion. For 2004, it will be about $8 billion in the red.

"The fact that America West looked at buying ATA and then backed off, clearly we’re dealing with an unemotional management team," he said. "Emotion is what puts you out of business."

He said Southwest is not without its challenges, including high labor costs.

America West’s Kirby expects both airlines to continue to grow gradually, especially locally.

But both airlines could be severely impacted by Delta Airlines recent announcement to drop its fares. Most large airlines followed suit.

"It’s going to have an adverse impact on industry revenue," Kirby said.

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