Tuesday, June 30, 2015

In Dallas, the freedom to fly cheap

If you haven’t flown out of North Texas recently, what are you waiting for?

Some fares to big cities, including Washington and New York, are close to half the price of a year ago. My ticket to Oregon for the July Fourth weekend was $133 cheaper than last summer.

This fall, advance tickets to Denver are $98 round trip. That’s $60 less than a flight to Houston, and Denver is almost three times the distance.

“These are some of the best fares out of Dallas that we’ll ever see,” said travel analyst Henry Harteveldt of Atmosphere Research. “These are the halcyon days.”

Last October, the Wright amendment limits ended at Love Field, and airlines have flooded the market with new flights, nonstop destinations and discount prices. Most of the credit goes to Southwest Airlines, which is tripling the number of nonstop cities out of Love.

Southwest is expanding to 180 daily departures by August, about 50 percent more than under Wright. Virgin America has moved to Love and added 19 daily flights. At giant Dallas/Fort Worth International Airport, American Airlines, Spirit and others are matching fares from Love and fighting for their piece of the growing pie.

Consumers have responded to the new competition. Since last fall, traffic at Love is up by over 2 million travelers. D/FW added over 2 million passengers in the 12 months ending in April.

Tom Parsons, who runs the website Bestfares.com, recently highlighted a fall travel offer from D/FW to Las Vegas on American: $219 round trip per person with three nights at a four-star hotel on the strip.

“Why am I staying home?” Parsons joked. “I can spend that much at a restaurant in Dallas.”

Expectations were sky high for the end of Wright, which had restricted nonstop service to a handful of nearby states. But we’re blowing past the projections, and Love Field’s biggest problems today are accommodating all the parked cars and all the airlines that want to add flights.

Southwest said load factors are “fantastic” at Love, above the system average of 80 percent. Planes to some markets are 90 percent full, a notable achievement given all the new capacity at the close-in airport.

“It’s such a raging success, and we knew it would be,” CEO Gary Kelly said in an analyst call in April. “In fact, we were kind of surprised at some of the pundits that were saying that the Southwest effect was gone.”

The effect lives

In 1993, the Transportation Department described how Southwest was changing air travel: The airline would enter a new city, introduce low fares and grow the market for everybody.

A decade ago, when the debate over Wright was heating up, local opponents often said there would be no such effect here. North Texas air travel was already stimulated, they said, because American was such a force at D/FW and Southwest dominated at Love.

More recently, Southwest has lost some clout as a low-cost leader. It never went through bankruptcy, so it didn’t cut labor costs like legacy airlines, and upstarts like Spirit can offer deeper discounts.

“RIP to the Southwest effect?” a headline in USA Today asked a year ago.

Well, the Southwest effect is alive and well in Dallas and making this one of the country’s top markets for the flying public. Both Harteveldt and Parsons said they were reminded of the early 1980s, when deregulation shook up the industry and fares plummeted.

One big difference is that airlines today are flush with profits and investing in planes and facilities.

But David Cush, CEO of Virgin America, said freeing Love was one of the most disruptive events since deregulation.

‘The egg is scrambled’

A renovated airport in an affluent part of town in a booming metro area was suddenly unconstrained. Airlines added a lot of capacity, prices dropped, and consumers turned out.

“Now that the egg is scrambled, people are seeing the benefits,” Cush said in a phone interview. “My gut feel is fares have probably overshot their natural equilibrium. But in the end, the people of Dallas are going to be winners for a long, long time.”

Cush hopes prices start to climb a bit. Virgin flights from Love brought in 19 percent lower revenue per unit than its flights from the East and West coasts, Cush told analysts in April.

Spirit also projects a double-digit decline in revenue per available seat mile. It said low fares in Dallas will account for about a quarter of the drop, but Spirit won’t pull back here, not with planes filling up.

American has said it won’t scale back or avoid matching rival fares. It even requested space to add four flights from Love. But American isn’t so sure that prices will improve. So much new supply naturally leads to lower fares, president Scott Kirby told analysts in April.

“I tend to be more in the camp of this is the new equilibrium point,” Kirby said. “We’re pricing to the demand and supply as it exists in the market today.”

For millions of local travelers, the basic economics don’t get much better.

( - The Dallas Morning News)

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