A TALE OF TWO MARKETS

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Mon, 08/27/2007 - 12:59 — Bill Owen

As part of the festivities celebrating our reentry into San Francisco International Airport (SFO) this Monday, Southwest Airlines also announced that we're going to supplement our initial SFO service by adding eight daily nonstops between SFO and Los Angeles Int'l Airport (LAX) effective November 4. This will supplement our existing 20 daily roundtrips (which operate on the hour or half hour all day long) between LAX and Oakland International Airport (OAK), which is quite literally just across the bay from SFO. While SFO isn't a "brand new" airport for Southwest (we served the airport for 19 years prior to discontinuing service in early 2001 due to congestion and cost issues), we've never flown between SFO and LAX. And it's about time–the SFO (and OAK) to LAX market has an interesting history.

Because I am a hopeless airline geek, I took a look at industry data going all the way back to 1979, which is roughly when I got into this insane industry. Back then, the SFO-LAX air passenger market was the largest in the country, with 49 daily flights on nine airlines with about 7,400 seats a day going back and forth, carrying roughly 1,520 people each day paying an average of $122 in 1997 dollars. Remember, back then, load factors were lower, and there were lots more connections going on, so the percentage of folks flying nonstop from origin to destination was much lower. By comparison, LAX to OAK in 1979 was served by 10 flights on 2 airlines, with about 1,800 seats serving only about **seven** (yes, SEVEN) local passengers flying between the two airports per day each way, and they paid an average of $139 in 1997 dollars. I guess that market was all connecting passengers.

Fast forward to now. SFO-LAX is far, far down the list of largest markets. While still large, today five airlines offer 37 daily departures with about 4,600 seats a day (and of the 9 that flew the route in 1979, only 3 survive)Ã¢â‚¬¦.but it serves only 1,100 passengers a day, who paid an average of $127–a roughly 32% decrease in the size of the market with no increase in average fare. Compare that with LAX-OAK, where there are now about 3,100 seats on 28 daily flights by 3 airlines (and neither of the two that flew the route in 1979 are still in business). However, even though LAX-OAK still has fewer seats than LAX-SFO, it carries nearly 1,700 local passengers each day (far more than LAX-SFO), who pay an average of just $87–a savings of $40 over LAX-SFO!

So, the traveling public has shifted in large numbers from LAX-SFO in favor of LAX-OAK. Wonder why? (Anyone? Anyone? Bueller?) It's fare drivenÃ¢â‚¬¦and the fare driver has been Southwest Airlines. Note the average fare difference between LAX-SFO and LAX-OAK. While I won't make predictions hereÃ¢â‚¬¦if I were a bettin' man, now that Southwest is flying between LAX and SFO, I'd bet that the fares in that market will drop like Brittany Spears' approval rating. We will bring our pricing to the market, which will give far more people the Freedom to FlyÃ¢â‚¬¦.and we'll do just as we have everywhere else in this Country–grow the market!

Welcome back, SFO, we've missed youÃ¢â‚¬¦.and welcome to the family, SFO-LAX!

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Comments

Bill,
As a fellow airline geek, I found your post fascinating. One of the carriers flying between SFO and LAX was Pan Am. They had a 747 that ran some of the days of the week from SFO to LAX before continuing to South America. They sold their fares for an amazing $14 (or maybe it was $19) one way. It was quite a contrast with the local SFO/LAX bargain fare travelers mixing with people paying thousands to fly to South America.
Brian

Brian Lusk — Mon, 08/27/2007 - 18:22

Brian, i remember Pan Am flying SFO-LAX--because I flew them! Back in 1979 they flew a 747-SP leaving SFO at 0700 arriving at about 0830....and I bought a $19 ticket on it because it was (1) cheap and (2) a 747-SP. My former employer didn't fly that market then, and the fare was cheaper than the service charge for a pass! I don't remember where the flight continued onto after LAX but it was a rather "eclectic" group.

The gate area they left from at SFO was the old PSA "rotunda" at SFO that is no more. And although Southwest Airlines Flight Attendants can get out drinks, peanuts, and 2nds on drinks between Northern and Southern California....the Pan Am Flight Attendants were "unable to provide beverage service due to the short duration of the flight." Ahem....okay, whatever!

Bill Owen, Southwest Airlines Schedule Planning — Mon, 08/27/2007 - 19:28

Where are these statistics from?

Micah — Mon, 08/27/2007 - 19:58

Micah,

Traffic is from CAB/DOT Table 8, and airline schedules are from the OAG.....but there is now a question of whether or not PSA or World reported traffic to the CAB back then--I've asked my VP, Pete McGlade, to see if he remembers. He worked for both PSA and AirCal back then--he should know. Update to follow!

Bill

Bill Owen, Southwest Airlines Schedule Planning — Mon, 08/27/2007 - 20:14

Ok, now I have two Southwest Blog favorites -- Pilot reports and Industry data. Lots of airline geeks out here.

Speed — Mon, 08/27/2007 - 20:14

Way to bring back memories! I really miss AirCal and PSA, and to a lesser extent RenoAir. I used to fly AirCal all the time between northern and southern California, same with Reno.

chris — Mon, 08/27/2007 - 21:08

Hey Bill,
I got to thinking about the 1979 OAK/LAX numbers and they seem awfully light. I worked in OAK at the time, and my airline's operations office was right next to PSAs gates. They filled up 727s to LAX on a daily basis. I know they boarded more than seven people a day?
Brian

Brian Lusk — Mon, 08/27/2007 - 21:16

Bill,
Your analogy with the increased LAX-OAK is definately correct and has been noted as the "Southwest Effect". We have noticed a similar impact here in Philadelphia on many flights. As a frequent traveler between Philadelphia and Buffalo, NY, two cities that Southwest serves but not directly, I'm hoping you guys look into starting service between Philly and Buffalo. Actually, is there anything I can do except plead with you to start service! There is only one direct carrier between the two markets, US Airways, and the fares are way too expensive and they don't have the famous Southwest hospitality. Philadelphia is a big market and I would think direct service between Philly and Buffalo/NF would be highly utilized. Look at the experience with flights between Baltimore and Buffalo which are numerous and full. No one before Southwest would have ever picked this as a top route in and out of the Buffalo market. Please look into initiating direct flights between Philly and Buffalo. I beg you! Thanks!

Troy Illig — Mon, 08/27/2007 - 21:19

Brian,
I think Bill is refering to people who only fly from lax to Oak and then leaving the airport. The rest were connecting passengers.

Where's da spell cheqer?
Ding! boy
Joe

Joe Friedmann — Mon, 08/27/2007 - 23:13

Ding! Boy
With most airlines that may have been true but like SWA, PSA didnt interline and served on on point to point route system. Also like SWA PSA was just beginning to fly out of state in 1979. Bottomline PSA didnt have any connecting traffic out of OAK. The airport was very different then with only ten or so gates total.
Blog Boy

Brian Lusk — Tue, 08/28/2007 - 00:51

Thank you Brian for the explanation. I guess Bill will have to explain the seven people thing.

Ding! boy
Joe

Joe Friedmann — Tue, 08/28/2007 - 11:04

[...] flights. Southwest has opted to one-up that attempt with 8 runs a day. According to a Southwest blog post today, they think their low fares are going to be the catalyst for the market to work. Had they [...]

The Cranky Flier » Southwest to Start LAX - SFO — Tue, 08/28/2007 - 14:49

Okay....I looked at the data again (thank you Brook Sorem!)....and it looks like of the two airlines that flew LAX-OAK in 1979, World Airlines didn't report their data, and while PSA reported some traffic--it looks VERY under-reported, given their eight trips in the market. However, I still think my point is valid, which is that back then, LAX-OAK was MUCH smaller than LAX-SFO, and now, through affordable fares and excellent Customer Service, LAX-OAK dominates LAX-SFO. And, come this November....when we bring some LUV to LAX-SFO, we'll once again see the "Southwest Effect" in the market!

Bill Owen, Southwest Airlines Schedule Planning — Tue, 08/28/2007 - 14:53

[...] it on such a short flight), it seems Southwest will prevail. Southwest seems to agree. In their blog, they compare the changes in the SFO-LAX market from 1979 to the present. Interesting for history [...]

Flight Wisdom » Competition Heats Up, New Routes, and — Wed, 08/29/2007 - 04:35

Bill,

Flying from LAX to SFO is nice but why not serve other airports to SFO such as SNA, ONT and BUR. There is a large demand for affordable service to these aiports as well.

Will — Wed, 08/29/2007 - 08:24

I fly from Baltimore a lot. One of the airports I fly to that Southwest does not go to is MSP. Northwest charges more to MSP than SWA charges to go to Vegas (Twice the distance at half the price.) It would be nice to see SWA enter MSP market so people don't keep getting ripped off flying in and out of MSP. Even if I had to switch planes at MDW, that would work too.
I think SWA could be sucessful just by flying to a couple hub cities like Las Vegas, Chicago and a Florida city like Orlando or Tampa from Minneapolis.

Steve — Wed, 08/29/2007 - 10:20

It's great that SWA is expanding and opening up more flights, nonstop or otherwise, to various cities. Now it's time to open up more nonstop flights from Islip. The majority of flights from ISP have a plane change in BWI or MDW and many have mulitple stops. Please, open up more nonstop flights from ISP, especially to places such as Dallas, Little Rock, St. Louis and Omaha. Opening up service to MSP would be wonderful also. SWA is our airline of choice so keep up the good work SWA.

Kim — Thu, 08/30/2007 - 17:54

Why doesnt Southwest have a web address to contact them on how ridiculous they are for kicking that lady off with the short skirt. Ive worn some pretty low cut tops but the boys on the plane dont seem to mind. Her chest was covered but her legs were exposed, maybe the pilot is a boob man not a leg man. I only fly Southwest but NO MORE! Make it right Southwest shame on you!

jill — Fri, 09/07/2007 - 17:03

Jill,

I'm not sure why you posted this comment as a reply to this particular piece, particularly since we have an ongoing thread about it at the very top of "Nuts About Southwest." Oh--and you might be interested in the MSNBC commentary on the issue. It's quite....ummm..."revealing."

Bill Owen, Southwest Airlines Schedule Planning — Fri, 09/07/2007 - 17:38

Bill

Any plans on flying into Memphis in the near future? Also, when does SWA start offering non-stops from Dallas to non contiguous states? I thought the Wright Amendment was changed? Please explain

Brandon Bauch — Sun, 09/09/2007 - 14:46

I would like to know why SWA has not taken advantage of the ripe Northern California market - in particular the Humboldt, Eureka, Arcata area? It is no secret that United has and uses their monopoly of the ACV airport. Alaska Air does hang a sign within, yet both airlines (in my opinion) offer a very minimal amount of efficiently routed, reasonably priced flights to the south, particularly to any of SWA's popular California and Nevada stops.
I'm not the only disgruntled flyer at this airport. I have found there are many business commuters, attorney's, student's, and general visitors that feel they have been taken advantage of. Likewise, I've heard a similar question many times: Does... or Why doesn't Southwest fly here?

So, would someone please explain to myself and other's, the reason SWA doesn't fly into ACV (Arcata), and are there any plans to, and any other particulars to this game?

joseph
PS. As a newbie to bloging and not knowing how or where to post a new topic. I chose what seemed closest to the issue - San Francisco.

Joseph — Sat, 09/15/2007 - 00:32

Brandon,
I will answer part 2 of your question.
The Wrong amendment is slowly disappearing over 8 years. Then you will see more routes.

Push one for yes and two for no.
Ding! boy
Joe

Joe Friedmann — Sat, 09/15/2007 - 20:52

Will SWA ever plan a stop in Harrisburg, Pa.? A permanent stop.

Frank — Tue, 10/02/2007 - 02:29

Does anyone have any idea as to why there are no fares posted on the Southwest web site beyond March 7, 2008. They usually post fares 6 months out.

Arlene — Tue, 10/23/2007 - 22:02

Steve - I'm with you. I recently relocated to MSP from BWI and have to fly back and forth quite often. NWA is terrible and the price gouging is out of control. I fly a couple of times per month (BWI and PIT much of the time) and would love for SWA to get some gates up here. They'd have 100% of my business in a heartbeat.

Jeff — Tue, 11/20/2007 - 06:07

I agree with Steve (Aug 29, 2007). I fly to Minneapolis from Albuquerque twice a year and my only choice for non-stop service is via Northwest. You are never sure when NWA will either be on strike or bankrupt. The only other options from ABQ are with changes in Denver, Salt Lake City, Phoenix or Chicago OHare. Perhaps Southwest could set up shop at the Humphrey Terminal since they have no interline agreements other than with ATA.

Regarding potential new service, I have been tracking the construction of the new airport in Panama City, Florida; which is now scheduled to open in early 2010 and will be able to accommodate 737 type aircraft. Southwest service to this relocated airport would help to fill a gaping hole in their Gulf Coast services. Currently, there are no coastal airports served by SWA between New Orleans and Tampa Bay. Airports such as Jackson, Miss; Birmingham, Ala; and Jacksonville, Fla, require a 5+ hour drive to the Panama City area. Panama City is know for some of the best beaches in the USA and hosts many tourists. Hope Southwest gets their foot in the door.

Frank Nagle — Sun, 12/16/2007 - 00:20

The problem with any flight into or out of SFO is the potential for FOG! When the fog rolls in over the coastal hills, SFO is the first to feel the effect and potentially shut down or incur lengthly delays. When I flew out of Albuquerque before SWA stopped service to SFO, I tried to avoid flights that originated in San Francisco as there was, in my opinion, a greater chance of delays. Oakland had less of a fog problem because it was further from the coast. Perhaps the situation has changed now?

Frank Nagle — Sun, 12/16/2007 - 02:04

Southwest needs to come to Milwaukee so it can compete with Northwest airlines. A ticket from MKE to Detroit is Over $400. we have to go to Ohare and sometimes Midway to get a cheaper fare. Please come to Milwaukee Ã

Jerry — Tue, 12/18/2007 - 20:43

Paging Southwest Airlines, Southwest Airlines you are needed at the Humphrey Terminal at MSP! Please Please Southwest come and save us from that giant red monster called Northwest Airlines!

Matthew — Thu, 01/24/2008 - 19:49

Hi SWA, I read a lot of comments about y'all flying into MSP....is there any chnace you might just consider S.P.? (Saint Paul) Any sort of competition for NWA would be great. PLEASE!!!

Thanks,
Paul

Paul T. Shafer — Tue, 02/19/2008 - 05:28

I can echo Frank's comments about the need for SWA to fly into the gulf region. I just returned to Northern California from Destin, FL via Delta for an Easter trip to visit my in-laws. We tried to find a way to get there via SWA and it simply wasn't possible. There are a lot of great destinations in the gulf and SWA serves none of them. Ft. Walton Beach or Panama City would be a great addition to the Southwest list of destinations. Please add one of them. Here is one family that will be booking flights at least 2X per year there once it is available.

Stephen — Sun, 03/30/2008 - 06:48

Please fly to Minneapolis SW!! Anybody but NWA

Anonymous — Fri, 06/20/2008 - 23:28

Please fly to Minneapolis! Loyal customer (SAN to SMF) that really wants service at MSP!!!

Steven — Thu, 06/26/2008 - 00:24

Another huge push for Panama City, Florida! We have a vacation home and business on Cape San Blas. We can't get there in less than 8 hours driving. If Southwest flew into Panama City, we'd probably buy tickets by the dozen. Panama City's new airport would be a great jumping off point for everything from Apalach to Destin.

Laurel — Wed, 09/17/2008 - 18:43

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