Atlanta sees ‘Southwest effect’ backfire since AirTran merger

Posted Saturday, Mar. 08, 2014  comments  Print Reprints
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When Southwest Airlines entered the metro Atlanta market — first in 2011 when it bought AirTran Airways, then a year later when it launched its own flights — metro travelers excitedly expected airfares to fall and flights to increase.

Dallas-based Southwest, after all, is the nation’s low-fare leader, famed for bringing fast growth and dependable service to airports around the country. And when metro Atlantans eagerly awaited “the Southwest effect” at Hartsfield-Jackson International Airport, Southwest’s CEO fed those hopes.

“It’s about us bringing more competition, bringing more low fares,” Gary Kelly said in 2010 announcing the AirTran acquisition. “I think [Southwest’s daily departures from Atlanta] could grow significantly … We'll have more flights than what they [AirTran] have today when all is integrated.”

But that’s not what happened. And the disappointment over what has occurred vs. what was anticipated and what was asserted has Atlanta travelers who had longed for Southwest’s arrival seeking answers.

Airfares have not fallen.

“As a matter of fact, fares seem like they’re higher since Southwest has come in,” said Chris McGinnis, publisher of travel newsletter The Ticket.

“Fares have definitely gone up and it’s been painful,” said AirTran frequent flier Joe Leader, of Dunwoody, Ga.

And instead of more flights, there are fewer.

AirTran operated a connecting hub at Hartsfield-Jackson with more than 200 daily departures before the merger. But Southwest has “de-hubbed” that operation, focusing less drawing passengers to connecting flights and more toward travelers starting or ending their trips in Atlanta. The result: a drop to about 160 daily departures for AirTran and Southwest combined.

Kelly has blamed a steep rise in fuel costs for Southwest’s higher fares. Southwest said its fuel cost per gallon, including taxes, increased 28 percent between the third quarter of 2010, when it announced the AirTran deal, and the fourth quarter of 2013. Other airlines have also seen higher fuel costs in recent years and raised fares.

But Hartsfield-Jackson airfares have gone up so much that Atlanta had the largest year-over-year increase in average domestic fares in the country, according to the most recent federal airfare report. In the third quarter of 2013, the average domestic airfare in Atlanta rose to $432, up 22.6 percent from a year earlier — a far greater jump than the average 5.1 percent rise in domestic fares across the nation.

That’s because the huge increase in Atlanta fares is not just about fuel costs, analysts said. It can also be attributed to AirTran’s “smaller and smaller presence in the market” and the profit-focused policies of Hartsfield-Jackson’s dominant carrier, Delta Air Lines, said FrequentFlier.com publisher Tim Winship. When a low-cost carrier like AirTran operates on a larger scale, it provides competition that helps keep overall fares in check, he said.

Fewer gates?

Kelly said that as fares have climbed, demand has ebbed — and this has caused Southwest to cut flights.

“Fewer departures may lead to a need for fewer gates” at Hartsfield-Jackson, Kelly said. Southwest-AirTran occupies gates at the airport’s Concourse C and Concourse D, but it’s possible Southwest could eventually decide to pull out of Concourse D. “It would be nice to be all consolidated in one terminal,” Kelly said.

To be all consolidated. That’s what Southwest is striving for with AirTran. But the merger has taken longer than many in the metro Atlanta market imagined.

More than three years since the acquisition was announced, Southwest’s metro Atlanta operation is still about 80 percent AirTran flights and 20 percent Southwest flights, Kelly said. And with 10 months of integration to go until AirTran’s final day of operations on Dec. 28, “it is not close,” the CEO said.

The two low-cost carriers have very different business models, making their combination complex.

AirTran passengers have been frustrated as their preferred airline, with its business class and assigned seating, has been folded into the all-coach, no-assigned-seats Southwest.

Joe Leader, the AirTran frequent flier, organized a “Save our Seats” campaign in an unsuccessful attempt to persuade Southwest to keep business class and assigned seats. The pain hasn’t been “quick, like pulling off a Band-Aid,” he said, but “painful for years.”

The changes have “turned off a lot of people,” McGinnis agreed.

Moreover, Southwest has hesitated to invest in improvements for AirTran that are offered on Southwest, such as access to a mobile app or expedited PreCheck security for elite frequent fliers.

Putting money into amenities for AirTran would be “a throwaway investment,” Kelly said. “We have limited resources and a gigantic list of needs. … You just have to weigh the cost-benefit.”

That has alienated passengers such as Kevin Cleary, who lives in Atlanta and travels a few times a month.

“They’re trying to save money … but they’ve lost a lot of business customers for sure by not making that investment,” Cleary said. “They’ve lost me to Delta.”

Kelly acknowledged: “It’s still two different airlines, two different brands, two different sets of policies. … You don’t have a consistent marketing message.”

Brighter future?

As Southwest works to find its footing in metro Atlanta, Delta has gained passengers, emphasizing its amenities and its hometown carrier status.

“We compete quite well … against Southwest,” Delta CEO Richard Anderson said late last year after Southwest cut flights.

Southwest and AirTran carried about 12.1 million passengers to and from Atlanta in 2013, down from 13.8 million passengers in 2012. Delta carried nearly 75.7 million passengers in 2013, up from nearly 74.9 million passengers in 2012.

Still, Southwest’s CEO remains hopeful that traffic will grow. Kelly is encouraged that as AirTran’s Boeing 717 aircraft are replaced with Southwest’s larger Boeing 737s, there will be more seat capacity per flight, something he believes will blunt the impact of cuts in daily departures.

And Kelly could find cause for optimism in frequent fliers such as Leader. To wit: Even though Leader misses AirTran’s business class, he likes Southwest more than he expected.

It helps that Southwest allows two free checked bags and has a no-change-fee policy. Leader also finds it easier to earn a companion pass on Southwest, and likes being able to pick his seatmate rather than being assigned one.

“I’ve never seen people self-organize better than on Southwest,” Leader said. “In a world where everyone rushes the gate based on zone number, I find [Southwest] much more civilized.”

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