Low-fare ride to the top

December 30, 2004|By Meredith Cohn | Meredith Cohn,SUN STAFF

Some 11 years ago, Southwest Airlines sparked the evolution of Baltimore-Washington International Airport into a low-cost hub, and that transformation will be completed in the spring when the airport opens a new terminal for the carrier that will be larger than any of Southwest's others in the nation.

The terminal is part of a $1.8 billion renovation and expansion that will largely be completed in 2005. Analysts and airport officials say it will show the power of the discount carriers to provide stability and even growth during a financially turbulent time for airlines.

"This puts [BWI] in really good shape," said Robert Mann, president of R.W. Mann & Co. Inc., an airline industry analysis and consulting firm in Port Washington, N.Y. "BWI will be a fast-growing portion of the national network, far in excess of National Airport and even should be higher than ... Dulles."

Mann said BWI is ahead of the curve in the move to low-cost dominance as many other airports struggle to replace shrinking service from high-cost traditional carriers, which have lost billions of dollars since the 2001 terrorist attacks. The discount airlines - including Southwest, the largest - continue to gain business as passengers have returned to the skies and now control over a quarter of the market.

Southwest and other discounters also could benefit from the air travel debacles over the Christmas holiday. Computer troubles forced Comair, a regional jet affiliate of Delta Air Lines, to cancel all its flights, leaving thousands of passengers stranded. At US Airways, baggage handlers at Philadelphia International Airport and flight attendants systemwide called in sick, helping to ground flights and separate passengers from their luggage - some through the week.

Analysts said the widespread news coverage and images of stranded passengers and mounds of lost luggage could make many travelers leery of booking teetering carriers. And the fiasco at US Airways could spell the end of an airline in bankruptcy protection for the second time in two years.

That could help Southwest grow in other cities such as Philadelphia, where US Airways maintains a large hub. Southwest had already planned to expand there, having solidified its position in Baltimore with 47 percent of the market and, after winning a bitter fight with discount carrier AirTran for gates at Midway Airport, in Chicago as well.

There is some fear among airline observers that Southwest will crowd out too many competitors and grow too dominant at some airports, but BWI officials and some analysts maintain there is room for others.

AirTran, for instance, has become the second-largest airline at BWI, with 35 daily flights.

Washington Dulles International Airport has a growing presence of other low-fare carriers, including JetBlue Airways and Independence Air, a former regional carrier for United Airlines that became an independent airline this year. Independence is losing money, and it's unclear how long it will continue to operate in its current form. But JetBlue has been growing in popularity. And AirTran also operates at Dulles.

Even as low-fare service grows at other airports in the region, Southwest's large presence at BWI - with 165 daily flights - gives the airport a competitive leg up.

Southwest officials say they will continue to add flights at BWI, mostly to the 35 cities the airline already serves.

"We added quite a bit of service in 2004 at BWI. And that's what we typically do in a market. We try to grow service to cities our customers want to fly to," said Ginger Hardage, a senior vice president of communications for Southwest. "We absolutely have a commitment to Baltimore, and I think you'll see a slow, steady increase in service in 2005."

The airline has announced an additional flight beginning in March from BWI to Chicago Midway.

The move to the new terminal will free up gates for other airlines, although the airport acknowledges that they will not all be filled immediately.

AirTran recently added flights to Sarasota, Fla., and officials said they would add more flights in 2005.

"We have ample room to grow in BWI and will continue to add more flights as demand warrants," said Tad Hutcheson, an AirTran spokesman. "BWI is our second-largest city after Atlanta and we will continue to grow our operations profitably there."

Other airlines plan to grow, too, such as USA 3000, which flies to Florida and nearby international resorts. Others have recently added a handful of flights as they have moved their fleets around in search of the most profitable routes.

But the move to a low-fare model will mean some losses for BWI from airlines that can't compete in the discount environment. All the traditional carriers face financial difficulties and offer service far below their peaks at BWI, and none now offers more than two dozen flights a day from the airport.

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