Southwest arrives (and departs) in Newark
Southwest Airlines flies out of Newark Liberty International Airport for the first time starting this week. Ovation's Executive Vice President, Michael Steiner, weighs in on how this will affect the airline's on-time performance and growth in the Northeast market.
Chris Rupprecht leads a visitor to a jet bridge amid the roar of airliners preparing to taxi down the runway and trucks sprinting around the tarmac one day last week.
Passengers will walk through that same accordionlike bridge today and board a 737 as Southwest Airlines flies out of Newark Liberty International Airport for the first time.
Rupprecht is the Southwest station manager in charge of ensuring the planes take off on time. The 15-year veteran, who was born in Neptune, previously worked at airports in Sacramento, Long Island and Baltimore.
"I’ve never worked at an airport this busy," he says, while climbing steep metal stairs to the jet bridge. "You’re at the mercy of the air traffic control tower. I don’t expect everything to be perfect the first day, but we’ll be ready."
The airport’s history of delays will test Southwest as it starts flying from Newark to St. Louis and Chicago today. Southwest, known as a discounter, also has imposed fare hikes in recent weeks to counter high jet fuel prices, which could curtail its low-fare strategy in the short term, analysts said.
The airline’s on-time performance will "come down while it is in Newark," said Michael Steiner, executive vice president of Ovation Corporate Travel, a business travel management company based in New York.
Still, the airline can succeed in Newark just as it has in Baltimore, Philadelphia and Denver, he said.
"They start small, and then they grow," he said. "Ultimately, they are looking to expand in the Northeast the way they did in Philly."
At Philadelphia, Southwest slowly whittled away market share from US Airways. In Newark, Dallas-based Southwest will start with just eight daily flights out of Terminal A, but on June 5 it will add service to Phoenix, Baltimore and Houston. The airline already flies out of LaGuardia International Airport.
"We will have just 1 percent of the entire New York market, but we expect to grow," said Bob Jordan, Southwest’s executive vice president of strategy. "Denver is a good example. We started with fewer than 20 flights and faced huge competition from United and Frontier (airlines). We have 148 flights today."
Southwest will be competing against the 800-pound gorilla in the New York region: Continental Airlines. The Houston-based carrier is the largest by far at the airport, which straddles Newark and Elizabeth, with a 71-percent market share.
"If somebody messes with Continental’s turf, they will come back and beat them up pretty good," said Tom Parsons, chief executive of Bestfares.com, which tracks airline ticket prices. "They’ve done a good job of protecting their Newark hub."
What will be problematic for Southwest and the rest of the industry is the skyrocketing cost of aviation fuel as oil has shot up from about $70 a barrel last year to more than $100. Fuel costs will be $1 billion higher for Southwest this year compared with last year, said Jordan, the Southwest executive.
Airlines have been raising prices the past several months to pay for their fuel bills. Southwest led some of those fare hikes, raising prices five times between December and last month, according to a report this month by J.P. Morgan analyst Jamie Baker.
"They are charging at least 20 percent more on some routes than they were last year because of (seat) capacity cuts and higher fuel costs," said Parsons of Bestfares.com. "Southwest is in the business of making money, and if they have to pay higher fuel costs, they will pass that on to consumers."
Southwest is still expected to bring down prices on some flights in the Newark market to battle Continental, United, Delta and JetBlue.
The carrier has sold some seats from Newark to its hub at Midway International Airport in Chicago for $197 round trip, a price that was matched for a while by competitors, said Warren Chang, vice president and general manager of Fly.com, an airfare search engine.
"Chicago is the second-most-traveled route out of Newark after Orlando," Chang said. "Newark is generally a more expensive airport to fly out of than the other New York-area airports. The fact that Southwest chose to fly to Midway will make it a battleground."
Initially, Southwest "will have more of an impact on price-conscious consumers in the leisure market," Chang said.
But Southwest could lure some business travelers with low fares, no charge for the first two bags and no fees to change a flight, he said.
It will have to take away those customers from large business-travel competitors such as Delta, American and United, all of which go to Chicago.
"Fares to Chicago will be a relative bargain, especially for fares not requiring a Saturday night stay since Southwest sells all fares one way," said George Hobica, founder of airfarewatchdog.com, a travel web site.
A fare sale will cause Continental "to lower fares to match Southwest or even beat them," Hobica said.
He does not expect recent fare hikes to slow the Southwest strategy of throwing cheap flights into a market.
"I don’t think the fare hikes applied to the lowest fares," Hobica said. "They never apply to all fares. If they did, no one would fly anywhere."
At Newark, Southwest has 50 employees who have been sprucing up three gates it took over from United, installing new black chairs with the company logo, signs and preparing for eight daily flights that will grow to 18 this summer.
Rupprecht, the station manager, is hoping the launch of service out of Newark will provide a beachhead for Southwest in the New Jersey market.
"A lot of airlines are very similar because they fly you from point A to point B," he said. "We try to make it friendlier. We’ve got a history of providing legendary service, and we want to give New Jersey residents a chance to experience it first hand."
by Joseph R. Perone
The New Jersey Star-Ledger