Southwest Airlines set to upset its NYC rivals
Discount carrier offers low prices for its first routes from LaGuardia
By Christopher Hinton, MarketWatch
Last update: 12:27 p.m. EDT April 7, 2009
NEW YORK (MarketWatch) -- New Yorkers who make frequent flights to Chicago and Washington, D.C., are about to find themselves paying less for airfare.
On Tuesday, Dallas-based Southwest Airlines (LUV:
LUV 6.84, -0.50, -6.8%) said it would begin eight daily flights from New York City's LaGuardia Airport to Chicago Midway and Baltimore-Washington airports, beginning June 28.
The low-cost carrier also offered historically low ticket prices on its LaGuardia routes, with one-way flights to Chicago for $89 and to Baltimore-Washington for $49. That's bound to put pricing pressure on rivals like AMR Corp.'s American Airlines and UAL Corp.'s United.
UAUA 5.53, -0.33, -5.6%) United and JetBlue Airways.
Many carriers out of New York City have offered similar fares during sales over the past three months to increase demand in a recessionary economy, but the "Southwest effect" of bringing permanently lower prices is well known across the industry, analysts said.
"They most definitely bring in a lower cost structure," said Vaughn Cordle, chief analyst with AirlinesForecast LLC.
More groundbreaking have been Southwest's walkup fares for LaGuardia, priced "substantially lower" than competitors at a range of $225 to $425, according to Rick Seaney of Farecompare.com.
"This may be in part to compensate for the legacy airlines' advantage with frequent nonstops to several popular business destinations out of New York where Southwest must connect with a one-stop," Seaney said.
Southwest announced last year that it would purchase LaGuardia time slots from bankrupt ATA.
At the time, Chief Executive Gary Kelly said he was confident his airline could maintain its high standard for on-time efficiency despite the airport's reputation as a traffic bottleneck.
Shares of Southwest were down 6% at last check to $6.94. Christopher Hinton is a reporter for MarketWatch based in New York.