Southwest’s Bid for Frontier Is Bad News for United
By Scott McCartney
It’s hard to run a huge hub at an airport where Southwest Airlines becomes a strong number two in market share. So the biggest impact of Southwest’s potential bid to buy bankrupt Frontier Airlines may fall on United Airlines.
If Southwest is successful in acquiring Frontier in bankruptcy court, the two airlines together will have about 30% of the market at Denver International Airport, with UAL Corp.’s United hanging on to 50%. But United is shrinking, and struggling financially.
A bigger fight in Denver with a stronger number-two airline could well weaken United. It might not be long before Southwest could overtake United as the largest carrier in Denver.
Southwest has always been a shrewd, opportunistic player. When Midway Airlines shut down years back, Southwest dispatched a virtual SWAT team to the Chicago airport to move in quickly.
Southwest jump-started its growth in the west by acquiring Morris Air, and took out a potential irritating competitor in Texas by buying Muse Air. Buying assets of bankrupt ATA Airlines gave Southwest slots and gates at important East Coast airports–plus more gates at Midway–at fire-sale prices.
The company has had a keen sense at pegging weak carriers not up for big battles to defend markets (viz. US Airways in Baltimore). Southwest has eaten away at entrenched hubs, weakening Trans World Airlines in St. Louis, for example, and Delta Air Lines in Salt Lake City.
As Southwest has grown at Los Angeles International Airport, United has shrunk, from some 240 daily flights to fewer than 100 departures a day. Airline hubs can better compete when Southwest is at a secondary airport, like Houston, Dallas, San Francisco and Chicago. But when the competition is head-to-head, it’s a lot tougher on incumbents.
Bob Jordan, executive vice president for strategy and planning at Southwest, notes that Southwest’s growth has already been strong in Denver. The airline started flying to DIA in January 2006 and in three-and-a-half years has grown to 113 flights a day. But combining with Frontier takes that operation to a whole other level.
“We’re in this to win,” Mr. Jordan said in an interview.
Be careful about betting against them.