News Column

Southwest Airlines Losing Low-Fare Edge

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ST. LOUIS --Tom and Bea Levenhagen take Southwest Airlines when they can.

The couple from Elizabethtown, Pa., look at things like the availability of a direct flight instead of those that require numerous connections. Good customer service. And the fees that some airlines charge enter into the final decision.

"We traveled with them for a lot of years -- originally because they were a discount carrier," Bea Levenhagen said last week, while waiting for a flight near the Southwest ticket counters at Lambert-St. Louis International Airport. "We don't look at it that way anymore. It is more the convenience."

Southwest Airlines, which pioneered the concept of low-cost, no-frills flying, has seen its typical base airfares surge to the rest of the pack at a time of continued airline consolidation, soaring fuel costs and rivals that charge fees for checked bags and ticket changes, according to interviews and government data.

Average one-way airfares between St. Louis and seven other cities have increased 25 percent since the fourth quarter of 2008, according to a review of the most recent U.S. Department of Transportation's Domestic Airline Fares Consumer Reports.

The average fare between St. Louis and Dallas increased to $194 in the fourth quarter of 2012 from $122 in 2008 -- a 59 percent increase. That is a sizable jump, considering Southwest competes with American Airlines in that market. Fares between St. Louis and Cleveland rose more than 50 percent during those four years.

Brad Seitz, president of the research company Topaz International, said the company studied Southwest's fares on 100 different city-to-city routes and concluded that the Southwest competitor offered a lower fare more than 60 percent of the time.

"The result is surprising given the perception in the marketplace, and with many travel managers, that Southwest Airlines is in fact the low-cost carrier in all markets they serve," the report states.

But in reviewing airfares when a single checked bag was factored in, Topaz found Southwest's competitors charged more 60 percent of the time. When a second checked bag was factored in -- something less likely for business travelers -- the other airlines were higher 88 percent of the time.

Southwest permits two checked bags per ticketed customer at no cost, provided they don't exceed the airline's size or weight limits. And passengers can change their travel plans without penalty.

SCRAPPY REPUTATION

Southwest entered the St. Louis market in March 1985 when Lambert was still dominated by Trans World Airlines and Ozark Air Lines. Within months, Ozark began chalking up losses to competition with Southwest and People Express Airlines -- both discount carriers.

The Dallas-based carrier forced other Lambert carriers to match its low fares on routes where the airlines competed head to head. By 1987, Southwest was the second-busiest airline serving Lambert -- albeit far behind TWA in the number of passengers. By that time, TWA and Ozark had merged.

Since TWA's successor -- American Airlines -- began to significantly scale back its St. Louis flight offerings in the fall of 2003, Southwest has filled much of the vacuum and now is solidly entrenched as Lambert's busiest air carrier.

Southwest carried 49.3 percent of Lambert passenger traffic through the first four months of 2013. American was a distant second, at 15.6 percent.

Lambert Airport Director Rhonda Hamm-Niebruegge, formerly a vice president of North American operations for TWA and later American's managing director in St. Louis, said Southwest has more employees at the top of the wage scale and older planes than it did when it burst onto the scene. Those have an effect on the bottom line.

"Are they still a low-cost carrier on a comparative basis? I think yes," Hamm-Niebruegge said. "Are their challenges stronger today than they were 25 years ago? Yes."

Southwest picked up flights to such cities as Boston, Los Angeles and San Diego, which once were served by American or other airlines.

Southwest has entered several new markets from Lambert. Airlines that do so are entitled to a short-term waiver of landing fees from the St. Louis Airport Authority. Southwest, which is housed in the open, airy Terminal 2 -- formerly known as the East Terminal -- now flies to 34 of the airport's nonstop markets.

AirTran Airways, a subsidiary of Southwest, still offers flights from St. Louis as well, and shares space in Terminal 2.

Southwest officials insist the airline's fares remain low. They blame price increases on the same rising fuel prices that have dogged their legacy-airline rivals.

"Are airfares higher than we would like them to be? Absolutely," said Southwest spokesman Brad Hawkins. "Is Southwest still the low-fare policeman of the skies? Absolutely."

Southwest is working hard to "conquer the cost mountain internally" through efficiency, Hawkins said. There are no plans to charge passengers for their first two bags or for ticket changes.

LOYAL CUSTOMERS

Despite the increasing airfares, Southwest customers interviewed last week remain fiercely loyal. They praise Southwest for its customer service, its reliability and its reluctance to impose fees.

"They get people on board. They get them off board. They don't play," said Kathryn Dalton of Wentzville, a former platinum member with Delta Air Lines. "What they do is they keep things moving."

A business traveler, Dalton acknowledged her company generally books her flights and absorbs the fares.

Missy Kent of Chesterfield said: "If I can fly Southwest, I will always do it. Their people are friendlier. They don't tack on all of the extras. ... Their flights are usually cheaper, and I fly a lot."

Kent also likes the ease of getting in and out of Terminal 2, Southwest's primary concourse at Lambert.

The fees make a difference. Frank Estrada flew from Texas to St. Louis, where he planned to play a round of golf at Bellerive Country Club before the pros teed up for last week's Senior PGA Championship.

His choices: Fly one airline and pay $50 to check his golf clubs, or book his flight with Southwest Airlines, where the first two checked bags fly for free. Estrada said it was an easy decision.

"If I have a choice (of airlines) to fly, Southwest is the way to go," said Estrada, a sales manager from El Paso, Texas. "But the prices? You might save five, 10 bucks here and there. It's not much of a difference. Getting there on time and getting your stuff -- that's a plus."

Michael Boyd, chairman of the aviation consulting firm Boyd Group International Inc. of Evergreen, Colo., said the average one-way fare has increased 12 percent industrywide in the past five years, but the cost has actually shot up 29 percent if ancillary fees are factored in.

In a recent report, Boyd analyzed base fares to rank the 10 airports with the highest cost airfares per mile. His findings run counter to the so-called "Southwest Effect" -- the belief that Southwest's entry to a market will reduce fares -- because seven of the airports on the list are served by Southwest.

"The very presence of Southwest doesn't guarantee you will have lower fares than you would have otherwise," Boyd said.

Because it doesn't charge for the first two checked bags or ticket changes, many consumers still view Southwest as a value buy, said George Hobica, founder of Airfarewatchdog.com.

"I don't see Southwest as being a low-cost carrier," Hobica said. "They're a low-fee carrier."

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(c)2013 the St. Louis Post-Dispatch

Visit the St. Louis Post-Dispatch at www.stltoday.com

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