When the 9/11 terrorist attacks led to a stricter, slower
airport security process at U.S. airports, short-distance flying lost much of
its appeal for airlines. Now, Southwest Airlines believes the time is right to
once again bulk up its short-haul network.
From June 2017 through this June, Southwest added 3,000
daily one-way seats in the intra-California market, where it is testing its new
short-haul strategy. The carrier has also changed its fare structure on
close-in intra-California bookings, offering more midtier prices in the $100 to
$200 range one-way on purchases made a week to two weeks out, Southwest chief
revenue officer Andrew Watterson said in an interview.
The result, the carrier said, was an increase in
intra-California traffic by 3,200 passengers per day over those 12 months,
coupled with a load factor improvement of 2.4%.
"We are thrilled. It worked much better than we
expected," Watterson said.
U.S. short-haul flying, which Southwest defines as routes of
less than 500 miles, took a steep dive in the immediate aftermath of 9/11.
According to Samuel Engel, an aviation analyst for the consulting firm ICF,
U.S. airlines overall saw a 10% drop in passengers from 2000 through 2002. But
on flights of less than 500 miles, the drop was 20%. For flights under 200
miles, the drop was 36%.
The reason for that decline was straightforward. With the
onset of tighter screening, passengers needed to arrive at airports much
earlier than they had to prior to 9/11. For some short-haul flights, Engel
noted, people used to show up as late as 20 minutes before their flight.
Suddenly, arrival times moved to an hour early and beyond. That fundamentally
changed the cost/benefit analysis of taking extra time to drive versus paying
the cost of a short flight.
"What was going to save you two hours, was only going
to save you one hour," Engel said.
Watterson said the Great Recession of 2008 and 2009, coupled
with the surging fuel prices that followed, dealt a further blow to Southwest's
short-haul schedule. But today's improved economy, coupled with the advent of
ride-sharing and the growth of TSA PreCheck, have changed that equation.
According to the TSA, in August, 94% of PreCheck members waited less than 5
minutes at security, meaning that the airport experience has gotten quicker for
many frequent travelers.
Watterson said Southwest would like to diversify its
short-haul expansion into other regions, including the East Coast, Florida,
Texas and the Midwest, though no time frame has been set.
"We are still working through California, understanding
what is the biggest driver; what do customers want in terms of increased feed,"
he said.
Southwest hasn't been alone in increasing intra-California
flying. Indeed, while Southwest remains the dominant carrier on such routes,
United and Alaska have both grown their intra-California seat count at a faster
percentage rate than Southwest in recent years.
Since 2015, Southwest has increased its annual
intra-California capacity by 1.98 million seats, or 13.3%, according to the
airline analytics company OAG. United's seat count is up 1.36 million, or 26%,
in that time. And since Alaska acquired Virgin America in 2016, the
intra-California seat count for the combined carriers has gone up by 956,000,
or 36%, according to OAG.
United spokesman Madhu Unnikrishnan said the emphasis for
the airline isn't on bulking up short-haul flying. Rather, United is taking
advantage of the strong California market by connecting more small destinations
to its hubs in San Francisco and Los Angeles as well as to hubs outside
California. United has also increased the average size of aircraft.
In an email, Alaska spokeswoman Oriana Branon said her
airline's intra-California buildup is a response to overall growth in the
intra-California market.
That dynamic has analyst Brett Snyder, who writes the Cranky
Flier blog, skeptical about the real reason for Southwest's intra-California
buildup.
"The way I look at it is that it's a competitive
response," he said. "Maybe it's internally driven, but someone
sparked them to take this move."
Alaska's buildup, in particular, is likely a concern for
Southwest since the carriers compete directly on more routes than Southwest and
United do, Snyder said. He cited intra-California routes that don't touch
either Los Angeles or San Francisco, such as San Diego-Sacramento and San
Diego-San Jose.
Engel said there could indeed be opportunity for renewed
growth in U.S. short-haul flying, and he noted that on a per-mile basis, ticket
prices tend to be higher on short flights than on longer ones.
"I think Southwest is right to look at markets that
maybe have less price-sensitive demand and may be underserved. It makes sense,"
he said. "But my point is there may be some opportunity, but it is a small
part of the travel system."