Southwest Plans Denver Return After 19 Years

By Marilyn Adams and Dan Reed

Discount giant Southwest Airlines early next year will start flights to Denver, a high-fare market and one of the biggest U.S. cities where the Dallas-based carrier doesn’t go.

At Denver, Southwest will take on a freshly restructured United Airlines, which dominates the airport, and Denver-based discounter Frontier Airlines.

“There’s a very large opportunity in Denver,” Southwest CEO Gary Kelly said.

Southwest pulled out of the former Denver Stapleton airport in 1986 because of congestion, delays, weather and cost. Its replacement, the larger Denver International, is less prone to congestion. Denver International is the USA’s 12th-largest airport as measured by domestic passengers starting or finishing a trip, according to consultant Back Aviation Solutions.

Southwest’s move may be a sign of things to come as big, traditional airlines such as United shrink in bankruptcy restructuring, leaving openings for discounters.

Kelly said retrenchment by United presents opportunity. United, which flies 54% of domestic plane seats departing Denver, has cut service. This month, it offers 21% fewer total seats than in October 2000 and 3% fewer than a year ago, according to OAG schedule data supplied by Back.

Ten-year-old Denver International initially cost airlines $20 a passenger to operate there, Kelly said. The cost has dropped to less than $9 a passenger, he said.

United COO Pete McDonald said Thursday that Southwest’s announcement won’t affect its plan to exit bankruptcy protection by Feb.1.

Southwest’s decision isn’t surprising, Frontier spokesman Joe Hodas said. Given the size of Denver’s market, “It was only a matter of time,” he said.

Frontier shares dropped nearly 29% Thursday to $7.68, after some analysts downgraded the stock.

“It is very difficult for any airline to beat Southwest in head-to-head competition,” Raymond James Financial analyst Jim Parker said in a research note.

But Denver-based aviation consultant Michael Boyd warned against quick judgments.

He noted that United and Frontier have been fierce competitors at Denver for years.

Unlike Southwest, Frontier and Ted, United’s discount unit, offer onboard TV programming and assigned seating. Denver has more Ted service than any other United hub.

“We’re going to have a nasty showdown among low-fare carriers,” Boyd said.

*Airlines report quarterly profit, 5B

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