Denver International Airport has been trying to land Southwest Airlines for more than a decade, and the carrier’s decision to add Denver to its schedule is welcome news. Denver represents important growth for the discounter, which often avoids the main big-city airports, and important diversification for DIA.
Several factors brought Southwest back to Denver after the airline left Stapleton in 1986. Southwest had airplanes available after ending some flights to the storm-battered Gulf Coast. DIA also sold the deal based on a strong local economy and landing fees and other airport costs that have dropped 50 percent since it opened.
DIA could benefit enormously when Southwest starts up here early next year. Southwest is the nation’s largest and most influential low-cost airline. It will help keep DIA airfares reasonable and provide travelers with more choices. Southwest will announce details next week, but experts say the airline could offer nine to 14 daily flights from DIA to up to 10 cities such as Chicago, Phoenix and Las Vegas, potentially competing with United and Frontier airlines.
More fundamental to our region is that Southwest will strengthen DIA during a period of high fuel costs and economic uncertainty. DIA has always paid its debts on time, but it needs steady and substantial cash flow to stay healthy, and its dominant carrier, United Airlines, is in bankruptcy.
United and its affiliates account for about 60 percent of DIA’s flights. But UAL’s fragility is shared by most of the large traditional airlines, and much of the industry’s strength rests now with discounters such as Southwest, Jet Blue and Denver-based Frontier. United and other so-called “legacy carriers” suffer to compete due to high labor and other locked-in costs. Delta and Northwest Airlines, both with a DIA presence, filed bankruptcy in September. USAirways, which has a few Denver flights, just emerged from bankruptcy by merging with America West.
Industry struggles have prompted DIA managers to make adjustments by shelving some construction projects and leaving some jobs unfilled. Even with these precautions, it would be imprudent for DIA to remain so heavily dependent on United, so the airport will benefit from a premier discounter joining the low-cost carriers already flying out of Denver.
The industry may be undergoing a transformation. There’s debate over whether traditional hub and spoke systems will endure as the industry’s key business model. About 45 percent of DIA’s passengers represent connecting traffic. By contrast, Southwest excels with point-to-point routes.
By wooing Southwest, DIA didn’t just add another carrier; it also diversified the business model of the airlines serving Denver. In so doing, DIA will be better positioned to ride out the industry’s turmoil.
