A royal battle of discount airlines is brewing in Denver, a city that once had some of the highest air fares in the country.
Though prices have declined significantly at Denver International Airport during the past five years, experts say the arrival of Southwest Airlines early next year will push them even lower.
Denver air travelers will enjoy a level of low-cost competition that few other cities can boast. Three major discounters – Southwest, Frontier Airlines and United Airlines’ Ted – will duke it out at one airport. Others, including JetBlue, AirTran and ATA, also fly here.
“Everywhere they’ve gone, they’ve lowered the fares,” Denver travel agency owner Robert Polk said of Southwest. “Even though the fares here are not high, I think we are going to see some very low fares. They’ll come in with both barrels firing.”
Polk expects United and Frontier, DIA’s top carriers, to defend their turf. That could mean fare sales before the end of the year to pre-empt Southwest’s arrival, he said. The airlines also are likely to woo their best customers with extra perks from their frequent-flier plans, he said.
“For the Denver traveler, it’s wonderful,” said airline industry veteran and retired Unisys Corp. partner Phil Roberts. “Competition is wonderful.”
Indeed. Since 2000, it has caused average air fares at DIA to fall 22 percent, according to the U.S. Department of Transportation’s Office of Aviation Analysis. Frontier had 7 percent of DIA’s passenger traffic then. It has nearly 20 percent today.
That doesn’t mean there’s no room for improvement. Denver’s average one-way fare was $177 during this year’s first quarter. That’s higher than fares in many large cities, especially those already served by Southwest. Fares in Baltimore averaged $132, while the average in Las Vegas was $133.
Meanwhile, Denver fares may be creeping up. Polk said tickets in and out of DIA sold by his agency, Polk Majestic Travel Group, have increased about 14 percent during the third quarter over last year.
Fares also have fallen in new Southwest markets. Southwest entered Philadelphia in May 2004, and average one-way fares there dropped 27 percent year-over-year in the first quarter. Fares in Norfolk, Va., and West Palm Beach, Fla., where Southwest launched service in 2001, have fallen 24 percent and 12 percent, respectively.
The drops can be more dramatic on individual routes. In the third quarter of 2004, the average one-way fare between Philadelphia and Chicago Midway Airport fell 46 percent, according to Southwest.
The carrier’s officials also like to point out that traffic increases when they come to town. Air-passenger traffic in Philadelphia has increased 30 percent since Southwest’s arrival. Traffic increased by 137 percent on the Philly-Midway route.
If trash-talking among airline officials over the past few days is any evidence, the competition in Denver will be spirited.
“They are certainly a lower fare (airline) than many airlines,” Southwest CEO Gary Kelly said of Frontier on Thursday. “But Southwest is the real thing when it comes to low fares.”
Countered Frontier spokesman Joe Hodas: “It’s just inaccurate. We lowered fares 27 percent (in markets served by Frontier) in the last four years.”
Plus, Frontier has individual TV screens in all of its planes, newer aircraft, assigned seating and loyal customers in Denver, Hodas said.
Of United, Kelly said, “The hub carrier has shrunk in Denver, creating a much better opportunity. … We’ll be able to come in with a lower cost structure and provide lower fares.”
United officials struck an equally aggressive tone.
“Southwest will match our fares. The fares are already very competitive in this market,” said Sean Donohue, who heads Ted and United Express. “Game’s on. We’re looking forward to it.”
Donohue said United has lowered its costs significantly in bankruptcy and – with the combination of the main airline, Ted and United Express – is ready for the challenge.
“We’ve been in Denver 70 years. We’ve got a terrific customer base. We have almost 60 percent of the market. If Southwest has a plan to grow that much, I think the challenge is going to be more theirs than ours.”
There’s some disagreement among airline experts over which competitor Southwest will hurt the most.
Frontier is stronger financially than United, but high fuel costs have kept it from earning a profit for six quarters. Southwest, which has hedged much of its fuel at below market rates, remains profitable. Frontier’s costs are closer than United’s to Southwest’s, but Frontier may be more vulnerable in a fare war at DIA because its operations are centered here.
“The key issue will be cost, and the carrier to watch is United,” said Roberts.
Countered Polk: “I think they’re looking at Frontier’s portion of the market. Ted will be in the cross hairs as well, but United has a strong business clientele, and I don’t think that’s Southwest’s market.”
To some degree, both said the amount of damage to United and Frontier will depend on which markets Southwest chooses and how big the airline grows here.
Either way, Denver travelers are relishing the growing competition.
“I think I would try (Southwest),” said Westminster resident Jim Boschert, who has flown United and Frontier but never Southwest. “I think that they’d be on par with Frontier.
“My impression is that they still have a fair amount of service, and yet they’re very economical.”
Staff writer Greg Griffin can be reached at 303-820-1241 or at ggriffin@denverpost.com.
Staff writer Kelly Yamanouchi can be reached at 303-820-1488 or kyamanouchi@denverpost.com.
