Audio "Airline envy" sets in over low-cost service (story audio) Photos Waiting for flights... William Wren of the MAC Letter-writers: Open the gates More from MPR Low-cost airlines change the face of air travel, but Twin Cities lag behind (10/28/2003) Resources Northwest Airlines CheapSeats.com BestFares.com Your Voice Join the conversation with other MPR listeners in the News Forum.

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"Airline envy" sets in over low-cost service
by Jeff Horwich, Minnesota Public Radio
April 6, 2004

Many industry analysts say major airlines, such as Northwest in the Twin Cities (seen here) and Delta in Cincinnati, can cast a shadow over the prospects for low-cost options -- which are more prevalent in other parts of the country. Northwest says it always prices competitively, and statistics can overstate its dominance. (MPR Photo/Jeff Horwich)

When some analysts look at the American economy, they increasingly see a land of haves and have-nots. It's not poverty they're looking at, but access to low-cost airlines. While these airlines like Southwest and AirTran now carry more than one-quarter of domestic passengers, access to their flights varies widely depending on where you live. Predictably, some cities are coming down with a case of "airline envy."

St. Paul, Minn. — From his office between the two runways at Minneapolis-St. Paul International Airport, Bill Wren sees red tail after red tail lift off. Wren is the director of air service marketing for the airport, and the tails belong to Northwest Airlines planes.

This is a hub for Northwest, and that means non-stop flights to 163 destinations -- a remarkable number for a metropolitan area the size of the Twin Cities. But Wren says the phone calls and letters he gets every week do not focus on the positive.

	William Wren of the MAC

"When they read about other cities having low fares ... and when they talk to their friends and they hear, 'I only pay such and such amount to go to this place,' they say, 'Well, I'm paying 900 bucks for that,' or 'I'm paying a thousand bucks for that,' they just get irate," Wren says.

When a so-called low cost carrier enters a market, it can bring fares down by as much as 50 percent, according to one industry analyst.

The Twin Cities do have some low-cost service from AirTran, ATA, Frontier and America West. Prices are highly competitive on certain routes like Chicago, Atlanta, and Los Angeles. But low-cost airlines carry just 6 percent of domestic passengers at this airport, compared with more than 25 percent nationwide.

Wren says his letter-writers are clamoring for jetBlue and, most of all, Southwest.

"We have, for 10 years or better, been talking to Southwest Airlines," Wren says. "They're always very cordial, always very friendly, very hospitable. And then they smile and say, 'Thank you very much, but you're not in our plans right now.'"

We have, for 10 years or better, been talking to Southwest Airlines. They're always very cordial ... and then they smile and say, 'Thank you very much, but you're not in our plans right now.' - Bill Wren, Metropolitan Airports Commission

Southwest and other low-cost carriers can and do shrug off the Twin Cities and some other markets. In fact, the low-cost model thrives on "cherry-picking" of profitable routes. Analysts say taking on Northwest here would tough; the airline is known as a fearsome price competitor on routes where it is challenged.

Another market that analysts say just isn't worth the trouble for low-cost carriers is Cincinnati, where Delta Airlines and its regional partner carry some 90 percent of the traffic.

But once in a while, the "cherry pickers" do spot some low-hanging fruit.

"The true battle and the future of air travel in the United States is going to be decided in Philadelphia," says Terry Trippler of travel Web site CheapSeats.com.

Trippler says Southwest intends to knock off struggling USAirways in its Philadelphia hub. Southwest begins 14 daily flights from Philadelphia in May, and plans to double that two months later.

The challenge may be rough news for USAir, but consumers are celebrating. USAir's CEO has declared Southwest "the enemy," and fare wars are already underway. A $450 round trip from Philadelphia to Providence, for example, will fall to $98 when Southwest service begins.

Analysts like Trippler say if Southwest succeeds, and dethrones a major airline in its hub, it will be a big boost to the ambitions of low-cost carriers. Some estimates see them growing to 40 percent of the U.S. market by the end of the decade. The seven low-cost airlines have a reported 400 aircraft on order in the next five years. And there may be a few more Philadelphias out there. But airline consultant Michael Boyd says most of this low-cost expansion would come in already established markets.

	Letter-writers: Open the gates

"There is a limit to the low-fare model," Boyd says. "It requires relatively big airplanes, 100 to 150-seat airplanes, flying with some frequency between points where there are a lot of people -- or you can collect a lot of people. There are not unlimited markets there."

In fact, the vast majority of the nation's 700 commercial airports will likely never see low-cost service. Tom Parsons, CEO of BestFares.com, says this could be especially frustrating for consumers in moderate-sized but isolated cities.

"They actually end up subsidizing, I believe, the rest of America," Parsons says. "So the low-cost airlines would probably never go to a Fargo (North Dakota) or a Missoula (Montana). They will probably be the bread-and-butter destinations for the bigger airlines."

Parsons says the low-cost airlines are bringing irreversible change to the airline industry as a whole, and they will add new routes. But whether they come to an airport near you depends on where you live.

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