Southwest aims to strengthen hold on Milwaukee market
Feb 04, 2013 (Menafn - Milwaukee Journal Sentinel - McClatchy-Tribune Information Services via COMTEX) --Having established itself very quickly as Milwaukee's dominant airline, with more than double the traffic of its closest competitor, Southwest Airlines has no intention of taking that status for granted.
"We enter the market to win," says Bob Jordan, the No. 2 executive at the Dallas-based carrier.
Which explains why Southwest -- which, along with its AirTran subsidiary, owns 52% of the market at Mitchell International -- is launching a major advertising and marketing effort in Milwaukee on Monday as it seeks to raise its profile here, especially among business travelers.
"Milwaukee is just really important to Southwest Airlines," said Jordan, Southwest's executive vice president and chief commercial officer. "What we're launching here in the next week is a real illustration of that commitment."
The effort, which Southwest has dubbed "Wheels Up Milwaukee," will include advertising that features its Milwaukee employees, as well as bonus frequent flier offers, a fare sale and community projects, said Southwest spokesman Brad Hawkins. The campaign will include television, radio, print and web-based spots.
"All that you are going to see starting Monday in Milwaukee is special," Jordan said. "Targeting a location like this is very unique for us."
The campaign will also seek to reach air travelers from northern Illinois, an audience that Mitchell International has sought to attract, with some success, for years.
With the campaign, Southwest is seeking to solidify its hold on an airport that has seen tremendous shifts in market share during the past several years.
In 2009, when Southwest entered Milwaukee, Midwest Airlines and its Midwest Connect feeder affiliates had nearly 35% of the market, followed by AirTran with about 24%. Northwest Airlines and its feeder affiliates had about 14%.
By 2012, Midwest was gone, having been purchased by Frontier, which dramatically cut service and had 5% of the market at year's end. Northwest no longer exists, having merged with Delta Air Lines.
Today, after Southwest bought AirTran Airways in 2011, the combination dominates Mitchell with its 52% share, followed by Delta with 25% and United Airlines with 8%. The remaining share is spread among American, US Airways, Frontier and Air Canada.
The situation illustrates Southwest's playbook of moving into a city -- many of them small to medium-size metro areas -- and then growing to become the dominant airline in the market. The company has done exactly that in Baltimore, St. Louis, Kansas City, Tampa Bay, Orlando, Nashville, Las Vegas and Oakland, among others.
"When you combine what AirTran started in Milwaukee with what Southwest has added through the acquisition, you end up with a pretty dominant player," said Robert Mann of R.W. Mann & Co., a New York airline industry consulting firm.
That doesn't mean Southwest stands alone.
Delta, in particular, has established itself in Milwaukee by building its own market share and putting its name on the city's convention center.
No lock on market
So even though the airline industry overall has been stressed by the slow economy and unpredictable fuel costs, among other factors, Southwest cannot assume it has locked up the Milwaukee market.
That is likely one of reasons it is launching the new marketing campaign here, said Jay Sorensen, an airline industry consultant who runs the Shorewood-based IdeaWorksCompany.
"If they don't, someone like Delta might step up to the plate, and Southwest will have given away market share and an opportunity by a lack of action," he said.
Jordan all but said as much.
"We don't enter markets to try them out and then leave if they don't work," said Jordan, who has been with Southwest for 25 years. "That is never the strategy at Southwest Airlines."
Southwest has turned a profit for 40 straight years, the only U.S. airline to do so. Along the way, it has become the nation's largest carrier when measured by number of domestic originating passengers.
The airline, along with wholly owned subsidiary AirTran, now serves 97 destinations in 41 states, the District of Columbia, Puerto Rico and six countries. It employs 46,000 people and operates 3,800 flights a day.
It flies 32 daily nonstop departures from Milwaukee to 16 cities, and passengers can connect to an additional 46 cities. Southwest employs 163 people in Milwaukee.
When Southwest executives say the airline is in Milwaukee to stay, they mean it, Sorensen said.
"I have absolute, 100% belief in that statement," he said.
So what's to keep Southwest from raising its prices in Milwaukee, now that it is the dominant carrier?
That's simple, Jordan said: Raising prices opens the door to competitors.
"You do see people in a position of dominance," Jordan said. "They raise their prices and what does it do? It opens up an opportunity for somebody to come in right below them and take the market away.
"Our philosophy has never been to hit a point of strength just so we can raise our prices."
Jordan points to Denver, Baltimore, Houston and Chicago as examples of cities where the airline has grown significantly but kept airfares competitive.
"We price those markets relatively today, at 200 flights a day in Baltimore, like we priced when we had 20 flights a day in Baltimore," he said.
Business travelers key
A key component of Southwest's plan for growing its Milwaukee presence is the business traveler.
Attracting the buttoned-down, pinstripe crowd might seem like a challenge for an airline that celebrates its history of irreverently bucking the system and opening up commercial air travel to the masses. But those masses include business travelers, Jordan said.
"We carry more business travelers than any other domestic carrier," he said. "We want to carry the public, and the public comes in all forms, business travelers and leisure travelers. We need particularly the business community as we bring service to Milwaukee. We need folks to try us."
The airline has added a number of amenities, including allowing travelers who pay an extra fee to move to the front of its open-seating boarding process.
While rolling out a new campaign, Southwest executives have been very cautious about promising any additional flights in Milwaukee. Additional service across its system will likely be limited as it continues to digest the AirTran acquisition, they have said.
And all airlines, not just Southwest, these days will add service only if there are the passengers to support it.
Fuel prices are a major driver of that: Airlines can't afford to fly planes that are half-full.
Fuel has moved from 10%-15% of total costs to around 40% of total costs for Southwest, Jordan said.
That in turn has pushed up fares across the industry, he said.
"Economics 101 says that as prices move up, it has an impact on demand," he said. "It has absolutely had an impact on the demand for air travel."
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