The Duke of Airlines : Southwest Lands With a Bang at John Wayne

If travel agents in Orange County wonder what the arrival of Southwest Airlines at John Wayne Airport will mean, they should talk to Jim M. Roberts in San Bernardino County.

Roberts, who owns Uniglobe Regency Travel in Rancho Cucamonga, has seen Southwest’s low fares and frequent flights push down fares and drive out rivals since it began service at nearby Ontario International Airport in 1985. Even clients hooked on competitors’ frequent-flier programs couldn’t resist Southwest’s prices and schedules. The Dallas-based airline now dominates Ontario, with 46% of the domestic passenger traffic.

“I think they are really going to be shocked as to what their customers’ response is going to be,” said Roberts, referring to travel agents in Orange County. “It wouldn’t surprise me to see Southwest make a significant dent in the passenger traffic of American and other carriers.”

Whatever the outcome, airline service will never be the same at John Wayne, which on Thursday became the region’s third suburban airport--after Ontario and Burbank--served by Southwest. The day was marked by festivities and opening ceremonies, with dignitaries snacking on a giant cake shaped like a cowboy hat.

“This is a tremendous spoonful of medicine for the tourism industry,” said Orange County Supervisor Gaddi Vasquez at the opening ceremonies, which included John Wayne impersonators and a live radio broadcast next to Gate 1 in the terminal.

Southwest also serves Los Angeles International Airport, but it has been at secondary, suburban airports where the carrier has had its largest impact. Passengers love the low fares and airport executives the additional revenue.

Yet the arrival of Southwest has also left travelers with less choice on many routes, and some airport officials fret about relying too much on a single carrier--one of the few to expand and turn a profit in recent years--for growth.

Southwest, which now serves more than 50 cities nationwide, has grown at a wild pace by offering no-frills service, cost-efficient Boeing 737 planes and on-time scheduling. It makes money on low fares because its costs are the lowest of any major carrier.

The airline’s arrival is particularly welcome at John Wayne Airport, which has been dogged for years by a reputation of being a convenient but expensive alternative for air travelers.

Southwest is offering seven daily round-trip flights to Oakland and eight to San Jose for an unrestricted, one-way price of $69. Advance purchase discounts can cut that to as low as $49 one way. Until Southwest arrived, other carriers were charging up to twice as much.

Southwest service “is a great idea, said Pat Davison, a library clerk in San Juan Capistrano who was going to Oakland on Thursday. “They have good prices and they get you there on time.”

Within a year, Orange County passengers could see lower fares on other routes, as major airlines create low-cost subsidiaries to head off Southwest before they get undercut again, industry analysts say.

Because of various restrictions, it might prove harder for Southwest and other discounters to expand service in Orange County. While Southwest can expand almost at will at Burbank and Ontario, the airline and other carriers at John Wayne are allocated a certain number of daily flights to meet restrictions on jet noise.

But already Southwest has sparked a fare war as other carriers plan to either match its $69 one-way fares or withdraw flights.

American Airlines, Southwest’s prime competitor to San Jose, plans to cut its nine daily weekday flights to six starting June 17, and the service could eventually disappear altogether. Those flights will be replaced with destinations where Southwest doesn’t fly from Orange County, such as Palm Springs and New York City.

Many airlines at Burbank and Ontario also matched Southwest fares at first, only to drop out on competing routes.

For example, USAir withdrew completely from Burbank in May, 1991, and Delta abandoned the airport last year. American dropped all six of its flights from Burbank to San Jose, United Airlines halted flights to Oakland, and America West reduced the number of shuttles to Las Vegas.

Southwest’s dramatic expansion at Burbank--formally known as Burbank-Glendale-Pasadena Airport--has left airport officials concerned about being too dependent on the carrier. Robert Garcin, president of the Burbank Airport Authority, worries that the reliance on Southwest could backfire when it come time to issue revenue bonds to build a new terminal.

“If I were a bond buyer, I’d like to have more than one carrier,” Garcin said. “We’ve put an awful lot of eggs in one basket, and it’s a problem we’ll have to face.”

“Yes, it bothers me that Southwest dominates the airport,” added Thomas Greer, executive director of Burbank Airport, which has seen passenger traffic soar 60% since Southwest began service in 1989. “But it is Southwest. If we’re going to have a dominant player, we’re lucky we have the one that’s making money.”

As competing carriers drop out on Southwest’s routes, passengers have been left with little, if any, choice of airlines.

As a result, Southwest is creating room to raise fares if it chooses to do so, analysts say. In fact, transportation planners have urged the federal government to encourage the creation of new low-cost, low-fare airlines if only to keep Southwest prices in check.

At Ontario Airport, routes to the Bay Area and Sacramento are “virtually owned by Southwest because of the frequency of their flights,” said Roberts, the Rancho Cucamonga travel agent. However, “they have not price-gouged. Their prices are still significantly less than when they entered the market.”

Losing Altitude

Southwest Airline’s once-soaring stock has tumbled by one-third since February as investors have grown worried about rivals’ plans to combat the low-fare carrier. Still, the Dallas-based airline says it expects to grow in 1994, as it has in the previous five years.

Weekly stock price (except latest) Thursday: 27.25 Sales (in millions) Profit (in millions) Source: Bloomberg Business News