Southwest to Expand Service to Denver; Rival’s Shares Plunge

Low-cost carrier Southwest Airlines Co. said Thursday that it would begin flying to Denver early next year, going head-to-head with United Airlines Inc. and Frontier Airlines Inc., a Denver-based low-fare carrier whose stock plunged on the news.

Southwest said it would release schedules and fares next week. Southwest is the No. 3 carrier at Los Angeles International Airport in terms of passengers and also serves Burbank, Ontario and Orange County.

“Denver’s growing community is one we have studied and intended to serve for quite some time, and we look forward to also serving the people of the entire state,” Southwest Chief Executive Gary Kelly said.

Dallas-based Southwest has stayed out of Denver International Airport, citing high airport-associated costs, but airline spokeswoman Whitney Eichinger said those costs had become more competitive.

She said Southwest was able to accelerate its schedule for starting in Denver because aircraft became available when the airline reduced service because of hurricane damage along the Gulf Coast.

United is the dominant carrier in Denver, followed by Frontier. Southwest served Denver between 1983 and 1986 at Stapleton International Airport, which was later closed and replaced by Denver International Airport.

Southwest’s entry into a market typically results in fare wars that can be beneficial to travelers but disastrous for competitors. Its return to Denver, coupled with the emergence of United from bankruptcy protection, “could represent a formidable competitive challenge” for Frontier, Merrill Lynch & Co. analyst Michael Linenberg told clients. Linenberg, who cut the stock to “sell” from “buy,” said 90% to 95% of Frontier’s capacity is to and from Denver.

Frontier shares fell almost 29%, losing $3.08 to $7.68, on the news. Shares of Southwest, which also announced Thursday that its third-quarter profit jumped 91%, fell 51 cents to $15.07.

Frontier spokesman Joe Hodas said the airline competed against Southwest at other U.S. cities and was awaiting details about Southwest’s plans for Denver.

“Much of our research would indicate that we’re very competitive,” he said.