The Strategic and the Myopic

While United applies itself to the important problem of insufficient employee load factor on Chicago-area expressways, the number three airline in Denver (Southwest) is spending strategically to acquire its number two competitor (Frontier) and move within single digits of United’s market share in that important western hub.

Southwest EVP Ron Ricks explains the anticipated “Southwest Effect” in Denver, including expected impacts on Frontier’s employees, in the company’s blog on last Friday:

Southwest has a 38-year history of reducing fares and stimulating new traffic, particularly in markets where we compete against large airlines (like United) in major cities (like Denver). How, you ask? Consider this. Today, Southwest is the third largest airline in Denver, carrying only 14 percent of Denver passengers. United, by far Denver’s largest airline, carries about 50 percent of Denver’s passengers. The combination of Southwest and Frontier in Denver will still be smaller than United (about one-third of flights to United’s 50%) but will immediately position Southwest as a larger and more effective low-fare alternative to United. The acquisition would allow us to significantly expand travel options and low fares for millions of passengers travelling to, from, or through Denver.

Southwest continues its push to become an international carrier as well — Frontier owns Denver routes to Mexico and Costa Rica that parallel SWA’s desire to codeshare to Canada with its partner Westjet. (SWA previously had a Honolulu codeshare with ATA Airlines, an agreement that was terminated with the bankruptcy and failure of ATA. John Tague, former ATA CEO, is now president of United.)