Southwest Plans Service to Dulles

The move is another sign that the carrier is increasingly interested in the busiest airline markets.
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Southwest Airlines

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said Tuesday that it will begin service to Washington's Dulles International Airport this fall, another sign that the low-fare carrier is increasingly interested in the nation's busiest airline markets.

The company said it has requested two gates at Dulles, one of three major Washington-area airports that in combination serve 65 million passengers annually. "The Washington, D.C., metro area is so large, it's a real advantage for us," Southwest CEO Gary Kelly told reporters during a conference call. Dulles would be the airline's 63rd airport.

Kelly said Dulles has been on Southwest's list of potential destinations for many years. More recently, the company was watching closely as the 2004 arrival of low-fare carrier Flyi stimulated growth.

"With gates becoming available because of (Flyi) ceasing operations back in January, now was the time for us to take another look," he said. "The airport is looking at allocating gates. If we wanted to get gates this year, we needed to speak up."

Southwest expects to announce its destinations in the middle of the summer and to start flying early this fall. It would begin with "a modest presence," at Dulles, Kelly said. Baltimore Washington International Airport, Southwest's fourth-busiest airport with about 166 daily departures, will likely remain as the airline's principal Washington-area airport.

Shares of Southwest slipped 3 cents to close at $17.92.

The trend of Southwest's recent expansion shows a clear pattern. The airline began service to Denver International, the country's fifth-busiest airport, in January. In 2003, it began service to Philadelphia. The following year, Southwest added Pittsburgh-Philadelphia service, a critically important market, and expanded rapidly in Chicago.

"We serve most of the large metropolitan airports in the country, but not all, so we look for opportunities at airports large or small that are overpriced or underserved," Kelly said. He added that Southwest began service last fall to Fort Myers, Fla., which "is not a large city by any stretch," and said "we'll continue to grow in a variety of ways."

Still, Kelly acknowledged that Southwest is aware that other low-fare carriers are also growing at the most desirable airports. "In terms of growing our business, we can't be complacent," he said. "There are carriers out there growing actively nationwide."

Aviation consultant Mike Boyd said the pressure is on Southwest to expand in places where it can quickly stimulate the most traffic, because even Southwest is impacted by the airline industry's brutal combination of high fuel prices and a harshly competitive fare environment.

"It used to be that Southwest could go anywhere and fill an airplane," Boyd said. "Now they want to go to places where they can fill an airplane right out of the box, and they want to get there before

AirTran

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and

JetBlue

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."

"This is a whole new world for Southwest," Boyd said. "They have to react, to go to markets they never dreamed of before. Southwest is now a carnivore. They have to go into other people's hubs because that's where the traffic is."

Dulles is a hub for

UAL

(UAUA)

unit United Airlines, which has nearly 300 daily departures from the airport, including 20 international departures to 18 destinations. Until Flyi shut down, Dulles was its hub.

In a previous life, Flyi was Atlantic Coast Airlines, a regional carrier that operated as United Express. But it balked when United sought, during a three-year stay in bankruptcy, to reduce the cost of its Express contracts.

The northern Virginia area near Dulles includes three of the nation's fastest-growing counties, Loudoun, King George and Caroline. Aviation consultant Darryl Jenkins, an area resident, said that Flyi managed to lure some passengers who had previously driven to Baltimore to fly on Southwest.

"Flyi was loved here because of its prices," he said. "Now, Southwest is moving to block any potential competitors."

Jenkins said United has plenty of experience competing with Southwest, particularly on the West Coast and now in Denver.

"The Dulles market can easily accommodate different models and different types of carriers," he said. "Dulles has been very successful for United's international operation."

United commented Tuesday on Southwest's entry at Dulles, saying, "We look forward to flying customers through our vast route network and our Star Alliance partners to the 800 or so destinations where they don't fly."

Meanwhile, Boyd noted that other changes are likely in the works for Southwest. He said he expects the airline to move to add seat assignments and in-flight entertainment in order to compete with carriers whose fares are equal to Southwest's and whose amenities are greater.

"Southwest isn't calling the shots any more," he said. "Now, as good as they are, they have to react to other airlines."