I'm blogging from Texas this evening because I'm attending a national air service conference sponsored by the American Association of Airport Executives. This is one of the conferences where you get a chance to talk to others in the airport/airline industries and find out what's going on across the country.

This afternoon I listened to a speaker that I know many of you would find interesting: the director of network strategic planning for Southwest Airlines, Lee Lipton. I know if some of you were here you would chew his ear about the absence of Southwest in the Springfield-Branson market. For those of you who haven't followed these past blog conversations, click here and here and catch-up!

Anyway, one point made by Mr. Lipton caught my attention because it vividly illustrates the financial conundrum facing all U.S. airlines. According to Lipton, Southwest presently has to sell the first 95 seats on every flight BEFORE the flight makes money. That's 95 seats out of 137 on every flight–the 96th passenger puts the flight in the black. Put another way, if the flight is 69.3 percent full (these percentages are called "load factors"), the airline only breaks even. It wasn't that long ago that most airlines were modestly content with a 70 percent load factor. What's changed? Energy prices. I hate to think about what it's like right now for those airlines that aren't as efficient as Southwest...

Today’s Wall Street Journal  provides an interesting read on Southwest Airlines. The headline says, “Southwest’s New Flight Plan: Win More Business Travelers.” Unfortunately, the story isn’t available on the paper’s web site unless you pay for it.

So, here’s the story in a nutshell: the airline wants to “wean itself from its reliance on budget travelers.” To accomplish this task the airline is trying to lure business travelers so it can raise fares. Here’s the catch: can it do it without maddening budget travelers?

That’s the meat of the story. But what’s really interesting are the details. The paper quotes an academic study that reports, “Southwest’s fares were lower only half the time when compared with fares of competitors selling tickets through the online travel site Orbitz.com.” You can find the study here and read the details.

This study, along with the Journal  article, are two more blows for Southwest as it works to protect its low fare perception. What do I mean by that? Play along here for a moment and I’ll give you an example...

2007 began with a screaming full page advertisement in the Journal. The catch line said, “Fares as low as $49.” Who do you suppose the airline was? Southwest? AirTran? JetBlue? Wrong, wrong and wrong. The correct answer: American Airlines. Admit it—you thought it was Southwest.

According to well known aviation analyst Darryl Jenkins, of Embry Riddle University, Southwest is the lowest fare carrier in less than one-third of its markets. He says, “The illusion of low fare is better than a low fare and Southwest has the highest percentage of high fares of any airline.” If you’re skeptical about this, do a market by market comparison of fares and you’ll discover what Jenkins already knows: the mystique of Southwest has more to do with perception than low fares. Analysts say one reason so many airlines have been in bankruptcy is because they’ve actually been competing with Southwest.

Perhaps the bottom line challenge for Southwest, as it tries to appeal to business flyers, is maintaining the "illusion."

Curtis leaves comments from a posting in August about Southwest Airlines:

"It is not true that Southwest won't fly to an MSA of less than 1,000,000 people. It currently flies to 17 of them, not counting any cities in Hawaii. Five of these (Midland/Odessa, Amarillo, Lubbock, Harlingen/South Padre, and Reno) are smaller than Springfield MSA (according to U.S. Census 2006 estimates). I also don't understand why they would only fly to one destination from SGF. The five smaller cities all have direct flights to at least three destinations each."

You're right Curtis, but there's a little more to it...

When Southwest began service in 1971, it was a Texas based airline serving only Texas cities (this was long before the company adopted its "million people in the MSA guideline").  The airline continues to service those small, legacy cities because it has a near monopoly on the service. Shawn Schroeder, the assistant director of our airport, used to work at the airport in Harlingen. The Harlingen MSA has about 378,000 people and Southwest service. He tells me that it's very difficult to entice other airlines to provide service there because they don't want to compete with Southwest. Southwest has no reason to leave Harlingen (or the other small Texas markets) because it has a lock on the market and they've always been there—the airline and Harlingen came to the dance together!

As for the Reno/Lake Tahoe market—its MSA is about the size of ours, but there's at least one very important difference: the tourism and gaming industry. The Reno airport has eleven airlines and moves approximately five million passengers a year. We have five airlines and less than a million total passengers a year. Given these facts, it's easy to understand why Southwest would serve the market. To compare our market to Reno, is to compare apples to oranges.

So, the bottom line is still true: today, in 2007, when people like me call Southwest and inquire about obtaining service, the airline says it generally doesn't consider service to an MSA of less than a million people.

Karen and Aaron want to know about Southwest Airlines. Karen says, "What was the law that kept Southwest from flying into Springfield. Wasn't that recently overruled, or didn't a new law go into effect that would allow it?"

Karen... You're thinking about the Wright Amendment. I most definitely am not an expert on this bit of airline/airport legislation. But in a nutshell: when the amendment was in full force it forbid Southwest Airlines from flying into any state that didn't touch Texas (the airline is based at Dallas Love Field). In 2005 the law was amended to allow flights to Missouri.

Aaron says...Why doesn't Southwest fly into Springfield-Branson? I get this question all the time, so forgive me for the well rehearsed response!

Low cost carriers (LCCs) are a tough nut to crack for smaller markets like Springfield. Why? Because the business model won't allow for service into a Metropolitan Statistical Area (MSA) of less than a million people. The population of the Springfield MSA is 400,000.

I'd guess that Southwest would want to have five flights a day, with the goal of filling a 130 seat aircraft to at least 80% capacity.  And it would only fly to one place. This is a key point... Southwest doesn't fly from point A to B or C, and so forth. It flys from point A to point B. And  in our case, where would point B be? It would almost certainly be Dallas Love Field.

So here's the down and dirty: we don't have the customer base to support an airline like Southwest, Airtran, JetBlue etc. In 10 to 15 years we might have the passenger numbers to entice an LCC--but don't count on it.

I know what you're thinking--what about Allegiant? It's a low cost airline and it serves Springfield-Branson!

Allegiant is a completely different animal. It operates on a much, much smaller scale than Southwest and its business model is different. It serves small market airports (like us) with service to vacation destinations only. And at the beginning of this year it owned only about 22 airplanes.

I'm sure we'll be talking about this subject a lot more!