Southwest's CVG launch could have larger impacts for region

When Southwest announced it was finally starting service out of the Cincinnati/Northern Kentucky International Airport, area travelers rejoiced – hoping for the low fares the carrier is known for.

But beyond possible cheaper tickets, there are other short- and long-term implications that will come after the Dallas-based airline starts service in early June. These range from those possibly cheaper tickets to slowdowns at other airports in the region to the potential for more international flights - not to mention the impact on local businesses and economic development.

Although one expert says that one would be hard-pressed to find any negative impacts to at least the local market.

“If you are doing a pro and con list, the con list will be very, very short,” said Michael Boyd, the noted airline/airport consultant from Colorado.

Here’s a breakdown of the possible impacts of the Southwest move, including whether those lower fares are indeed on the way:

Lower fares?

At its start, Southwest was indeed known as a pioneer in the low-fare movement, selling tickets for as low as $9 and even now advertising sales to popular destinations for as little as $59 each way.

But according to Boyd and national stats from the U.S. Department of Transportation, Southwest doesn’t always offer the lowest fares and has matured into a full-cost airline.

“People don’t just love Southwest because they are cheap, because they aren’t so much anymore,” Boyd said. “They love Southwest because they are treated nicely.”

Indeed, Southwest co-founder and chairman emeritus Herb Kelleher was once famously quoted as saying that he didn’t care how much money he made off a passenger on a particular flight, but rather how much the airline might make over the lifetime of that passenger.

What you need to know flying Southwest from CVG

So local fliers should see a drop in prices on competing routes through the Chicago-Midway and Baltimore hubs.

That being said, CVG is no longer the fortress hub of Delta Air Lines of the 1990s and early 2000s, and the fares reflect that. Once long known as the most expensive airport in the country with average tickets in excess of $600-700, CVG’s averages are closer in line with national levels at about $378 per flight in the second quarter of last year.

That’s less expensive than the Southwest cities of Louisville and Dayton.

“There probably will be an impact (on fares), but not as much as people think,” Boyd said. “Southwest isn’t always the cheapest. It will be interesting to see how much lower that market can go.”

Surrounding markets could decline

Speaking of Dayton, another longer-term impact is that the Southwest presence could drain traffic from airports such as Lexington or Dayton, and even Indianapolis or Columbus.

Dayton is already losing its two daily Southwest flights (which were a leftover from the airline’s merger with AirTran in 2011).

In years past, it was just the opposite, as lower fares drew CVG travelers to other cities within a two-hour drive. In fact, one study from the late 2000s showed more than a third of possible travelers from the Cincinnati area used other airports.

Delta hub to shrink further?

In 2002, CVG handled more than 22 million passengers, and the Delta hub peaked in 2005 with nearly 700 departures a day. At that point, Delta and the now-defunct commuter carrier Comair employed more than 11,000 in well-paying jobs.

Those days are long gone, and it’s a stretch to even call Delta’s local operation a hub anymore. After handling nearly 60 percent of all the passenger traffic at CVG, Delta flights and passengers now account for about a quarter of the total (although DAL is still the largest local presence).

The Atlanta-based carrier, which handles more domestic passengers than anyone except Southwest, now operates about 70-plus departures a day out of CVG to 34 destinations. (That last number is about half of the destinations from CVG from when the Delta hub was in full force.) The current number includes flights to Paris, Toronto and Cancun.

Still, Delta employs about 1,600 workers locally (including a local reservation call center). Any success by Southwest could mean a Delta drawback and fewer jobs here.

That happened when Southwest took on then-US Airways in its Philadelphia hub straight on in 2004. That proved to a crippling blow to the struggling US Airways, which eventually merged with American Airlines.

But those were different times in the industry, which was already undergoing major consolidation. Delta is in a much stronger position to survive and compete, especially given its long-standing accounts with major corporations locally.

Not only that, but there may be brand loyalty locally even despite anger over those high fares especially because of Delta’s SkyMiles frequent flier program. Delta’s previous reactions to such low-cost startups to CVG was to slash fares and lose in the short term to chase off the competition. But this is Southwest and the CVG Delta hub isn’t the fortress it once was.

“I can’t imagine this would impact Delta’s long-term strategy for Cincinnati all that much,” Boyd said.

More international flights

Boyd said that “you can make a solid book in Vegas” that the Southwest announcement will mean more international traffic out of CVG, specifically to London.

Delta long operated a London flight out of CVG, but moved it to Detroit soon after the Northwest merger. Boyd said that with increased traffic caused by Southwest, international carriers such as British Airways could come sniffing around Cincinnati – especially given the diverse business community here.

“I would go and put a $1,000 bet down right now on that happening within 24 months, that’s how strongly I believe in it,” Boyd said.

Will business community be happy?

When the Delta hub was thrumming, the area’s larger corporations were ecstatic with the service, especially since they got corporate discounts and didn’t face the higher fares that smaller businesses and leisure travelers did.

Will those same business travelers blend well with Southwest’s low-cost image?

Boyd says yes, especially since Southwest has added its own Business Select sections and isn’t the “cattle call” airline it was once known as.

He also said that the move to open lines to the Midway and Baltimore hubs shows this isn’t a short-term grab at travelers headed to Florida. One of the area business community’s issues with the downsized Delta hub is less of access to some markets, including Chicago and Washington, D.C.

“This shows Southwest wants the city to have access to its entire system, and that means the corporate community there,” he said.

Indeed, the announcement came after years of negotiation that included pledges by local businesses to buy a certain number of seats and help defray initial marketing costs.

It could also give local economic development officials back a lure they had lost when it came to attracting relocating companies. When Delta pulled back here, those officials began touting service from surrounding airports, and the area even lost two major companies – Chiquita and Toyota – in part because of reduced air service from CVG.

Nashville, for example, actually grew its business base after losing an American Airlines hub by teaming up with Southwest - although that market is aided by a robust vacation crowd.

More future destinations

Depending on how successful the routes prove to Southwest, the move could mean even more flights for CVG, Boyd said.

Southwest operates major “focus city” operations in Dallas, Phoenix, and Denver – which would mean a direct competition with one of CVG’s other low-cost carriers in Frontier Airlines. (That carrier operates its hub in Denver as well).

But Boyd was quick to point out that doesn’t mean Southwest is looking at creating a hub here and that Cincinnati is now the spoke in the Southwest system after being the center of the Delta network.

“Still, I really have a hard time seeing a downside of this for anyone,” Boyd said.