Southwest Airlines has announced new service to Chicago O’Hare (ORD) and Houston George Bush Intercontinental Airport (IAH). Both airports are in cities already well-served by Southwest. Both are hubs for United Airlines. Does Southwest have a solid plan or will it fail like it did in Newark, another United hub?
Southwest Challenges United With New Service To ORD + IAH
Yesterday, Southwest announced new service to Chicago O’Hare and Houston George Bush Intercontinental Airport. No routes have been announced, though service is set to begin in the “first half” of 2021. Southwest has never served ORD but did serve IAH until 2005. In fact, when Southwest Airlines first began operations IAH was an original service destination.
Speaking of the new destinations, Southwest CEO Gary Kelly said:
“Southwest owes decades of success to our Employees and Customers who have supported our business in Chicago and Houston. Today’s announcement furthers our commitment to both cities as we add service to share Southwest’s value and Hospitality with more leisure and business travelers.”
What Strategy Is At Play Here?
To some extent, all airlines are grasping at straws during this difficult period. The playing field has been leveled to the extent that traditional bread and butter routes no longer are reliable performers. With business travel greatly depressed and likely the last travel segment to recover, airlines are looking to new routes in ways that would have unimaginable prior to the pandemic.
One strategy has been to add leisure destinations. For U.S. carriers that includes ramping up Sunbelt service, particularly to Florida and Mexico. That isn’t at play here. Another strategy has been to go wide instead of going deep. Hourly flights between hubs works well when there is demand to fill planes, but not during a pandemic. Eight flights per day have become 2-3 flights per day, leading to surplus aircraft, surplus staff, and an incentive to try out new routes.
I think that is at play here. Chicago Midway (MDW) is Southwest’s number one airport in terms of passenger seats. Houston Hobby (HOU) is seventh. For visitors, both are more convenient to the center city than O’Hare or Bush Intercontinental. For connecting passengers, HOU and MDW will remain “hubs” (in quotes because Southwest technically does not have hubs, though in practice it operates in a hub-and-spoke style from airports including MDW and HOU).
Instead, Southwest appears to hope to attract local travelers in which IAH and ORD are far more conveniently located. That’s smart in the sense that some North side residents in Chicago or Houston would never think of using Midway or Hobby. The problem, of course, is that Houston is a stronghold for United Airlines and Chicago is a stronghold for both United and American Airlines. With limited service and loyal clientele, will Southwest be able to even make a dent?
Why Challenge United Airlines?
I don’t think Southwest Airlines smells blood in the water or sees particular weakness on the part of United. Instead, it appears Southwest is simply testing the waters in places where it does not offer service.
Why not target Delta? Southwest already serves Atlanta, Cincinnati, Detroit, Minneapolis, and Salt Lake City.
Why not target American? Southwest already serves Charlotte, Miami (recently announced), Phoenix, and Philadelphia. Perhaps we’ll see Dallas Fort Worth (DFW) next?
Southwest tried to challenge United Airlines in Newark and ultimately pulled out. It struggled to gain traction and its routes were not generally profitable. As Kelly said in 2019:
“The financial results at Newark have been below expectations, despite the efforts of our excellent Team at Newark.”
Southwest also challenged United in Denver, a bit more successfully, though United responded strongly by beefing up service and preempting Southwest on Hawaii routes. Denver remains United’s most profitable hub.
Again, I don’t think Southwest sees particular vulnerability at United…it just wants to try two new big airports that happen to be United hubs.
Southwest plans to start service to IAH and ORD in the first half of 2021, though no new routes have been announced yet. It’s too soon to say whether Southwest will succeed, but consumers will. Expect a fare war involving American, United, and Southwest on any route Southwest decides to be a challenger on.
image: Southwest Airlines
I think SW will pick up considerable traffic from the Northside of Chicago with this move. I live by Wrigley field and it is so much easier to fly out of O’Hare. I know many people, myself included, that enjoys flying Southwest but just refused to fly out of Midway unless the flights are basically free.
Southwest is running out of places to expand. International is out of the picture for now. Southwest is not going to buy A220’s and expand to small cities so 737’s to IAH makes sense.
Road traffic is getting so bad that passengers can find one of a city’s multiple airports as more convenient. EWR was an anomaly because New Jersey people are not going to go to LGA.
IAH, ORD, and MIA are reasonable choices. For decades, not everyone drove to LAX but flew from Burbank or Orange County.
Someday, WN may start service to Anchorage.
It all depends on Southwest flights into and out of those new cities. I am in San Antonio and fly international, so flights to IAH are good because of 2 bag policy.
Disagree with the notion that Southwest doesn’t smell blood in the water. Southwest is targeting AA and UA directly. For example, look at PSP. Southwest undercut extensively and the legacies were forced to match. Southwest also added additional flying from CLT both to PHX and DEN.
I also may be wrong on this, but I think there was some stipulation in the wright amendment that Southwest can’t serve DFW for a certain amount of years after the repeal.
I live well north of Chicago and ORD is far and away the better place to get to. Traffic getting to MDW is murder. Yes, it’s more convenient from downtown and maybe some SW suburbs but that’s it. If you live north, northwest or west (and that’s most of your high income demo), ORD is far more convenient. So, this is a good idea for WN if done properly. My guess is that they’ll offer flights to leisure mainstays (PHX, LAS, MCO, FLL) some west coast flights (OAK, LAX), and flights to larger hubs not mentioned above for connections (DEN, BWI, DAL, HOU). I would think that service to DAL and HOU would be a unique selling point for WN from ORD.
This SW move to fly to IAH will work great for me when international traveling opens up, and I bet that for any “international” traveler who lives in any of the small cities served by SW who HAS TO stop at a hub (or two) when traveling overseas. UA and SW are the only two airlines serving my town in TX (AA stopped after September 11th). Hence for European flights the tickets are expensive all year round (sometimes double than from any major city). For while there are frequent IAH offers from other airlines UA makes it impossible with their expensive fares from my town to IAH (less than 1 hour flight in a small plane). Flying SW to HOU would have been a feasible option if we didn’t have to take into account the extra time needed to commute to IAH which would lengthen an already lengthy trip plus adding the uber cost. With SW flying to IAH I’ll have a crop of airlines to choose from for my European trips and I’m already rubbing my hands in glee!
I dont understand this post. You’ll have to buy tickets from IAH to Europe, and IAH has some of the most expensive international fares of any airport in the USA. Also – where are you from? There’s no given that Southwest will operate from any city in Texas to IAH. Maybe Dallas, and that’s it? Weird post, with no base in facts or logic.
You write this above: “Chicago Midway (MDW) is Southwest’s number one aircraft”
I assume you meant airport.
Proofread/ do one more check, or have a fresh set of eyeballs look at these things before you post, otherwise sloppiness undermines your otherwise good analysis.
So SW can’t go to DFW until 2025 due to the legal agreement within the Wright Amendment Repeal.
IAH is a smart return. Granted the last time they were serving IAH, they were only going up to Love Field and that was when Continental was the strongest player there before the merger.
I feel this is smart for them at least in Houston to go back to IAH since it is way more convenient for literally everyone that is north of I-10 since even for me when I lived outside of Houston, getting to Hobby was a drastic challenge.
I live between ORD and MKE… I used to fly SW out of MKE until they raised prices substantially and priced me out of the market. Let’s hope that with ORD flights, prices from MKE will be in line with ORD fares.