joleo wrote:
I really want Southwest to start Omaha to MSP. Right now, only 55 people fly each way as was mentioned above but prices are horribly expensive. If Southwest were to start this, I would expect that 55 people to go to 200-250 people easy! It is a very short flight but it's a 6-hour drive having to go through Des Moines. There is no direct angled highway.
I don’t think it is that simple. If we were to pro-con this really the only pro is a consumer based issue and no so much an airline/profitability issue. The obvious perceived pro is that Southwest offering a flight to Minneapolis would lower prices on the route. I’d agree. There is little doubt that Delta and Northwest before the merger has enjoyed a pricing premium on the direct flight. That said, while I’ve seen outrageous prices on this route in particular and paid an asinine amount for a family member that needed specific dates around Christmas, checking random dates over the next three months for a 2 night stay I was mildly impressed. On average, the direct flights were $300-$400 most days with the lowest I found being $280. On some trips were Delta was offering roughly $400, United was offering about $20 less. That said, United’s total travel time including a layover in O’Hare was 4 to 4 and a half hours, largely negating the option to drive. Q4 DOT data indicated an average fare paid of $361 on the route.
The cons for Southwest entering the market are numerous and by no means not limited to the following.
The drive- as someone who makes said trip about once a year at least, it isn’t that bad. From airport to airport it is 378 miles. With a 70 mph speed limit in Iowa and Minnesota, if you drive the limit that is under 5 and a half hours. Average 5 mph over the limit and it is 5 hours flat. Denver and Chicago an hour or two further away.
Lack of O/D Demand- This isn’t trivial. 55 PDEW is low. Is some of the price related where people are seeing $400 prices and weighing it versus about $60-70 worth of gasoline? Probably. But nowhere near the 200-250 that you think would magically start flying if Southwest added a single flight. Furthermore, you have to pry those 55 away by presumably offering lower prices. Great for the consumer, not great for the airline.
Lack of connections- Most of Omaha’s Southwest routes set up natural connections. From Midway you can go a ton of places one stop. From Denver, Las Vegas or Phoenix you can connect to California and the West. From St. Louis multiple East/Southeast options. From Texas the same as well as the international destinations from the new Houston flight. Of Southwest's 9 full season scheduled destinations, they fly to 4 of them already. Atlanta and Baltimore can easily be connected to from Midway and St. Louis. And I don't see many people flying from Omaha to Minneapolis to go to Kansas City. This is something that really kills viability because as we’ll see with Delta, they’re not flying Omaha to Minneapolis for O/D traffic. They’re really only doing it to connect people to a hub.
PDEW vs. actual seats- We established in Q4 of 2015 on average there were 55 passengers flying daily each way O/D for OMA-MSP. In that same quarter, Delta few an average of 503 seats to MSP and 503 seats from MSP to Omaha daily. Of those 411 seats on average daily OMA-MSP were occupied and 409 MSP-OMA. That is an 81% load factor, something that will come into play later.
What this tells is that if there were 110 total O/D daily passengers (PDEW X 2) and roughly 774 total passengers flying Omaha to Minneapolis and Minneapolis to Omaha daily, only 14% of the passenger’s at best on Delta’s flights in Q4 were O/D. The other 86% were connecting to somewhere other than MSP or coming to Omaha from somewhere other than MSP. In other words, on a 100 seat fully filled plane only 14 people on that flight were actually going to Minneapolis on average. The other way of looking at this is Delta is operating 7 flights from OMA-->MSP tomorrow. If our 55 PDEW are distributed evenly you’d expect only roughly 8 passengers on each of the 7 flights to have MSP as their final destination. This ties back strongly to the previous two bullets about a lack of O/D traffic and SW’s inability for connecting traffic at MSP.
Load Factor/ Seat capacity and Delta’s obvious response if Southwest entered the market- As mentioned above, in Q4 Delta’s combined load factor for both flights to Minneapolis and from Minneapolis to Omaha was roughly 81%. This also means on average they had 94 seats unsold per day or over the 7 flights they’ll operate tomorrow (we’ll see what their winter capacity ends up being on the route) you’d expect an average of 13 empty seats per generic flight.
If Southwest were to hypothetically launch a flight on ~140 seat 737, Delta has so much extra capacity on the route with those 94 seats that they could massively undercut them. This is taking it to the extreme a bit, but it illustrates my point. Delta is operating those 7 flights for frequency to its hub regardless. At an 81% load factor they literally have 94 seats they could sell for $1 or $5 or some trivial amount of money that would keep you from thinking about booking your ticket with Southwest on the route. Plus, they have 7 different times you can choose from to Southwest’s one flight.
If this was a market that had quadruple the o/d demand or if Southwest had a hub (and there are legitimate factors from keeping that from happening at MSP: Delta protecting a fortress hub, two LCCs in the market already with Spirit and home team Sun Country) then it would be a different story.
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