Southwest Airlines is moving into new territory with its ATA Airlines deal at Chicago's Midway airport as it continues to reshape the US industry, reaffirming its role as a strongman.
The largest low-fares carrier in the USA, Southwest, won a bidding war for Midway airport assets held by ATA Airlines, and is preparing to begin a major codesharing pact with ATA, in bankruptcy reorganisation since last year.
ATA accepted a $117 million cash infusion offer from Southwest, a deal which gives Southwest part ownership of ATA. It also won rights to six of ATA's 14 gates at Midway, giving Southwest control of 25 of the airport's 43 gates.
The pact applies to ATA flights serving 11 destinations from Midway, where ATA and Southwest will interchange. It also allows Southwest to bring some presence to markets it had assiduously avoided, including airports such as Boston Logan, Denver, Honolulu, New York LaGuardia and Newark and Washington National. In each of these, ATA has wrested a market position that Southwest would consider too small to serve on its own. However, Southwest will not codeshare on ATA flights at Dallas/Fort Worth.
Southwest had previously avoided codesharing pacts. The airlines will split revenues from passengers flying the two airlines, and Southwest chief executive Gary Kelly estimated it would generate up to $50 million annually in additional income for each carrier. However, each airline's frequent flyer plan will remain separate and passengers will not earn interchangeable points. That may change, Kelly says.
Kelly says Midway will be Southwest's priority for 2005, and that the airline's May entry into Pittsburgh, once a US Airways stronghold, will be gradual and measured. Pittsburgh is the only city to be added to Southwest's network in the first half of this year, although another may be added before year-end, he says.
The carrier is to take delivery of 29 Boeing Next Generation 737s this year, some of which will be deployed to Pittsburgh. The carrier recently retired its last classic 737-200.
Source: Airline Business
