Bloomberg News

Virgin America Plots American-Southwest Showdown in Texas

March 05, 2014

Virgin America Plots Texas Showdown With American-Southwest

A Southwest Airlines Co. Boeing 737-7H4 plane taxis next to a Virgin America Inc. jet. Photographer: Patrick T. Fallon/Bloomberg

Virgin America Inc., the discount carrier partly owned by U.K. billionaire Richard Branson, wants to step up competition with American (AAL:US) Airlines Group Inc. and Southwest (LUV:US) Airlines Co. on their home turf in Texas.

The plan pivots on acquiring two gates American is selling at Dallas Love Field, a Southwest bastion, Virgin America said today. The Burlingame, California-based airline would exit the region’s major airport, Dallas/Fort Worth International, and fly from Love to American hubs in Chicago and Washington.

Virgin America’s gambit would create a competitor at an airport where Southwest commands about 97 percent of travelers and that is less than half as far from downtown Dallas as D/FW, American’s largest hub. American fought for years to retain Love Field’s nonstop-flight limits before a 2006 accord to lift those curbs later this year.

“We can make a compelling case that having Virgin America at Love Field is very good for business fliers out of Dallas, as well as people coming into Dallas,” Chief Executive Officer David Cush said in an interview. Virgin America offers “a very different product” than low-fare Southwest, Cush said.

In its biggest expansion since starting service in 2007, Virgin America would add flights to New York’s LaGuardia, Washington’s Reagan National and Chicago’s O’Hare airports from Love Field, where Southwest’s headquarters is located. Reagan and O’Hare are hubs for Fort Worth, Texas-based American.

More Service

Virgin America now offers three daily flights between Dallas-Fort Worth and Los Angeles and San Francisco, and plans to increase those frequencies after relocating to Love Field.

That shift isn’t guaranteed. Southwest and Atlanta-based Delta Air Lines Inc. have said they will bid for the Love Field gates being divested by American, which has about 81 percent of D/FW travelers.

Southwest now controls 16 of the 20 gates. Winning two more would allow the addition of 20 daily round trips to 11 new markets, said Whitney Eichinger, a Southwest spokeswoman.

Delta “welcomes the opportunity to compete with Southwest and Virgin America” at Love Field, according to a statement today. Adding the two Love Field gates would push daily departures to 18 from five now, and expand service to five destinations instead of just Atlanta, Delta said. The airline also has 45 D/FW flights.

American declined to comment because the Love Field gates haven’t been sold, said Casey Norton, a spokesman for the airline who works at public relations firm Weber Shandwick.

Discount Competition

Virgin America’s Cush said he is “confident we ultimately will get” the gates, satisfying U.S. regulators’ desire to increase low-fare competition.

Virgin America recently won rights to operate six daily round trips at LaGuardia and four at Reagan. Like the Love Field gates, the so-called flight slots were among assets American agreed to sell to settle a U.S. Justice Department lawsuit opposing its merger with US Airways Group Inc.

In addition to the Love Field divestitures, American also must sell two gates at O’Hare, Boston Logan, Los Angeles International and Miami International airports. Virgin America “may be interested in additional facilities, at Chicago in particular,” Cush said.

Under the lawsuit settlement, American says it has 180 days from the Dec. 9 merger to shed the gates, and the Justice Department must approve the buyers.

Dallas Difficulties

If Virgin America fails to secure the Love Field access, it would retain its D/FW flight schedule and use the Reagan and LaGuardia slots to fly to other cities, Cush said. Adding destinations from Dallas-Fort Worth is “extremely difficult” because American offers many more flights each day as it connects passengers through the hub there, Cush said.

The jockeying over access to Love Field shows airlines’ interest in operating from an airport only about six miles (10 kilometers) from downtown Dallas, the heart of the nation’s fourth-largest metro area based on population. That service would be more convenient for business travelers in several areas of the city, including downtown.

Most of Virgin America’s new Dallas service would begin in October, when the 1979 federal law restricting nonstop service from Love Field to Texas and eight other states expires. The carrier will announce full schedules once it acquires the gates there. The Dallas-Chicago flights would begin in early 2015.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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Companies Mentioned

  • AAL
    (American Airlines Group Inc)
    • $40.17 USD
    • -1.51
    • -3.76%
  • LUV
    (Southwest Airlines Co)
    • $28.9 USD
    • -0.34
    • -1.18%
Market data is delayed at least 15 minutes.
 
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