Phoenix Sky Harbor International Airport

Southwest continues to show conservative approach to growth with deferral of 737s

Southwest’s move to defer deliveries of 30 Boeing 737-800s scheduled for 2013/14 to 2017/18 is a concerted effort to continue a disciplined approach to capacity management and a way to accelerate the company’s often-touted goal of achieving a 15% return on invested capital that it enjoyed in the 1990s. The move illustrates Southwest’s classic conservative approach in running its business as it believes an uneasy economic recovery and volatile fuel prices are creating uncertainty in how the airline business will evolve during the next couple of years.

The carrier first committed to the 737-800 in Dec-2010, opting to substitute 20 of the larger 175-seat aircraft for 137-seat 737-700s it had on order. Southwest expanded its Next Generation 737 order a year later and now has 73 737-800s on firm order with Boeing, plus an additional five leased from a third party scheduled for delivery later in 2012.

Frontier encouraged by its strategy of dodging Southwest in Denver, but looks for new bases

Frontier Airlines believes its tactic to target markets from its main Denver base not served by rival Southwest Airlines remains the best method in fortifying its major hub. But at the same time Frontier is looking to lessen its reliance on a single hub and is exploring new bases, two of which are opening this summer supported by a single aircraft.

Southwest returned to the Denver market dominated by United and Frontier in 2006, and since that time has built its presence at the airport to 159 daily departures to 51 destinations. Based on US Department of Transportation (DoT) data, Southwest had a 22.5% market share at the airport from Feb-2011 to Jan-2012.

Union support of US Airways' quest to take over American is a first step in a long merger process

Public support by American’s unions of a merger with US Airways is an unprecedented move, and reflects the years-long frustration that has built among American’s employees towards previous and current management. The employees see an opportunity to start fresh, and work with a management team that will cease blaming labour for the carrier’s plight. US Airways sees an opportunity to completely overhaul American’s lacklustre revenue management that has consistently produced results that pale in comparison to its peers. But many questions remained unanswered over the perceived strength of a combined network, and many tasks have to be completed before a merger gets remotely close to reality.

US Airways formally declared it was examining its options regarding American earlier this year, and tactically began courting the carrier’s unions to gain support for a merger of the two companies that would entail US Airways’ management taking charge of the new American. Unlike US Airways' attempt to take over Delta Air Lines in 2006 when it was restructuring under Chapter 11 and Delta employees rallied to block the deal, American’s employees are exhausted with methods management has adopted in negotiating new collective bargaining agreements during the last few years.

Frontier continues to scale back Milwaukee as it concentrates on Denver and axed AirTran markets

Frontier is continuing to pull back capacity at its Milwaukee hub with six more routes to be cut next month. Once considered a key hub for the combined operations of Frontier and Midwest Airlines now unified under the Frontier brand, Milwaukee’s importance eroded last year after Frontier embarked on a network revamp as part of a USD120 million cost improvement programme to restructure Frontier to regain lost profitability.

Milwaukee has taken the brunt of the network changes resulting from the cost cutting. Daily departures offered by Frontier from the airport will plummet to only 18 from mid-April of this year. This represents a 73% drop from the 67 departures from Milwaukee operated during the peak summer period of 2011 and a 44% drop compared to the 32 departures currently operated. Midwest had an even bigger operation at Milwaukee before it was sold to Frontier parent Republic Airways Holdings in 2009.

Phoenix Sky Harbor airport slips down rankings but traffic is returning

Phoenix is a US large city that has shown spectacular growth in the past half century. In 1960, it had a population of 726,000, a number that by the 2011 census had grown to more than 4 million. It has displayed double-digit growth in every census year and in the 1990s trailed only Las Vegas in expansion.

How consolidation has changed the US airline industry; more to come - US Airways' Doug Parker

Judging from press reports, the greatest insight during the US Airways Media Day last week was something US Airways Chair Doug Parker has been saying for years - there is probably one more big merger move left in this round of US airline consolidation. But there were two greater nuggets during the event - the fact that the world remains unconvinced that the US airline industry has really changed and those changes mean the need for more infrastructure may be completely overstated.