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Watch the trailer at: http://www.foxsearchlight.com/theclearing/index_nyt.html \----------------------------------------------------------/ Southwest Comes Calling, and a Race Begins May 10, 2004 By MICHELINE MAYNARD PHILADELPHIA, May 9 - Southwest Airlines Flight 741 took off for Chicago a minute before 7 o'clock Sunday morning, inaugurating a critical city for Southwest, the nation's largest low-fare carrier, and setting off a flashpoint for the brutally competitive airline industry. While depicted as a threat to the struggling US Airways, which uses Philadelphia as one of its three hubs and operates 68 percent of its flights from here, Southwest's presence has set in motion a battle for passengers between low-fare carriers and traditional airlines that epitomizes what is going on nationwide. Now that Southwest has started service, Philadelphia residents can soon expect Frontier Airlines to arrive, with low-priced service from the West. Delta Air Lines, meanwhile, has expanded flights to Philadelphia from Atlanta, a route where it competes with AirTran, another low-fare airline that preceded Southwest here, as did A.T.A. Airways and America West. "Is that where the new front is? Absolutely," said Robert Roach, vice president for transportation at the International Association of Machinists and Aerospace Workers, whose union represents US Airways mechanics. "This one brings the competition to a new level," said Philip A. Baggaley, the airline industry analyst with Standard & Poor's, which downgraded US Airways last week, giving it the weakest rating of any major carrier. Philadelphia is proof that no airline should consider itself safe anywhere, no matter how dominant its operations. "Given the overall financial shape of the industry, I don't think you can argue that anyone is controlling any market," said Doug Blisset, vice president for network analysis at Delta Air Lines. US Airways executives have expressed a mix of trepidation and confidence in the face of the competitive onslaught. The airline warned last week that increasing competition from low-fare airlines put it in danger of a second bankruptcy, unless it could win a third round of concessions from recalcitrant union members. But executives at US Airways also maintain that the fare wars that have erupted here in Southwest's wake will serve to attract more passengers. "You can expect to see Philadelphia grow," said B. Ben Baldanza, US Air's executive vice president for marketing. But competitors think US Airways' long hold here will probably be shaken, now that passengers have alternatives. "Everybody wants a bite out of them," said David Neeleman, chief executive of JetBlue Airways, the low-fare carrier which as yet does not serve Philadelphia. Still, the war began today with just a few shots. Southwest, the sixth-largest airline over all, started its service with 14 daily flights to six cities. That is only a fraction of the 375 flights a day that US Airways offers from here, including a bevy of international flights. (Southwest does not fly outside the United States.) Gary D. Kelly, Southwest's chief financial officer, said its modest initial approach in Philadelphia was similar to what it had done in other markets. "We've had our Philadelphias before," he insisted. Yet he acknowledged that the stakes this time were tremendous for all airlines, which are struggling to deal with soaring jet fuel prices, up more than 40 percent the last year, and to respond to stiff competitive pressures. Indeed, Southwest is wasting no time increasing service, which will reach 28 flights a day to 12 cities by July. Since last fall, Mr. Kelly said, "the airline industry has continued to perform poorly from a financial perspective and energy prices have risen dramatically and stubbornly." Along with that, revenue for the nation's airlines is not rising because of the influence of Southwest and its low-fare rivals, which now have one-quarter of all domestic flights. If the enthusiasm among passengers that greeted Southwest's first flights is any indication, the airline is clearly welcome. Passengers were already lined up to check in at Southwest's ticket counter, festooned with lavender, red and gold balloons, at 5:05 a.m. The travelers looked like a cross section of Southwest's customer base, which is primarily leisure passengers with some thrift-minded business fliers mixed in. Employees dressed in golf shirts and khaki pants or shorts scurried to assist them. Three generations of Marie Geiger's family - her husband, Harry; daughter Susan and son-in-law Michael Chatary; and the three Chatary children - were on hand two hours early for their trip to Orlando. The family, who live in Philadelphia, bought tickets for $49 each way on Saturday. Asked why the family was traveling on Southwest, Sayla Chatary, age 7, piped up, "It's cheaper." Mr. Chatary said a similar trip on US Airways would have cost at least $200 a person, more than the family was willing to spend at the last minute. According to BACK Aviation, an industry consulting group, US Airways resisted lowering its highest fares on competing routes from Philadelphia until the last minute, still charging more than $1,100 for walk-up fares to Phoenix a week ago. But it has since begun offering deals from Philadelphia, as billboards on the highway to the airport attest. Meenu Guptu, a computer consultant who lives in Wilmington, Del., had been driving 90 miles to Baltimore to catch Southwest flights. With the airline now 30 minutes away in Philadelphia, Ms. Guptu said she would travel more frequently. She took the inaugural flight to Chicago, where she planned to spend the day with her mother and planned to return Sunday night. While she travels on other airlines, including US Airways, "if Southwest is heading that way, I'm flying it," Ms. Guptu said. Kanae Tsubaki of Philadelphia, traveling with her 5-year-old son Hiromi, had a more personal reason for choosing Southwest: her admiration for its colorful founder, Herbert D. Kelleher, who was born across the Delaware River in Haddon Heights, a suburb in Camden County, N.J. After reading a book about him, "I wanted to fly Southwest" as soon as it came to Philadelphia, she said. Despite passengers' enthusiasm, all did not go smoothly in the early hours. Southwest's ticketing kiosks were out of service, forcing airline personnel to direct the technology-savvy fliers who wanted to use them to an express check-in lane whose line stretched back to the door. Likewise, a computer problem at Southwest's curbside baggage stand meant some travelers had to carry their bags into the terminal. But by 7:30 a.m., the first three flights had departed, and airline personnel took a break to await the first Philadelphia arrivals due later in the morning. John Minor, Southwest's station manager in Philadelphia, said the real test for the airline would come this summer, when air travel would be at its peak. Glancing at Southwest's ticket counter, wedged into a corner of Terminal E across the escalator from Delta, Mr. Minor said the airline would probably need more space. "If only we can get Delta to go away," he joked, before heading off to tote a passenger's bag. No doubt US Airways wishes the same of Southwest. But Mr. Neeleman said he expected a lengthy confrontation here, because of the significance that Philadelphia has assumed for all involved. "They are not going to retreat out of Philly. They'll pull out when they die," he said. Last week, in fact, US Airways said that it planned to cut back on operations at its hub in Pittsburgh to deploy planes here and reorient its operations to offer more direct flights, mirroring those operated by Southwest and other low-fare carriers. Mr. Kelly of Southwest said the heated challenge that US Airways faced in Philadelphia proved that all airlines, including his, had to be constantly vigilant. "The competitive landscape can change literally overnight, by the fact that you can direct airplanes to new airports" assuming gates are available, he said. Yet, Mr. Blisset at Delta said in the end the competition was healthy even if the industry was not. "As carriers continue to grow, opportunities to grow will overlap with each other," he said. http://www.nytimes.com/2004/05/10/business/10air.html?ex=1085195472&ei=1&en=7b1870b5a80d5563 --------------------------------- Get Home Delivery of The New York Times Newspaper. 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