A Plebeian's Airline Market Analysis

Two days ago, I flew roundtrip on Southwest Airlines from San Francisco to Ontario, CA* (SFO-ONT). Southwest just began operating this route in June 2019, competing with United Airlines, the only airline to previously offer non-stop service between SFO and ONT.

Because United essentially had a monopoly on the route, airfares were previously exorbitant: between $400 and $500 for a roundtrip Economy ticket purchased within two weeks of departure. That's between about $0.55/mile and $0.68/mile. For comparison, in 2018, my average for 41,623 total miles of business travel (fares usually purchased within two weeks) was $0.18/mile. Southwest's entry into the SFO-ONT market promised a fare reduction; and indeed, the roundtrip Economy ticket I purchased from Southwest 18 days in advance was $172. Out of curiosity, I also checked United's roundtrip fares for the same dates. They had dropped to between $200 and $300. The "Southwest effect" had struck again. Behold, the market economy.

Southwest is unlike other U.S. airlines in that seats cannot be reserved. Instead, passengers claim seats on a first-come-first-serve basis upon boarding. Thus, what matters when flying Southwest is boarding order, which is assigned based on check-in order. On full flights, dozens of passengers are at their computers exactly 24 hours in advance of the scheduled departure time to check in and receive a good boarding position. Even if you clicked "submit" just as the second hand passed the 12, you still might end up with, say, boarding position B13 on a very full flight.

Just over 24 hours before each of my scheduled departure times, I prepared to check in as soon as the minute struck. Due to my unfamiliarity with the user interface of the recently-downloaded Southwest app, I missed the 24:00:00 mark by somewhere between 15 and 30 seconds in both cases. Nevertheless, I managed to secure boarding positions A21 and A19. (Positions A1 through A15 are reserved for higher fare classes, which are not always sold, so I did pretty well.)

As I boarded each of the flights, I found out why my boarding positions were so good. The SFO-ONT segment had 44 ticketed passengers for a 143-seat aircraft, and the ONT-SFO segment had 27 ticketed passengers for a 143-seat aircraft. "Which row do you want?" I joked to my coworker. Annoyingly, on the return segment, I took a window seat in the third row, and someone sat in the aisle of the same row. Just...why? When you could take any other aisle seat? Introvert problems.

I have to wonder if the route is profitable for Southwest, or what their strategy is for continuing to operate that route. I assume that Southwest did their homework and conducted plenty of market research before deciding that it would be a good business decision to allocate an aircraft to that route. Also, it's not as if Southwest is offering limited service on this route; they offer four flights each way on weekdays. (United offers six.) There is something to be said for undercutting United; or perhaps Southwest is playing a long game with the ultimate hope that United passengers will gradually shift over; or perhaps Southwest believes the route will grow in popularity. Still, at least in the short term, it seems like a sub-optimal use of an aircraft, especially given that Southwest was hit hard by the grounding of the Boeing 737 MAX. It seems that Southwest should instead want to cover more popular routes previously served by the MAX with whatever non-MAX equipment it has.

It's also possible that the new route hasn't been around long enough for Southwest's market capture to be fully understood or realized. If, for example, the target market of this route is leisure travelers, then it would take more time to observe the popularity of the route. Leisure travelers are more likely to purchase flight tickets several months in advance to get lower fares; perhaps the two months that the route has been operated is shorter than the expected purchase lead time.

But, hey, I'm not complaining. As long as Southwest keeps operating this route, and I continue to travel down to ONT, I'll keep flying with them over United, if for no reason other than the fares are cheaper.







* Yes, Ontario, CA exists--it is a suburban city in the Inland Empire (i.e., San Bernardino/Riverside area) with painfully hot summers, the largest shopping mall in San Bernardino County, no downtown, and no real ability to get around without a car. This begs the question: why would I even go there? Because ONT, the local airport, is one of my clients. The city of Ontario has nothing to offer that would attract me to it otherwise. Consequently, it's probably safe to say that there's no way I'd pay to fly to ONT out of my own pocket, unless the airfare plus the last-mile (or last-dozens-of-miles-to-get-where-I'd-actually-want-to-go-ugh-suburban-sprawl-am-I-right) costs were substantially cheaper than an alternative Southern California airport that might be closer to my destination.