Wednesday, Oct. 29, 2003 | 11:14 a.m.
Tourism industry professionals are split over how Southwest Airlines' decision to begin service to Philadelphia next year will affect competition between Las Vegas and Atlantic City.
Southwest, which hauls more gamblers to Las Vegas than any other airline, announced Tuesday that it would begin service to Philadelphia International Airport with up to 14 flights a day beginning in May.
Some think the arrival of Southwest in Philadelphia will provide new low-cost options to tourists in the region that could give Las Vegas a boost over Atlantic City. Others say Southwest's arrival in Philadelphia is irrelevant to the competition between two of the nation's major gaming centers, since nonstop service already exists between Philadelphia and Las Vegas on two other airlines.
But all of the experts concede that an important piece of the puzzle is still missing -- whether Southwest will offer nonstop flights to Las Vegas.
In a teleconference, Southwest co-founder Herb Kelleher gave no clues as to whether that would happen after the Dallas-based airline announced that Philadelphia would be the 59th city and Pennsylvania the 31st state it would serve.
Kelleher played it so close to the vest that he dodged questions on whether the service to Philadelphia would be comprised of more short-haul or long-haul flights, although he did confirm that there are no operational issues at the Philadelphia airport that would preclude cross-country flights.
He said schedules and fares for Philadelphia would be announced in December.
Southwest already is the busiest commercial passenger carrier at McCarran with an average 175 round-trip flights a day in and out of Las Vegas.
Tuesday's announcement was one of the most anticipated in the industry since it was the first entry to a new city for Southwest since the Sept. 11 terrorist attacks. Southwest announced service to Norfolk, Va., prior to the attacks and made good on that promise in the aftermath.
The Philadelphia announcement was filled with intrigue and aviation experts will continue to ponder Southwest's strategy while Nevadans consider the prospect of having the nation's most popular discount flier in a market that is a key feeder to Atlantic City.
Philadelphia, the largest city in Pennsylvania, has a population of 1.5 million people. The metropolitan area surrounding and including the city -- including Wilmington, Del., Atlantic City and Camden, N.J. -- is considered by the Census Bureau to be the sixth largest metro area in the nation with 6.2 million people.
The Philadelphia airport is the 19th busiest airport in North America with 24.4 million passengers using it in 2002.
The Atlantic City Convention and Visitors Bureau says it takes about one hour to drive from downtown Philadelphia to Atlantic City on the Atlantic City Expressway.
"It really won't have much impact on Las Vegas unless we get nonstop flights," said Bill Mahaffey, manager of transportation and marketing for the Las Vegas Convention and Visitors Authority. "We can't help but wonder if we're going to be a part of that route structure. If they came in with 10 flights a day, sure, that would make a difference. But their normal trend is to start off with something small and then build off it. Sometimes they even start off with Saturday-only service and grow from there."
Mahaffey pointed out that there already are nonstop flights between Las Vegas and Philadelphia. US Airways has five nonstop round trips a day while America West Airlines, which has positioned itself as a low-fare operator, has two a day.
Analysts say the arrival of Southwest in the Philadelphia market could push prices down for the other carriers, a phenomenon that has occurred in other markets the airline has entered and documented as "the Southwest effect."
If airfare prices fall in Philadelphia, it could bode well for Las Vegas, a casino company spokesman said.
"Cross-market play is one of the big drivers of our revenue growth," said Gary Thompson, a spokesman for Harrah's Entertainment Inc., Las Vegas. "For our customers in the Philadelphia area, their home market would be the Atlantic City casinos. If access were to become easier to Las Vegas, we could become a more appealing place where they can spend three or four days."
Harrah's, which operates Harrah's Las Vegas on the Strip and the Rio hotel-casino in Las Vegas, also owns Harrah's Atlantic City and the Showboat hotel-casino on the Boardwalk.
"Las Vegas is a destination resort," Thompson said. "Atlantic City is still evolving into one. It still doesn't have the number of hotel rooms it needs to be a true destination resort. Even with the Borgata (a new resort opened this year by MGM MIRAGE and Boyd Gaming Corp.), there are only about 13,000 rooms. Compare that with Las Vegas' total (nearly 130,000). In many respects, Atlantic City is still a day-trip market and the room rates are much higher there as a result."
Aviation consultant Mike Boyd expects a Las Vegas-Philadelphia nonstop flight will occur eventually -- but possibly not among the first 14 promised by the airline.
"I think they'll go into Florida first but, sure, Las Vegas is there. Las Vegas is one of the first markets they usually go into (with nonstop service)," said Boyd, who heads the Boyd Group, Evergreen, Colo.
Boyd is among those contemplating the intrigue of the Southwest move. Many analysts had speculated that Southwest would land in Pennsylvania -- but most thought it would be in Allentown, less than an hour's drive from Philadelphia.
"This is an unusual move for Southwest," Boyd said. "They normally avoid heavily congested East Coast airports. If you look up 'heavily congested East Coast airport' in the dictionary, it says, 'See Philadelphia."'
Southwest had been courted by Allentown, but Philadelphia and Pittsburgh became options when US Airways asked those two cities for airport lease concessions and threatened to pull out of its Pittsburgh hub.
Southwest's move into Philadelphia will now require US Airways to compete vigorously to maintain its market share there, which US Airways executives Tuesday said they would do.
But Boyd sees even more corporate intrigue. He believes Southwest made its move on Philadelphia as a pre-emptive measure against JetBlue, which has become Southwest's biggest competitive worry.
"JetBlue recently announced they had ordered a bunch of planes," Boyd said. "They have to put them somewhere. I think Southwest moved quickly on Philadelphia to head off JetBlue. US Airways is just an innocent bystander in all this."
JetBlue also announced Tuesday that it is pulling out of Atlanta, where Delta Air Lines has its largest hub and discounter AirTran Airways is strong.
Boyd said there could be negative implications for Philadelphia if Southwest begins to dominate.
"They shouldn't be dancing in the streets of Philadelphia just yet," Boyd said. "If they lose a big portion of US Airways, what have they gained?"
Philadelphia is one of US Airways' international gateways and the airline flies 65 percent of the city's passengers.
But Philadelphia's airport manager is clearly pleased with the Southwest decision. The company initially will occupy four gates and employ between 100 and 120 people there.
"As far as we're concerned," said City of Philadelphia Director of Aviation Charles Isdell during the Southwest conference call, "we now have the holy grail."
archive
