Final frontier

 They call Denver the Mile High City because of its Rocky Mountain surroundings. It could be also called that because it’s one of the very last remaining fortress hubs. Now though the enemy is at the gates or will be soon when Southwest takes on Denver early next year. Denver had long been one of those big airports where conventional wisdom had it Southwest would never go. Denver, they said, was like DFW or Atlanta: just not in line with Southwest’s philosophy of going to a secondary airport (look at Love Field in Dallas or Birmingham, in northern Alabama, a few hours’ drive from Atlanta). But Southwest has been taking on big city airports for a while. Remember it went to Philly in spring ’04, taking on monopolist US Airways. 

Denver isn't a monopoly though because decade-old discounter Frontier co-exists there with United, and it is Frontier, not United, that Southwest threatens, Merrill Lynch analyst Mike Linenberg says. At Denver, United’s approximate 57% market share is followed by Frontier’s, which has a 19% share of Denver traffic. Southwest has a lower unit cost (pennies per seat mile, or CASM) of 7.8 cents versus 8.9 cents for Frontier, and a much stronger balance sheet with $2.3 billion in cash versus $174 million for Frontier at 30 June, notes analyst Jim Parker of Raymond James & Associates.

Frontier knows it faces a challenge and within days of the Southwest announcement had said it would beef up frequencies from Denver to each of its five top destinations by January, including Dallas/Fort Worth, Phoenix, Las Vegas, Salt Lake City and Chicago Midway, all Southwest cities. Frontier will also add a seventh daily flight between Denver and Las Vegas, one of Southwest’s busiest cities. Southwest briefly served Denver in the early 1980s and it is one of the few cities that the airline has left. Two decades ago however Denver was another far less efficient airport and United wasn't the only network carrier there: Continental was a major player. Now, says Southwest, Denver’s a more efficient and less expensive airport.