Airline is lone star of American skies

AIR PASSENGERS in the New York area last week had some good news with the report that Southwest Airlines, the biggest low-fare carrier in the United States, would start flying to MacArthur airport on Long Island next spring.

Assuming the plan stays on course, although Southwest will not confirm it, this will be the first time a big cut-price airline will have penetrated the New York metropolitan area, the world's biggest air-passenger market. The arrival of Southwest could cut domestic air fares to and from New York by as much as two-thirds - with the average one-way ticket price to Washington DC dropping from $200 to around $70.

Until now, the Washington-Boston east-coast corridor, with New York at its centre, has remained stubbornly impervious to the projected benefits of airline deregulation: more flights and cheaper fares.

But the manner of Southwest's incursion is instructive. Its first months will be a big test of whether airline deregulation, as it has evolved in the US, benefits air passengers, or simply helps the biggest companies increase market dominance and profits.

As in the few big urban centres where it has a presence, Southwest has sought a base outside the main, favoured airports. The newly upgraded MacArthur airport is about 40 miles east of New York City's most central airport, La Guardia, so passengers face long road and rail journeys to the city. But the missionaries of deregulation at Southwest deny they are shut out of the more convenient locations.

The company's spokesman, Ed Stewart, said Southwest had a policy of seeking airports where traffic was light so delays did not affect their efficient operations, a factor in keeping prices low. The company did not want to fly to the busy airports of La Guardia or National in Washington DC, he said.

Other small airlines have complained that they were prevented from using big airports, but Mr Stewart is positive about industry deregulation. "If there had not been deregulation, we would never have gone outside the state of Texas," he said. Deregulation meant Southwest could "decide to fly to whatever state we want, when we want, at whatever price we care to set". The rest was up to the market.

Mr Stewart said the company could pick and choose from 160 airports which were clamouring for its business, and aimed to start operations at one or two new airports a year.

But there are two reasons why so many airports are crying out for Southwest, or a company like it, for American-style deregulation has not been kind to everyone. Many passengers have seen their services cut or their ticket prices drastically increased as competitors are driven out or persuaded to share the market.

They have also seen the evolution of price structures which favour long advance booking over last-minute travel, penalising not just business travellers but those flying because of family emergencies.

Deregulation may have given Southwest the freedom of the US skies, but it is unique. It is a young company with a new fleet of aircraft and maintenance is simplified because the aircraft are from one manufacturer.

Southwest works out of airports with cheaper fees, to lower profit margins, and can afford to undercut the ticket prices of older, less streamlined carriers. But it has competed by negotiating its way around the big boys, rarely by competing head on. Small airlines that have tried to compete on lower fares have found themselves bought up or squeezed into oblivion.

And the big companies, such as United, American Airlines or USAir, have powerful means at their disposal, starting from the provision of information and the hub-and-spoke system of routes that has developed with deregulation.

Finding objective information about who flies where, when and for how much is an enterprise which could tie up a would-be passenger for hours. Information from travel agents may be influenced by bonuses from carriers, and the services of Southwest and other cheaper companies may not be included on the main internet travel databases.

The hub system reinforces the information bias. The big airlines increasingly have terminals that dispense and display only their flight information. At Atlanta, you are likely to find yourself in a virtual "Delta world", in Miami, it is all American Airlines.

For passengers, whose end destination is not a hub, it necessitates transfers where none had been needed before, extending the length of a journey by several hours. The tendency for one airline to dominate its hub has resulted in monopolies or cartels, which guarantee profits for the dominant airlines and high ticket prices for passengers.