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Southwest poised to upset its New York rivals

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Written by editor

New Yorkers who make frequent flights to Chicago and Washington, D.C. are about to find themselves paying less for airfare.

New Yorkers who make frequent flights to Chicago and Washington, D.C. are about to find themselves paying less for airfare.

On Tuesday, Dallas-based Southwest Airlines Inc. said it would begin eight daily nonstop flights from New York City’s LaGuardia Airport to Chicago Midway and Baltimore-Washington airports, beginning June 28.

The low-cost carrier also offered historically low ticket prices on its LaGuardia routes, with one-way flights to Chicago for $89 and to Baltimore-Washington for $49. That’s bound to put pricing pressure on rivals like AMR Corp.’s American Airlines and UAL Corp.’s United and low-cost carrier JetBlue Airways Corp.

Many carriers out of New York City have offered similar fares during sales over the past three months to increase demand during the recession, but the “Southwest effect” of bringing permanently lower prices is well known across the industry, according to analysts.

“They most definitely bring in a lower-cost structure,” said Vaughn Cordle, chief analyst with AirlinesForecast LLC.

More groundbreaking have been Southwest’s walkup fares for LaGuardia, priced “substantially lower” than competitors at a range of $225 to $425, according to Rick Seaney of Farecompare.com.

“This may be in part to compensate for the legacy airlines’ advantage with frequent nonstops to several popular business destinations out of New York, where Southwest must connect with a one-stop,” Seaney said.

Shares of Southwest were down 7% at last check to $6.94, due to pressure from a declining wider market.

Flights from LaGuardia will continue on to Albuquerque, N.M.; Austin, Texas; Denver, Houston and Ft. Lauderdale, Fla., among other cities. Other airlines that fly to those destinations from New York with single stops also will feel the pinch, said Terry Trippler of the consultancy Trippler Associates.

“Southwest have less than a 30-minute turnaround” for flights that land to pick up more passengers before continuing on to their final destination, and that’s a well-known competitive advantage, he commented.

“They will have an even greater impact than people may think,” Trippler added.
Southwest announced late last year that it would purchase LaGuardia time slots from bankrupt ATA.

At the time, Chief Executive Gary Kelly said he was confident his airline could maintain its high standard for on-time efficiency despite the airport’s reputation as a traffic bottleneck.