Airline Weekly - January 9, 2012

Cover Story

Dallas in Wonderland: The hometown carrier is bankrupt, but DFW is buzzing with activity

There’s nothing spectacular or eye-catching about the headline traffic figures at DFW airport—through the first 11 months of 2011, passenger counts increased just 2% y/y. But this masks a sudden burst of dynamism and change at America’s fourth busiest airport, which trails only Atlanta, Chicago O’Hare and Los Angeles in terms of annual passenger traffic—and which serves America’s fourth largest metro area (after New York, Los Angeles and Chicago). Indeed, there’s something doing in Dallas.

DFW, to be precise, actually lies between the cities of Dallas and Fort Worth, the western part of a sprawling metropolis that’s now home to more than 6m people, up from less than 4m in 1990. Despite this surge in population, however, airport traffic has remained largely stagnant, topping 50m annual passengers for the first time way back in 1992 and hitting an all-time high of 61m way back in 2000, only to fall back to just 57m in 2010.

Why the decade-long malaise? Lofty fuel prices, which stunted traffic growth throughout the U.S., are of course one critical factor. Another is American’s repeated downsizing. And still another is the fact that Delta closed its DFW hub in 2005. Southwest, a growth engine at many other U.S. airports for much of the past decade, shuns DFW for the much smaller Love Field. In addition, Love Field saw some of its regulatory shackles removed in 2006, thereby putting additional pressure on DFW’s traffic volumes. In the meantime, other LCCs largely stayed away—the hometown airline American still accounts for 86% of all DFW traffic. Finally, DFW isn’t a particularly busy airport for international traffic (Air France doesn’t even fly there, for example), and international flights are responsible for much of the growth at U.S. airports in recent years.

A lot of this, however, is changing. In September, Emirates surprisingly named Dallas-Fort Worth one of its new markets for 2012, with daily B777-200LR nonstops to Dubai launching next month. Significantly, the fast-growing longhaul airline chose DFW before even Chicago and Washington. Last year, Qantas moved its San Francisco flights to Dallas-Fort Worth, never mind that northern California draws many more tourists than northern Texas. But unlike San Francisco, DFW is oneworld country, and Qantas is now planning a revenue-sharing joint venture with DFW-based American. This will make its new DFW-Brisbane-Sydney service, launched in May, all the more likely to succeed, thanks to shared financial risk... (415 of 1,660 words)

Also Inside this Issue:

For most of the world’s airlines, January is the slowest month of the year, a post-holiday hangover period. For many folks, there’s neither money nor energy left for leisure travel following weeks of frenetic holiday shopping.

Fortunately, December seemed to be a good month for many carriers, as documented by BA/Iberia, US Airways, WestJet, Norwegian and others. Fuel prices ended the year at uncomfortably high levels, but capacity discipline continues to do wonders for unit revenues. In the U.S., meanwhile, a strengthening job market and recovering economic growth helped turbocharge demand.

Several years of strategic maneuvering have also positioned many airlines to better weather the ups and downs of supply, demand and input costs. US Airways is a good example of that, having fortified its network by concentrating nearly all flights in hub markets where it commands some level of pricing power. It certainly holds such power at Washington’s business-heavy Reagan National airport, where a big expansion is under way.

It’s hard to mention expansion without the conversation eventually turning to Emirates. Sure enough, the dynamo of Dubai announced another new destination last week: Ho Chi Minh City in Vietnam.

Expansion to and from Europe might be less brisk with the E.U.’s carbon trading system now applying to airlines. Carbon permits are cheap for now, but they’re nonetheless one more hurdle to leap.

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