Southwest starting New York flights — and could bring lower airfares

LaGuardia Airport is the smallest of the three major airports in the New York area, with just two main runways. Planes often sit in long lines on the tarmac, waiting their turn to take off.

So why would Southwest Airlines, a carrier that boasts about its on-time prowess, want to go there? In many ways, because it has to.

Southwest prospered by offering low fares to leisure travelers whose only other affordable option was a car trip. It flew primarily to America's secondary airports where costs are low and productivity is high because incoming planes can land, drop off passengers, take on the next group and get back in the air quickly.

On Sunday, Southwest starts service at LaGuardia, one of the nation's most congested airports. This should bring cheaper ticket prices to the New York area. But the move is also part of a risky transition that Southwest knows it has to make to win the loyalty of business travelers who increasingly will dictate its future prospects for success.

Southwest started flying in 1971 with three planes. Herb Kelleher, the garrulous, chain-smoking co-founder, fought in court and in the air against bigger airlines that tried to run him out of business.

Southwest didn't offer the amenities found on other airlines, but it outlived early rivals such as Braniff by sticking to a core philosophy: Give people low fares and great service.

The Dallas-based carrier still sees itself as an underdog today, even as it serves 65 cities and carries more than 100 million U.S. passengers per year. There are still no first-class cabins and no assigned seats on Southwest, giving it the air of a carrier for penny-pinching vacationers.

"We're very dependent on business travelers, so we're not a leisure airline like some of our smaller competitors are," CEO Gary C. Kelly countered in an interview. He says company surveys show that in normal times at least 40 percent of his customers are traveling on business.

Airlines covet business travelers because they make repeat trips and often pay higher fares for booking at the last minute.

Southwest needs that revenue now. The Dallas-based airline has been profitable for 36 straight years but has been in the red since last fall. Traffic is down and costs are rising.

While it's cutting flights across its system, Southwest is also entering New York and three other big cities, including Boston's Logan Airport.

Robert Crandall, who competed against Kelleher when he ran American Airlines in the 1980s and '90s, said Southwest has stuck to a well-defined business model of low fares and low costs at secondary airports.

"Going into LaGuardia is a change to that model," Crandall says, "but they've decided they don't have any choice — they need the (passenger) volume to grow."

Kelly has been fine-tuning the Southwest model since becoming CEO in 2004. In pursuit of business travelers, he bent the traditional "first come, first served" seating rules with "Business Select." Passengers pay a few bucks more to get a spot at the front of the boarding line, an extra frequent-flier award and a free drink. He also pushed Southwest into the kind of huge airports it once spurned. The strategy has worked in Denver and Philadelphia, where Southwest has grown rapidly.

Despite the notorious delays in New York, Southwest officials believe they can turn around incoming planes in 30 minutes, close to its nationwide average. That's important because Southwest keeps costs down by getting the most use out of its planes — on average, they make six flights and spend 12 hours in the air each day.

Rick Seaney, chief executive of FareCompare.com, studied fares in Denver before and after Southwest returned to the market in January 2006. He said United, then the dominant carrier there, cut its average cheapest round-trip fare out of Denver by one-third in the first year after Southwest said it would serve the same airport.