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Southwest's passage clear

Improved infrastructure, and industry changes, lure discount carrier to Logan

By Nicole C. Wong
Globe Staff / February 27, 2009
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When Southwest Airlines Co. entered New England in the late 1990s with flights departing from Providence and Manchester, the low-cost carrier knew it picked the right airports each time its executives drove to Logan International Airport in Boston.

"There was massive construction going on. There were a lot of detour signs," said Steve Sisneros, Southwest's Dallas-based manager of properties who previously was the airline's area marketing manager based at T. F. Green Airport near Providence. "We used to laugh about how the Big Dig was really helping us because the congestion was really a mess."

Since then, the gridlock has loosened thanks to the completion in 2007 of the largest public works project in US history, which took about 15 years to reroute Boston's main highway beneath city streets, add lanes, and create a straight shot to Logan. That weighed heavily on Southwest's decision to launch service at Logan by the fall, and it highlights how both the airline and the airport have evolved over the past decade.

"Boston Logan today is not the same Boston Logan was 15 years ago," said Bob Jordan, Southwest's executive vice president of strategy and planning. "The Big Dig, making it much easier to get to Boston Logan, obviously attracts folks. If we're not there and it's easier to get there, they can't fly us."

Southwest started flying in 1971 as a no-frills airline that beat the big network carriers at keeping costs - and airfares - low and flights on time. Its secret? Flying directly between secondary airports, which offered cheaper landing fees and terminal rents, avoided the logistical hassles associated with connecting flights, and were less congested than big-city airports. That business model grew popular with leisure travelers with more time than money to spare.

Today, with 64 destinations and the most daily domestic departures of any US carrier, Southwest wants to continue growing but is running out of secondary markets to serve. Plus, like all the other airlines squeezed by volatile fuel costs and vacationers' recession-driven cutbacks, Southwest wants to attract more profitable business travelers. That combination has pushed Southwest into busier airports. It plans to launch service at Minneapolis/St. Paul International Airport next month and New York's La Guardia Airport later this year.

Meanwhile, Logan has been investing in ways to shed its reputation as an expensive, inconvenient, and chaotic airport for both passengers and airlines. Over the past decade, the Massachusetts Port Authority, which runs Logan, has poured $4.4 billion into modernizing the facilities and their surroundings. Among other things, it built snazzier food courts, expanded parking, and completed the I-90 Ted Williams Tunnel so a drive between Logan and Boston's Financial District takes considerably less time than before.

Perhaps the most significant changes came between 2003 and 2006, when Logan finished adding a fifth air carrier runway, opened the ultramodern Terminal A, and expanded international Terminal E. The new runway reduces delays by an estimated 32 percent and allows planes to keep taking off on days when strong northwest winds would otherwise leave the aircraft sitting on Logan's tarmac and ripple delays through an airline's national network. The terminal renovations also gave Logan eight additional gates.

Massport highlighted these fixes in a 17-slide PowerPoint presentation it showed to Southwest officials last summer. The slides also pointed out that Boston has the fifth-highest per capita income, which is 37 percent higher than the national average. The area is home to big employers such as State Street Corp., Genzyme Corp., Novell, Fidelity Investments, Raytheon Co., and Thermo Fisher Scientific. And the city's two convention centers brought more than 772,500 attendees to town in 2007.

"We knew strategically Boston would eventually have to be on their scope and radar," said Edward C. Freni, Logan's director of aviation. "We just didn't know when that would happen."

In the meantime, the enhancements enticed other low-cost carriers. JetBlue Airways Corp. arrived in 2004 and became Logan's fourth largest airline based on passengers served in 2008. And Virgin America launched service in Boston this month.

Southwest was considering Logan, too, as it became more worried about growing competition there. Other low-cost carriers flew 26.8 percent of all domestic flights offered at Logan in 2008, which also prodded legacy carriers to aggressively reduce their prices to compete.

"The incentive for folks to drive a bit to come out to the airports that Southwest serves very effectively with low fares does decrease, by sheer Capitalism 101, because you have low fares at Logan as well," said Jordan, the Southwest strategy executive.

So three to four years ago, the airline began what resembled a top secret investigation at Logan. Sisneros, the carrier's manager who assesses airport real estate, flew in three times and wandered through the airport alone to size up the ticket counters and gates, unbeknownst to Massport. With a computer bag in one hand and a pad of paper in the other, he jotted down notes on how big each ticket counter was, whether a particular gate looked "customer friendly," whether a vacant gate was in a terminal where rent cost twice as much as in another terminal, which concessions were nearby, and how easy it was to access the security checkpoint.

He concluded each half-day scouting trip by timing how long it took to leave the airport. Sisneros wouldn't divulge his specific observations, but said, "I noticed the driving situation in Boston had gotten better."

Then around September, as US airlines slashed seat capacity and eliminated routes to grapple with the summer's record-high fuel prices, Southwest's interest in Logan intensified. Senior leaders gave Sisneros the go-ahead to contact Brian R. McMorrow, Massport's aviation chief financial officer, to pinpoint how much it would cost to operate at Logan. Sisneros swore him to secrecy. For months, the only other person allowed to know of their discussions was McMorrow's boss, airport director Freni.

The trio found Southwest an affordable ticket counter and two gates in Terminal E. After adding in landing fees, it will cost Southwest a bit less than $13 per passenger to operate at Logan, Freni said. While that's more than double the airline's average of $5 to $6 per passenger, Southwest said it's betting it can operate Boston flights profitably.

"We just think this is going to be a home run," Jordan said.

Nicole C. Wong can be reached at nwong@globe.com.

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