American merger might have impacted Southwest's exit

In March, the arrival of Southwest Airlines (NYSE: LUV) in Branson was celebrated with fanfare worthy of a championship sports team. Gov. Jay Nixon and Bass Pro Shops founder Johnny Morris were among the welcoming committee at Branson Landing.

Nine months later, the party is over, and the low-fare carrier has its bags packed by the door.

Southwest announced Dec. 5 it would discontinue service in Branson on June 6. The planned exit comes alongside decisions to stop flying out of Key West International Airport in Florida and Jackson-Evers International Airport in Jackson, Miss., and it might have been brought on by a lack of available planes, according to one industry expert.

Aviation analyst Michael Hynes of Branson-based Hynes Aviation Service Industries said the recent merger between American Airlines Group Inc. (Nasdaq: AAL) and U.S. Airways was likely a key factor for Southwest because he said gates on the East Coast have opened up and Southwest has a plane shortage.

“With the merger between American and U.S. Air, Southwest … needs airplanes to go to those gates,” Hynes said.

On the same day Southwest delivered its news to Branson, the Dallas-based carrier announced it had picked up 12 takeoff and landing slots at New York’s LaGuardia Airport divested by American Airlines. In addition, Southwest gained permanent control of 10 takeoff and landing slots it currently operates under a lease from American, and it plans to begin its new service at LaGuardia in May.

However, Southwest spokesman Dan Landson said the decision to leave Branson was made before the company knew about the slots opening up in New York.

“Branson has been good to us, and so it was a tough decision,” Landson said, noting several factors related to profitability were considered, though he declined to disclose the key metrics. “Every airport has its own unique value, and with Branson specifically, we knew our long-term goals were not going to be accomplished.”

Hynes said other slots on the East Coast should open up, too, but Landson said nothing had been determined as of Dec. 11.

Branson Airport Executive Director Jeff Bourk declined an interview for this story, but in provided statements he said BKG performed admirably for Southwest.

“The load factors for the period were slightly above system average,” Bourk said via email. “It appears that Southwest’s decision was based on many factors not related to Branson’s performance. Other factors include the small station size at Branson, the fact that the Southwest Airlines fleet continues to shrink and gate opportunities at large airports created by the merger of U.S. Airways and American Airlines. These factors and others are putting great demand on a shrinking Southwest fleet.”  

According to the Bureau of Transportation Statistics, Branson’s load factors on Southwest’s planes were 81.2 percent, indicating the airport filled eight out of 10 seats the airline flew out of BKG. The airline’s systemwide average this year was 80.35 percent.

About a year ago, Hynes forecasted Branson couldn’t increase its passenger volumes by as much as the airport was predicting due to a shortage of available Southwest planes on the horizon. Since Southwest’s $1 billion acquisition of Orlando, Fla.-based AirTran in May 2011 – how Southwest entered the Branson market – it has agreed to sell off AirTran’s DC-9 planes in favor of flying its larger 737s. With Southwest’s commitment to turning Houston’s William P. Hobby Airport into a South American hub, the airline wouldn’t have a surplus of planes to help grow Branson even if its routes are filled with passengers, Hynes said.

During its brief association with Southwest, BKG officials had marked the red-bellied planes as the answer to the airport’s well-publicized financial troubles. When airport officials requested $23 million from investors in late 2012, they projected a roughly eight-fold increase in revenue and enplanements, or the number of boarding passengers, through 2022 with Southwest air service in place.

Hynes said the loss of Southwest is not necessarily the death knell for the cash-strapped, 4-year-old airport. Its revenue and enplanement gates outlined through its funding and forbearance agreement with bondholders are now effectively null and void, Hynes said. While the airport still needs operations funding from investors – he estimates between $3 million and $5 million in 2014 – Hynes said BKG has the opportunity to pursue new airlines.

“In some respects, I think Southwest’s presence in Branson deterred anybody else from wanting to come in to Branson and compete with Southwest head to head,” Hynes said. “I don’t think this is the end of the world. The airport is not going to close.”

The airport now has a proven track record in Southwest’s markets, he said.

“Somebody else could come in and take over without having to develop the market,” Hynes said. “With the changes we’ve seen with the major carriers – United, Continental, American, U.S. Air – a lot of the minor league, feeder airlines have had their contracts cancelled. A lot of them have excess airplanes and crews, and they need to find some place to serve.”

Springfield-Branson National Airport spokesman Kent Boyd said he wasn’t surprised to learn about Southwest pulling out.

“We knew, based on historical standards that Southwest has used, Branson didn’t seem like a fit,” Boyd said, noting the airline’s bread and butter is markets with 1 million people.

With about 400,000 residents in the Springfield metropolitan statistical area, Boyd said it seemed like a long shot the airline would stick long term.

In recruiting a replacement, Hynes suggested carriers such as Allegiant in Springfield could be a good fit for Branson.

“Springfield is such a major hub for (Allegiant), Branson might be better,” he said. “That may be a sleeper there. It will be interesting to see, but somebody will show up.”

Boyd said he wasn’t worried, pointing out Allegiant has a presence in northwest Arkansas. He said the Springfield airport typically draws passengers from the north, east and west of town.

“Any airline can pick up their toys, so to speak, and leave a market,” Boyd said. “Are we concerned? No.”