LoneStarMike
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WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 13, 2007 4:40 am

KXAN Channel 36, the local NBC affiliate here in Austin, ran a story on the 6 pm news this evening which claimed WN is having a dispute with local airport officials concerning lower terminal fees the airport plans to charge ultra-low-cost carriers (so far only Viva Aerobus) who elect to operate out of the low-cost terminal currently under construction on the other side of the airport from the main terminal where Southwest and all the other airlines are located. Here is the gist of the report that aired:

A letter was sent to airport officials from a vice-president of Southwest which says that a new low-cost terminal will provide other airlines with a "substantial cost advantage," while Southwest is bound by their lease agreement to use the more expensive facilities in the main terminal. The letter goes on to note that Southwest's lease agreement with AUS stipulates they (WN) should pay the same terminal fees as all other airlines. Obviously, WN's lease agreement was signed before the city decided to lease land to GE to build and operate the new low-cost terminal.

In the city's response to Southwest, the city's aviation director says that things are completely different for Southwest because they fly from a different terminal. The city also claims they can charge lower terminal fees for carriers using the low-cost terminal because the city will not be providing baggage claim services, jetways and other amenities that they currently provide airlines using the main terminal.

The Austin City Council is set to discuss the issue tomorrow in a closed session.

I was unable to find a link to the text version of this story on the station's website, but if you follow this link you should be able to watch the same video report I saw earlier.

http://www.kxan.com/Global/category.asp?C=4427

Look for "Tension between Southwest Airlines and ABIA" The story lasts about two and a half minutes.

If the city were talking about charging lower landing fees for new carriers, then I would be more sympathetic towards Southwest's point of view, but I personally don't have a problem with any of the ultra low-cost carrier being charged a lower gate/ticket counter/terminal fee for using an inferior terminal. I'm kind of disappointed with Southwest's position on this issue.

LoneStarMike
 
blueflyer
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WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 13, 2007 6:24 am

So what does this have to do with US?

On to the story itself, the video states the city will not provide luggage service at the new terminal, one of the reasons to justify its lower use cost, but does it mean that checking luggage in will not be an option, or that airlines will have to install and pay for their own infrastructure ?

If it is the latter, I do understand Southwest's beef. They, and all other carriers, should be allowed to walk away from their current lease if they are ready and willing to set up their own equipment in the new terminal. If it is the former, on the other hand, I think Southwest is just airing sour grapes, as they would not be using the new terminal anyhow.

[Edited 2007-12-12 22:29:29]
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SANFan
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WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 13, 2007 6:49 am

The thing is, if WN gets ticked off enough at the airport folks in Austin, despite who's "right" or "wrong" in this dispute, the station could rather quickly slip from its present position as the 21st busiest WN city (with about 50 flights as of 5/2007.) We've seen WN's reaction to what they consider unfair or excessive airport costs before, e.g., ELP, SEA, etc.; maybe nobody cares but it looks like WN carries about a third of the pax that fly in and out of Bergstrom. (http://www.ci.austin.tx.us/austinairport/downloads/activityrpt_oct07.pdf.)
I could easily imagine WN easily moving at least some of their AUS service 60 miles away to a more "friendly" airport near the Alamo.

Just something to consider...

bb
 
LoneStarMike
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RE: WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 13, 2007 8:05 am



Quoting BlueFlyer (Reply 3):
On to the story itself, the video states the city will not provide luggage service at the new terminal, one of the reasons to justify its lower use cost, but does it mean that checking luggage in will not be an option, or that airlines will have to install and pay for their own infrastructure ?

The low-cost terminal won't have any sort of automated baggage handling system, and the way I understand it, even if a carrier wanted to install their own, they wouldn't be able to do so. The low-cost terminal will only be marketed towards airlines which don't need these "amenities."

Passengers flying out of the low-cost terminal will still have the option to check luggage, though (for an additional fee.) The luggage will just have to be carried out to the plane by hand, either by the passenger or an airline employee.

Quoting SANFan (Reply 6):
The thing is, if WN gets ticked off enough at the airport folks in Austin, despite who's "right" or "wrong" in this dispute, the station could rather quickly slip from its present position as the 21st busiest WN city (with about 50 flights as of 5/2007.) We've seen WN's reaction to what they consider unfair or excessive airport costs before, e.g., ELP, SEA, etc.; maybe nobody cares but it looks like WN carries about a third of the pax that fly in and out of Bergstrom.

Yeah, I thought specifically of WN at ELP when I read this. I guess if Southwest wanted to move some AUS flights to SAT (and thinks they can make more money in the process) then that's certainly their call.

At DTW, NW uses gates in the fancy new terminal, while WN operates out of one of the older terminals. Does WN have to pay the same rate for its' gates in DTW that NW does? (I'm asking because I truly don't know.)

LoneStarMike
 
LoneStarMike
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RE: WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 13, 2007 10:00 am

OK, KXAN finally updated its' website. Below is a link to text version of the story, the video that ran on the local news last night and copies (pdf files) of WN's letter to AUS and the airport's response to Southwest.

http://www.kxan.com/Global/story.asp?S=7490590&nav=0s3d

One discrepancy I noticed is that Southwest's letter to the city seems to indicate that the required discussions between the airport and the incumbent carriers haven't taken place, yet the city's response claims that they have.

Reading both letters, it doesn't sound like either side is going to back down.

It will be interesting to see how this one plays out.

Mike
 
tcfc424
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RE: WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 13, 2007 5:05 pm

I was wondering what was up with WN and ABIA. WN is a very large carrier at AUS and could really impact the availability of non-stops if they wanted to get nasty...but XE is at AUS and would surely pick up some of the slack. It really seems silly for WN to be fighting the arrival of Viva Aerobus, as WN doesn't fly to Mexico! They are not even a competitor! Perhaps they are figuring someone else may start service using that terminal, but the only one I can think of would be Virgin America.

B6, F9, YX, and XE are all out of the main terminal, surely locked in to the same leases WN is, so no cost advantages there. Of course, if the city caves to the request, the floodgates are open for every carrier to renegotiate lease rates. I don't know what the lease rates are, but the WN letter says they are the same for all carriers, and if that's the case, UA must be a red-headed step-child for the airport because they are constantly maintaining the AA and WN ops/ramp/etc areas while they might repaint our stuff when it is so faded you can barely see the lead-in line.
 
iahflyer
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RE: WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 13, 2007 5:20 pm



Quoting LoneStarMike (Thread starter):
The city also claims they can charge lower terminal fees for carriers using the low-cost terminal because the city will not be providing baggage claim services,

How will no baggage claim work??
Little airports with the big jets are the best!! Floyd
 
Mir
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RE: WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 13, 2007 5:29 pm



Quoting IAHFLYER (Reply 6):
How will no baggage claim work??

Probably just bring the bags from the plane and put them on a carousel or something, all by hand.

-Mir
7 billion, one nation, imagination...it's a beautiful day
 
william
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RE: WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 13, 2007 5:32 pm

SWA isn't going anywhere,they are not stupid. They are the largest carriers out of AUS and will not risk pissing off some of their most loyal flyers (those who have flown SWA when SWA was a Texas only carrier) and high yield traffic.
 
Tornado82
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RE: WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 13, 2007 11:28 pm



Quoting TCFC424 (Reply 5):
Perhaps they are figuring someone else may start service using that terminal, but the only one I can think of would be Virgin America.

Virgin America wouldn't touch that new shed with a 10 foot pole. They provide service in their experience, not air stairs and paying for checked bags. The airlines who'd look at that shed-terminal would be Skybus, or if they found a route worth flying from AUS (WN already claimed them all) Allegiant. Southwest is FAR more likely to move into that shed than Virgin is... even though WN ain't going either. It's pretty hard to do a 25 minute turn without the proper infrastructure.

Quoting LoneStarMike (Reply 3):
Yeah, I thought specifically of WN at ELP when I read this.

There's a difference. Austin is a thriving business/economic market.... ELP not so much.

Quoting LoneStarMike (Reply 3):
At DTW, NW uses gates in the fancy new terminal, while WN operates out of one of the older terminals.

NW is financially connected to that terminal of theirs. They paid for considerable chunks of the place, and called the shots. At the end of the day when you look at the capital investment NWA has in that place, they probably pay significantly more overall.

Quoting SANFan (Reply 2):


The thing is, if WN gets ticked off enough at the airport folks in Austin, despite who's "right" or "wrong" in this dispute, the station could rather quickly slip from its present position as the 21st busiest WN city (with about 50 flights as of 5/2007.) We've seen WN's reaction to what they consider unfair or excessive airport costs before, e.g., ELP, SEA, etc.; maybe nobody cares but it looks like WN carries about a third of the pax that fly in and out of Bergstrom. (http://www.ci.austin.tx.us/austinairport/downloads/activityrpt_oct07.pdf.)
I could easily imagine WN easily moving at least some of their AUS service 60 miles away to a more "friendly" airport near the Alamo.

That would be a case of cutting off your nose to save your face. WN goes after the business traveler in AUS, and the business traveler ain't gonna drive to SAT when his business is in AUS.

Besides, it's not like WN really handed out any significant retribution in SEA anyways... because they couldn't afford to cut in such a lucrative market.

Quoting BlueF0yer (Reply 1):
I think Southwest is just airing sour grapes, as they would not be using the new terminal anyhow.

Ding ding ding, we have a winner. Just like in SEA, this is all fist pounding, hot air, and rhetoric.
 
cjpark
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RE: WN & AUS In Dispute Over Low-cost Terminal

Fri Dec 14, 2007 12:42 am

Southwest is always threatening some community over some perceived injustice against the airline. This is not news this is just business as normal for Southwest.

Hopefully Austin will not cower to WN and continue with plans for the low cost terminal concept.
"Any airline that wants to serve the [region] can go to DFW today and fly anywhere they want," WN spokesman Ed Stewart
 
austinairport
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RE: WN & AUS In Dispute Over Low-cost Terminal

Fri Dec 14, 2007 4:46 am

Yeah I think everything stated above was very correct. I dont see Virgin coming to AUS, not for now at least. Skybus, possibly. I dont think that they could fly CMH-AUS daily and make it work. But what the Hell do I know.  Smile But yes Southwest is a little bastard. I for one am in great favor of the new terminal and would love to see that little airline "Give It A Try,"  Smile VIVA AEROBUS!!!
Whoever said you can do anything you set your mind to has obviously never tried to slam a revolving door!!!
 
LoneStarMike
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RE: WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 20, 2007 11:30 am

Well, here is an updated report from News 8 Austin, the Time Warner local cable news station. Apparently all three Texas-based airlines (WN, AA & CO) are protesting the new terminal. There's some new information in this report that wasn't in the first one.

Major airlines upset over terminal deal

The council member interviewed in the story said there is the potential for the airlines to sue the city and demand equal treatment. He says at least three council members were under the impression that Viva Aerobus would be the only airline operating out of the low-cost terminal and that it would have only three gates, but said the City Council became aware of a plan to expand the ultra low-cost terminal from three to eight gates and include domestic low-cost carriers. I knew that the city was eventually going to try and attract other ultra low-cost carriers, but I don't remember anything about there being eight gates. Maybe that's a second planned phase.

According to the City Council member, the three airlines say the low-cost terminal for flights to Mexico should not include domestic ones. Although the agreement with GECAS to build the terminal has been approved by the City Council, nothing has been signed yet.

The report also said if WN, AA & CO can prove the city violated their lease, it might be hard for the low-cost terminal to even get off the ground, but also claimed that .Viva Aerobus still has plans to start offering service to 6 cities in Mexico in the spring. I'm afraid that might change, though, if the low-cost terminal doesn't get built. And even if it does get built, this dispute will probably delay construction.

I could live with a compromise - no domestic carriers in the low-cost terminal, but I would like for Viva Aerobus to be able to at least give AUS a shot.

LoneStarMike
 
rfields5421
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RE: WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 20, 2007 12:56 pm

Southwest is just the lead airline on this argument - as noted above - the other airlines will join in.

Does anybody seriously think the airlines don't talk to each other about such situations and work together on the PR campaign?

Using government (airport) money to lower the cost of some airlines to operate at the airport while keeping the same lease rates for others will never work in the US. The airlines will not put up with it and will mobilize their customers. Yes, Southwest and the others would like lower lease rates - but more important is maintaining a status quo situation where no new competitor has a cost advantage.

If the low cost airlines want to build their own terminal building with their own money - that might happen.

If it is built with government money - it's going to have to have comparable lease rates as the other terminals.
 
PSU.DTW.SCE
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RE: WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 20, 2007 2:02 pm



Quoting LoneStarMike (Reply 3):
At DTW, NW uses gates in the fancy new terminal, while WN operates out of one of the older terminals. Does WN have to pay the same rate for its' gates in DTW that NW does? (I'm asking because I truly don't know.)



Quoting Tornado82 (Reply 9):
NW is financially connected to that terminal of theirs. They paid for considerable chunks of the place, and called the shots. At the end of the day when you look at the capital investment NWA has in that place, they probably pay significantly more overall.

As Tornado82 mentioned, NW paid for a significant portion of the Worldgateway themselves and designed the terminal to suit their needs. They paid for for all of the "extras" to make it a premier hub facility.

WN and the other non-Skyteam airlines all operate out of the old Smith terminal which will be replaced by the new North Terminal, scheduled to open in late 2008. WN has raised some complaints about construction costs and the increased lease rates that will occur when the new terminal opens. Right now rent for the Smith terminal is rather cheap, but rates are going to essentially triple next year when the new terminal opens. WN (and AA too) are actually going to occupy fewer gates for the same amount of flights in the new terminal than they currently have now. Granted the new terminal will be more operationally effecient and allow for better gate utilization as well as relatively close remote RON aircraft parking, but they don't want to pay much more than they are today.

WN & NK have battled construction costs particularly on who should pay for the ground transportation center and other "bells and whistles" in the new terminal, hence why the North terminal will be much more bare-bones than the Worldgateway. They want costs to be as cheap as possible and its a balancing act for the airport administration & the county as the new North Terminal will also house some legacies like AA & UA, non-Skyteam international airlines like LH & RJ, and all of the LCC's (NK, WN, F9, FL, US).
 
sccutler
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RE: WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 20, 2007 2:09 pm

Also of serious concern, the City of Austin has not yet offered any details on how this proposed bus-station-of-the-air does not impinge upon the general aviation use at the airport.

This project is potential trouble, in many different ways.
...three miles from BRONS, clear for the ILS one five approach...
 
LoneStarMike
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RE: WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 20, 2007 3:16 pm



Quoting RFields5421 (Reply 13):
Using government (airport) money to lower the cost of some airlines to operate at the airport while keeping the same lease rates for others will never work in the US.

What about airports that offer incentives to get new carriers? If an airport offers incentives in the form of reduced rental fees and/or reduced landing fees to a new entrant that's starting new service, isn't that using government (airport) to lower the cost of some airlines, while keeping the fees for the other airlines higher?

Quoting RFields5421 (Reply 13):
If the low cost airlines want to build their own terminal building with their own money - that might happen.

If it is built with government money - it's going to have to have comparable lease rates as the other terminals.

I see your point, but Austin's proposed low-cost terminal would be built and paid for by GECAS, not Viva Aerobus nor government (airport) money.

At any rate, here is another write-up from Evan's Spark's Aviation Policy Blog on this issue. He's siding with the airport regarding this issue, but that's just his opinion.

Gates, Terminals, Fees and the Business of Airports

LoneStarMike
 
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RE: WN & AUS In Dispute Over Low-cost Terminal

Thu Dec 20, 2007 3:20 pm



Quoting LoneStarMike (Reply 16):
What about airports that offer incentives to get new carriers? If an airport offers incentives in the form of reduced rental fees and/or reduced landing fees to a new entrant that's starting new service, isn't that using government (airport) to lower the cost of some airlines, while keeping the fees for the other airlines higher?

There is a fine line here to prevent favortism. The existing tenants usually don't mind if they incentives / guarantees are for a limited period of time - to cover start-up costs, or coming from a private source. They do get very upset when they are coming from publicly funded sources/entities and/or without a time constraint.

Remember the Delta & AirTran issue at ICT?