A Page One index item referring to an April 5 Business article about Southwest Airlines incorrectly said that the carrier serves Reagan National Airport.
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Southwest To Begin Dulles Service
Southwest's move to Dulles will ratchet up the carrier's competition with fellow discounters, including JetBlue.
(By Noah Berger -- Bloomberg News)
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Many industry observers see Southwest's move into Dulles as a defensive one to head off the expansion or start-up of other low-cost carriers at the airport.
"There is competition," Kelly said. "There are carriers out there that are growing rapidly. We can't be complacent."
Dulles will present Southwest with some challenges. The airport has higher fees after a multibillion-dollar expansion. It will cost Southwest about $8 to $9 per passenger to operate at Dulles, compared with an average cost systemwide of about $5 per passenger.
The expansion comes as Southwest faces other financial challenges. Its hedges against rising fuel costs have long been among the industry's best, but as oil prices continue to rise, the airline is facing greater pressure.
Last year, Southwest was able to hedge about 85 percent of its fuel at $26 a barrel, a move that helped the airline save about $900 million and enabled it to remain the nation's most consistently profitable major carrier. But this year, Southwest has hedged only about 70 percent of its fuel at $36 a barrel.
To offset the rise in fuel prices, Southwest has raised its fares twice this year, with one increase as much as $10 each way.
Southwest faces other challenges, including the rapid growth of rival low-fare carriers such as JetBlue and AirTran. And this summer, Southwest will begin contract talks with its pilots union, the first labor group to begin negotiations that are expected over the next year or two.
Industry consultant Darryl Jenkins said Southwest would eventually be able to charge higher fares out of Dulles because of demand. "But even their highest fares are still half of what other airlines' highest fares are," he said.
