Virgin America is launching service to Denver in March 2016 from its San Francisco home and United Airlines has decided to respond. That response is a significant one, with United adding 6 daily flights, bringing the carrier up to 15 frequencies by April. This is not the first time United has chosen such an approach when Virgin America entered a United hub-to-hub market. When the upstart launched thrice daily nonstop flights between Newark and San Francisco United made a similar move. That was 3 years ago and Virgin America is still operating on the transcon route while United has shifted its market there because of its withdrawal from JFK.
The new San Francisco service from United represents an increase of more than 70% in daily seats flying (comparing 22 Feb 2016 & 11 Apr 2016) while Southwest Airlines remains static with its three daily flights (plus 3x daily to SJC and 4x daily to OAK). The Virgin America service displaces Frontier’s 3x daily service which ends on 4 April 2016. Interestingly, however, United did not feel the need to increase capacity to compete with either Frontier or Southwest. Virgin America, on the other hand, seems to routinely exact a response.
In theory United can be somewhat surgical in the attack, targeting lower fares only against the flights around when Virgin America is flying. That would allow United to essentially dump capacity in the market without also slashing fares throughout the schedule. It would keep fare pressure on Virgin while not destroying yields on the other flights. Of course, it is not clear that’s what will actually happen, but here we go.
Read More: United’s response to Virgin America in Newark
Virgin America may also be trying to collect connecting traffic to help fill these planes. It operates from San Francisco to nine destinations west of Denver. It is unlikely that the carrier will be able to pick up significant levels of traffic to San Diego, Los Angeles, Las Vegas, Portland or Seattle. Honolulu and Maui may produce some flow while Cabo San Lucas and Puerto Vallarta each get one non-stop daily from Southwest. Building up traffic is going to cost Virgin a bit of cash, depending on how long the other airlines are willing to play the low-fare game.
Read More: Virgin America sets their sights on Newark
Denver passengers are something of a winner in this game, with increased competition and new service (Sun Country and Air Canada are also starting service in 2016) available. As for Virgin America, it is taking delivery of 8 more new planes by mid-2016, increasing its fleet nearly 20% in that time. Figure there are going to be a lot more routes added and many of them are going to be competitive.
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I feel United has strategically failed in Denver. It has basically failed to protect its position as the dominant carrier. Instead WN has grown and is the airline of choice for many business flyers because the only other option is a United RJ.
The city is growing rapidly, has a healthy economy and is now attracting more interest from other airlines. United could be in a much stronger position and could have what is much closer to a fortress hub there by now. Yes they may have had to endure some pain, but a fortress hub in a growing city can mean a big payoff years or even decades in the future. Delta gets this with Seattle. So Denver’s future is looking more like LAX than SFO or EWR, which is good for Denver flyers, not so good for United.
Fortress hub can make sense with sufficient O/D demand and something to protect as an operation. I’m not sure DEN offers either of those. And suggesting that DL is trying to build a fortress hub in SEA is a very interesting assertion.
UA has held relatively steady on total passenger count handled at DEN.
I and my daughter flew Virgin for the first time from SFO to SAN a month ago. We enjoyed it. I had already booked my daughter flights home on United this week and Southwest over the holiday break. She said she hated her United flight and asked me to please place her on Virgin from now on.
I’m hoping that this gemerates some sub $400 dates to Hawaii. I’m not sure that UA is that interested in defending that market though.
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