Bringing Change to Washington: Airlines are shaking things up in America’s sixth biggest market

Bringing Change to Washington: Airlines are shaking things up in America’s sixth biggest marketEvery election year, political candidates pledge to bring change to Washington. Just like airlines are already doing.

At all three of the major airports serving America’s capital city, big changes are re-shaping the competitive landscape, affecting nearly every major U.S. airline. With 65m passengers handled last year, Baltimore-Washington, Dulles and Reagan National airports collectively make Washington, D.C., the nation’s sixth busiest airline market, behind New York (106m), Atlanta (94m), Chicago (88m), Los Angeles (80m) and Dallas-Fort Worth (69m).

In one respect, Washington’s airline market isn’t seeing much change at all: That 65m figure in 2013 was nearly identical to the 2012 number. But this masks some tectonic shifts in airline behavior inside the beltway.

At Reagan National Airport (DCA), just a short Metro ride from the White House, passenger volumes topped 20m last year for the first time ever. And although this year’s traffic is running a bit behind last year’s pace in the seven months to July, scheduled seats for the first half of 2015 are up by double digits compared to the same period in 2014, according to Diio Mi, portending big traffic increases to come.

The biggest cause of this year’s decline? A broad industry trend from which capacity-constrained, yield-rich DCA is immune six days of the week—but to which it is just as exposed as any other airport on Saturdays. Indeed, the same airlines that fall all over themselves for any weekday DCA slot pair they can grab have nonetheless slashed capacity on Saturday, when the politicians, lobbyists and businesspeople aren’t traveling and DCA demand patterns look a lot more like demand patterns everywhere else.

But one highly DCA-specific trend also explains much of what’s changing there. In a deal with antitrust regulators wary of their planned merger, American and US Airways agreed to sell more than 50 daily roundtrip flights’ worth of Reagan National slots to LCC rivals. As a result, the new American discontinued service to a number of small- and medium-sized cities like Omaha, San Diego, Little Rock and Montréal. Frontier, transitioning to an ultra-LCC, ended some Reagan National flying too, stopping service from Kansas City, Madison and Omaha. In some of those cases, other airlines filled part—but usually not all—of the void.

LCCs, meanwhile, haven’t yet completed their buildup, with lots of new flights slated to begin in the coming weeks and months. Take JetBlue for example. In January, it bought the rights to launch 12 new daily DCA flights (and eight more slot pairs it was already leasing from American), building on the 18 it already offered. Nassau, Hartford and Charleston in South Carolina came online in June. A second frequency to Tampa started in July. And new service to three more Florida cities—West Palm Beach, Fort Myers and Jacksonville—begins in December. This makes Washington one of the two most important growth markets for JetBlue (Fort Lauderdale is the other), even counting its cuts at nearby Dulles.

Virgin America bought DCA slots from American too. More specifically, it bought four pairs, which it will use to operate four daily flights to Dallas Love Field. Three of those frequencies begin next month; the fourth takes off next spring.

But the biggest growth story at Reagan National? That would be Southwest, which bought 27…

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