Delta Air Lines, Inc. (DAL), Southwest Airlines Co. (LUV): Memphis Fliers Should Have Seen This One Coming

It’s not all bad news
Fortunately for Memphis residents, Southwest may be coming to the rescue shortly. Southwest Airlines Co. (NYSE:LUV) acquired its first Memphis route when it bought AirTran several years ago. The carrier recently announced plans to move Memphis service to the Southwest brand beginning in November, with flights to five cities.

Southwest Airlines Co. (NYSE:LUV) reportedly expects to be the largest carrier in Memphis eventually, which is good news for Memphians hoping for cheap flights. In the past, low-cost carriers have been deterred from competing with Delta Air Lines, Inc. (NYSE:DAL) in Memphis due to the fear that Delta would add flights and drop fares to drive out the competition. Now that Delta has drastically reduced its footprint in Memphis, Southwest can plan to expand its Memphis service over time without worrying about Delta trying to sabotage it.

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Ultimately, Memphis is probably better off with Southwest as its top carrier rather than Delta Air Lines, Inc. (NYSE:DAL). Delta’s cost structure in Memphis meant that the company was losing money even though customers were paying very high fares. Southwest has provided plenty of flight options in other “de-hubbed” cities like St. Louis and Kansas City, and can carry passengers to a wide variety of U.S. destinations at a lower cost than Delta.

As a result, while I view this week’s announcement as a positive for Delta Air Lines, Inc. (NYSE:DAL) — it shows that the company is still on track to quickly reduce its 50-seat regional jet operations — it is also a positive for Memphis. There may be some pain for the first few years of the transition as Southwest Airlines Co. (NYSE:LUV) gradually builds a point-to-point operation in Memphis, but in the long run fliers will be compensated for the loss of their hub with lower fares.

The article Memphis Fliers Should Have Seen This One Coming originally appeared on Fool.com.

Fool contributor Adam Levine-Weinberg has no position in any stocks mentioned. The Motley Fool recommends Southwest Airlines.

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