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At Logan, things are looking up

Fierce competition lowers fares, shields airport from industry woes

The “Southwest effect’’ is changing the game at Logan: Its arrival prompted fare wars with JetBlue and others. Virgin America, Sun Country Airlines, and Porter Airlines also came to Boston this year. The “Southwest effect’’ is changing the game at Logan: Its arrival prompted fare wars with JetBlue and others. Virgin America, Sun Country Airlines, and Porter Airlines also came to Boston this year. (Pat Greenhouse/Globe Staff)
By Katie Johnston Chase
Globe Staff / December 18, 2009

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More people are taking to the skies above Boston, despite the sinking fortunes of the air travel industry, thanks largely to increased competition and four carriers that started flying out of Logan International Airport this year.

The turnaround at Logan started in July, after passenger numbers fell in all but one of the previous 20 months. Traffic crept up 0.2 percent over the previous July; by November, it had risen 7.3 percent over 2008 levels.

But across the country, traffic continues to fall, and the airline industry is projected to lose upward of $5 billion this year. Nationwide, air travel has decreased by an average of 6.8 percent since February, according to the Air Transport Association, a trade group.

At Manchester-Boston Regional Airport in New Hampshire, traffic slid 15.6 percent in October from the same month last year, according to the most recent figures. T.F. Green Airport in Rhode Island reported a 9.3 percent drop in November.

The uptick at Logan is largely attributed to the four airlines that launched service from Boston this year - Virgin America, Sun Country Airlines, Porter Airlines, and, in particular, Southwest Airlines - ratcheting up the competition and driving down fares.

Incumbent airlines, including JetBlue Airways, American Airlines, and United Airlines, responded by adding flights and destinations and bringing in larger planes. About 800 more domestic flights took off from Logan last month than in November 2008.

Southwest is credited with attracting new passengers, including some who avoided Logan during the traffic-choked pre-Big Dig era, instead flying out of Manchester and T.F. Green.

“They generate a new type of traveler,’’ said Edward Freni, director of aviation for the Massachusetts Port Authority, which operates Logan.

The “Southwest effect,’’ as it’s called in the industry, often generates fare wars. JetBlue and AirTran Airways quickly jumped into the fray at Logan; all three low-cost carriers now offer one-way tickets to Baltimore for $39 and to Chicago for $79.

Last December, the least expensive average ticket was virtually the same price at Logan, T. F. Green, and Manchester, with the cost a few dollars higher at Logan, according to FareCompare.com. This December, the cheapest average ticket at Logan is $80 cheaper than at T.F. Green, and $69 cheaper than at Manchester.

Lower costs are making Logan a more attractive option. Christopher Pike, an economist at IHS Global Insight’s Philadelphia office, said before Southwest started flying out of Logan in August, he would fly to Manchester to get to company headquarters in Lexington. “Logan had priced itself out of a certain sector of the market,’’ he said.

The national air travel market, which depends on discretionary spending, is still hurting, even as other segments of the economy appear to be inching toward recovery.

Business travel was one of the first expenses to be slashed or eliminated as companies dealt with the recession. Now, business flights are more likely to be booked in lower-priced coach sections instead of in first class. Persistently high unemployment has also prompted a lot of out-of-work or nervous employees to take shorter, cheaper vacations.

“The travel industry is like Blanche DuBois,’’ said Henry Harteveldt, an analyst at Forrester Research. “It’s dependent on the kindness of strangers.’’

Boston’s travel market is also bolstered by the strength of the local technology and education sectors, he said.

And though Logan’s passenger numbers have been on an upswing, they look good partly because last year was so bad: Traffic fell 16 percent in November 2008 from November 2007.

Logan officials expect to finish the year with about the same level of traffic as in 2008, and the outlook is brighter for 2010. But airlines still have a lot of ground to regain, and local officials are cautious about declaring an end to difficult times.

“There is a huge blinking red-and-yellow light saying, ‘Do not take these numbers to the bank,’ ’’ said Patrick Moscaritolo of the Greater Boston Convention & Visitors Bureau, “because we are not out of this economic tailspin.’’

Katie Johnston Chase can be reached at johnstonchase@globe.com.