DIA's Jeppesen Terminal looking south. DIA Photo.

The average air fare out of Denver International Airport was lower in the first quarter this year than when DIA opened in 1995 – testimony to airline competition, cost containment by the city and what some call the “Southwest Effect.”

In fact, Denver is one of only four air travel markets among the top 85 on the country that had lower air fares than 14 years ago, according to figures compiled by the federal Bureau of Transportation Statistics, part of the U.S. Department of Transportation.

Only Richmond, Va., declined more in average plane ticket price than Denver over the same period.

The figures show that the average air fare in Denver in the first quarter this year, the latest period available, was 3.7 percent lower than in the first quarter of 1995. That was when Denver was preparing to transition to the new airport from Stapleton International Airport. DIA opened Feb. 28, 1995.

You can look at an Excel spreadsheet of the data here.

The national average air fare, by contrast, was 16 percent higher in the first quarter this year than in 1995.

The average domestic fare at DIA in the first quarter this year was $292.02. The national average domestic fare was $314.94, according to the BTS figures. You can look at an Excel spreadsheet of those fares in the top 100 markets here: Air Fare Changes Q1 2001-2009.

The change is even more dramatic in the shorter term, because in the five years after DIA opened, fares rose in Denver and nationally.

This chart tracks the quarterly changes in average air fares in Denver (dark blue line) and the U.S. (light blue line) since 1995, when DIA opened. (Source: US Bureau of Transportation Statistics)

From 1998 through 2000, as the accompanying chart shows, Denver ranged high above the average fare. The trend reversed in early 2001. Denver’s average air fare was 35.5 percent lower in the first quarter this year than in 2001. By contrast, nationally, average fares dropped 9.4 percent in that time frame.

Competition between Denver-based Frontier Airlines, which began operations in July 1994, and market leader United Airlines spearheaded the reduction in prices. The gap between Denver’s fares and the national average continued to close as national fares stabilized in the post-Sept. 11 terror attack business environment.

Denver air fares are now below the national average, beginning with the arrival of Southwest Airlines in 2006.

“Southwest, Southwest, Southwest,” said Tom Clark of the Metro Denver Economic Development Corp., when asked about the major reasons for the numbers. “It drove new flyers to the market, kept downward pressure on fares and became the fastest growth market in Southwest’s history.

“Three competing carriers in one hubbing airport is, I believe, a one-of-a-kind in the nation.”

“This is obviously great news for the Denver passenger,” said DIA spokesman Jeff Green. He pointed to a combination of the airline competition at DIA with cost-cutting measures by airport managers that have reduced airlines’ cost to operate at the nation’s fourth-busiest airport.

“Denver has always been a very competitive air market, with United and Frontier building a strong route network from DIA,” Green said. “We’ve also worked very hard at DIA to reduce our costs, which in turn have reduced the cost of operating at DIA for the airlines. Lower costs equal better fares.

“Over time, we’ve reduced costs and more carriers now split the market share, making Denver very competitive. It’s the perfect recipe for lower fares.”

Green said DIA’s lowered operating costs led to Southwest’s return to the Denver market.

“Their presence has certainly made the market even more competitive and is certainly one of the main reasons that fare prices in Denver track below the national average,” he said.

Cost-cutting measures at DIA along with higher passenger counts have lowered the average cost-per-passenger for airlines to operate there. When DIA opened, it had one of the highest costs per passenger in the nation, around $16. Over time, that has lowered to around $10.50.

Cost per passenger is not an actual charge to the airlines. It is simply the arithmetic average of all the landing fees, rents and other charges from the city divided by the number of departing passengers at each airline. It goes down as the number of passengers goes up.

Denver last had three airlines competing with large-scale operations in 1986, when United, Continental Airlines and the original Frontier Airlines all staged banks of flights out of cramped Stapleton International Airport’s airfield.

Later that year, original Frontier folded and was bought out by Continental. Continental eventually pulled its hub operation out of Denver prior to DIA’s opening.

Hub operations are where airlines concentrate banks of multiple flights in a short period of time. They allow passengers to quickly transfer to other flights to their final destinations.

Southwest operated out of Stapleton briefly in the early 1980s, subleasing gates from Ozark Airlines. But persistent flight delays led the airline to pull out in 1985. Southwest determined that delays getting in and out of Stapleton, which was reduced to a single arrival runway in bad weather, was the cause of 70 percent of its flight delays nationwide.