Virgin America is doing what I have wished an LCC carrier would do to American Airlines for 10 years:  compete with them.  In December, they took up the challenge to compete against AA on the DFW-LAX/SFO markets and they’ve done pretty well.  Virgin America knew going in that it was an long term investment and that they would see a strong reaction from AA.  Of course, that’s no surprise since VA CEO David Cush is a former senior AA executive.

Now Virgin America is set to start competing with American Airlines and United Airlines on routes between Chicago and LAX/SFO.  The response from American Airlines tells a story.  According to the Dallas Morning News Aviation Blog, American Airlines is giving away a “special gift” that includes:

“. . . a $100 discount for future travel that is booked on AA.com, a $150 voucher for bookings on AAVacations.com, 5,000 AAdvantage miles and an Admirals Club pass and $50 discount on a one-year membership.”

If Virgin America was looking for any confirmation of the threat it presents to AA, there it is.  That’s a pretty special gift to try to keep business customers away from VA.  As incentives go, that’s a pretty surprisingly high price to pay.

And it doesn’t surprise me in the least.  The VA product should compete exceptionally well against the AA offerings.  The difference in the physical service product alone is the difference between night and day. 

I’ve now heard a number of first hand stories from people flying VA out of the Dallas area and, anecdotally, I’d say that AA is in real trouble.  The responses I’ve heard have uniformly been expressed as shockingly impressed with the aircraft, service product and staffing.   This is from corporate travelers, not the occasional vacation flyers. 

I think VA has identified that it can compete and it can erode American Airlines’ strengths on routes and I think we’ll see VA look to do it on more and more American Airlines “core” routes while they also nibble on United Airlines as well.  Right now, I would say that Delta is somewhat safe from VA but they also have Southwest to worry about so they aren’t exempt from pressures.

Filed under: Airline News by ajax