I’m rather surprised that they could not find one more Caribbean island to start service to but here we are: JetBlue is coming to the DFW area too.
Now, it’s not a real deep commitment. It’s 3 daily round trips from the Dallas / Fort Worth area to Boston and they’ll be using their Embraer E-190 100 seat aircraft for those flights. The aircraft itself isn’t bad, particularly on JetBlue where minimum seat pitch is 33″ and the seat widths are just a hair wider than what is found on the typical A320 aircraft. That said, it’s one inch less seat pitch than the standard JetBlue A320 and JetBlue’s main attraction, in my opinion, is the level of seat comfort offered.
I’m always pleased to see new entrants in the DFW area and I don’t think it’s a coincidence that these flights showed up a week after American filed bankruptcy. I also expect to see others swooping in to pick up business on high fare American Airlines routes in the near future. This is one moment in time where American can’t hit back and many airlines will see significant opportunity.
I fully expect that the guys at Virgin America are having numerous conversations about both Dallas and Chicago.
The FAA is going to fine American Eagle airlines a negotiated amount of $900,000 for tarmac delays during a day of storms in Chicago on May 29th. The storms moved through the area more slowly than anticipated and several America Eagle flights bumped into the 3-Hour window.
This is the first announced fine for breaking the 3-Hour rule and it has some implications in that it sets precedent for other airlines going forward in the future. My first impression is that this fine was a touch heavy on American Eagle. It certainly is a non-trivial sum and when you consider the thin margins of a regional airline, it certainly makes an impact. If every regional flight earned $500 in net profit (and they don’t come close to that in the real world), it would take 1,800 flights to earn that fine back. Consider that for a moment.
On the other hand, American Eagle is by far the worse violator so far. It has twice as many of these delays as the 2nd place leader, Delta.
I think this fine has huge implications for JetBlue and its violations during the October snow storm. You can bet that JetBlue will be scrambling to defend itself over those delays. Sadly, there is quite a bit of public perception already going against JetBlue in that instance and perception can often be a great influence in such fines.
It was in the news earlier this week that Frontier is laying off an additional 120 people in Milwaukee. Likely these are more former Midwest employees but the hit hurts just the same.
It’s another sign of just how much Frontier is bleeding and another sign of just how much Republic Airways is approaching their investment with a lack of enthusiasm.
Frankly, I thought Southwest was the better suitor for Frontier but I didn’t believe that Republic would lose interest quite that rapidly either. The truth is, Republic has never shown much enthusiasm for its purchases of Frontier and Midwest. They blame high fuel prices for their problems. I blame a lack of expertise in running a brand airline, getting rid of the expertise that did come with Frontier and just not really going “all in” with their purchase.
There is now speculation that there will be no interested buyers for Frontier and it is hard to argue with that. There is a tiny bit of speculation that Frontier could be of interest to JetBlue largely because of fleet commonality and, somewhat, service commonality.
Going up against Southwest and United in Denver is not for the faint of heart. I don’t disagree that jetBlue could be interested and I do think there is some “fit” there. I also don’t think JetBlue has enough guts to make such a purchase. They have signaled their complete happiness with being the airline they are today and have made little effort to grow into new markets. Denver certainly isn’t an attractive market for the risk adverse management of JetBlue.
But another airline does come to mind. Virgin America. The fleet commonality works and they *are* being smart about competing with legacy airlines. I don’t think you would see Frontier in Milwaukee for very long or quite as much flying in Denver either. But I think Virgin America has an aggressive enough management cadre to figure out how to make Denver profitable and how to use the remaining fleet to enter into other profitable markets quicker.
The real question is whether or not Virgin America could even financially swing such a deal given how much Frontier is burdened with debt.
Once again, jetBlue managed to mangle handling somewhat unexpected severe winter weather last week and let several aircraft stand on tarmac in Connecticut while an early winter storm passed through the New York City area. One aircraft already famous in the media managed a 7+ hour sit while the pilot begged for assistance from the airport.
And JetBlue has apologized . . . again.
Thing is, should they really have been caught out this badly again?
JetBlue already had a famous JFK system meltdown several years ago. In fact, it managed to get David Neeleman fired from his job as CEO of the airline.
I’m not saying that the winter storm wasn’t a bit early. It was. On the other hand, it wasn’t *that* early for the northeast and, more importantly, one would expect JetBlue to have a better action plan already in place no matter what time of year it is.
After all, it is not like that area doesn’t get severe storms in the summer forcing diversions as well.
I think JetBlue just kind of fumbled again and used a rather sedate apology and the circumstances to justify what happened. They certainly have been quiet about what they were trying to do to better help their customers. And the ATC recordings of its pilots asking for police (to settle passengers) and help in getting people off the airplane doesn’t speak to JetBlue trying very hard to figure out what to do for these people.
Yes, American Airlines also had a long tarmac delay at the same airport. They also worked diligently towards getting customs people to return to the airport to facilitate getting people off the plane. You can’t blame them if those same customs people didn’t exactly work very hard at returning. In short, American has a valid excuse and some significant evidence that they worked the problem hard.
I’ll also point out that it isn’t just JetBlue and American Airlines that flies frequently into the area. United Airlines, Delta Airlines, Southwest Airlines and several others all managed their problems acceptibly in a variety of ways.
So JetBlue can apologize but I’ll make a point: If David Neeleman were still there, he wouldn’t have permitted this kind of thing to happen after the Great Winter Snafu of 2007. He is a human being and he does make mistakes but he also possesses the characteristic of not repeating those mistakes.
How ironic that Mr. Neeleman continues to live in Connecticut right between JFK airport and Hartford, CT.
It depends on what your standard is for low. If you mean lower compared to this summer, yes, they probably will be a bit lower. If you mean lower than last year, I think not.
Airlines continue to manage their capacity very closely and consolidation has brought more capacity management into play. LCC carriers such as Southwest are not acting like rebels right now in that they’re joining most fare hikes quite willingly.
I do expect some fare sales and I do think that some of those advertised fares will be incredibly low. I also think that the number of seats available at those fares will be incredibly small. They are the “door busters” of air fare sales.
Should you buy now? I think you can hardly go wrong buying a ticket for holiday travel right now. It’s possible that a lower fare might come along in a few instances but I think the probability of that is quite low.
Expect seats on LCC carriers in the holiday season to be at a premium. Particularly on airlines such as Southwest and jetBlue as their no baggage fees for a checked bag make travel for families much cheaper. A family of 4 can save as much as $200 and that’s real money.
So, if I were looking for an inexpensive fare for holiday travel, I would buy now. If I were hoping for a great fare for a whimsical trip, I might wait just a bit longer. I do not think that we’ll see a plethora of low, low fares until after January 1st.
In what I will declare to be the most greedy of moves for 2011, most US airlines have decided to raise fares to offset the FAA taxes that have (temporarily) disappeared as a result of Congress’ inaction on a new bill for the FAA.
By most US airlines, I mean airlines such as American, United, Continental, Delta, US Airways, Southwest, AirTran and JetBlue. By raising fares, I mean they’ve raised them about 7.5% to offset the taxes that disappeared. A few airlines such as Virgin America, Frontier Airlines and Alaska Airlines have so far not raised fares to grab that cash.
I am immensely disappointed in this development and particularly disappointed that I find both SWA and Airtran in that group. Airlines don’t deserve this money and it is shameful behaviour to run and grab it.
jetBlue has this most excellent commercial for making its point on baggage fees. Far better than even what SWA has done so far. It’s notable, however, that while jetBlue doesn’t charge for the first checked bag, it does charge after that. It charges $35 for the second bag and $75 for the third bag.
They did it again. AMR, parent company of American Airlines, has lost money for the 1st quarter of this year totaling $436 million. Ironically, AA executives will likely earn bonus compensation this year because of the way their compensation deal is structured to offer shares in the event that the 10 major shrink to a lesser number. They have.
1st Quarter Earnings reports will probably show just a few airlinese earning a profit: Southwest, JetBlue and Alaska Airlines. Losses will be blamed on higher fuel prices (they are) and airlines earning a profit will have that attributed to being a low cost carrier with lower costs.
That isn’t so true. Southwest’s costs are less than, say, American Airlines but they are no longer the lowest in the business. Alaska Airlines is certainly not a low cost carrier as they operate like a legacy airline and they are a legacy airline. They have, however, been smart in renewing their fleet with very fuel efficient aircraft in contrast to the other legacy airlines who haven’t.
There are a few lessons here: Fuel is and will probably be the most volatile component in airline operations going forward. Labor may not be the key driver in airline costs anymore. Fuel efficiency is probably going to win over “cost of ownership” when it comes to the decision of buying new aircraft. Delta’s model of retaining old aircraft may end up being a very poor strategy with volatile fuel prices. Finally, good labor relations leads to good productivity and good productivity leads to profits. All three of those airlines work hard to maintain good employee relations.
Back to AMR: It’s unsurprising that the flight attendants are ranting at American Airlines for its poor performance. Their methods are incendiary but their point should be taken: This isn’t a leadership team that has performed. Mitigating losses to a lower level isn’t performance. Particularly when taken into account over the past 10 years.
Arguing that the compensation paid to the executive team is necessary to attract competence is probably a valid point. AA has often argued that it has to pay the salaries it pays in order to attract talent and keep it. The question that, I think, has gone unasked is: Is this really a top talent team?
Can you really argue at this point that the executive team is full of top performers when the total losses over the past 10 years adds up to over $11 billion? Pay the compensation, absolutely. But perhaps it’s time to pay it to airline talent that have a better track record.
Remember that this is the team whose corner stone strategy includes waiting for other airlines to have the same labor costs as they do.
With the various mergers and consolidation that we’ve seen over the past 3 years, there is quite a bit of speculation as to who is next in the merger game in the United States. The truth is, with the exception of some very small players, I see no opportunities.
Sun Country is actively looking for a purchaser and I think it will find one but it won’t be for Sun Country’s business nearly as much for Sun Country’s Minneapolis / St. Paul gate space and, perhaps, a few routes. Two candidates as buyers come to mind in this area: Southwest and Frontier. Both should find the opportunities in MSP attractive and Southwest is liable to also be attracted to the staff and equipment Sun Country is flying. Sun Country flies the 737-700 and -800 and getting their hands on the -800 of which there are 10 available could help SWA get a jump start on an aircraft it needs.
Frontier has a little bit less incentive for MSP. The aircraft fleet doesn’t match and they already have hubs and/or focus cities bracketing MSP in Denver, Kansas City and Milwaukee. But getting to compete against Delta in MSP where it is by far the dominant airline could be attractive to Frontier.
As far as other airlines go, I just don’t see it for now. Airtran will be going away this year. JetBlue is doing OK and while I think it could stand to grow, nothing is available and an attractive fit in areas where it could grow. There is the ever so slight chance that JetBlue could make a bid for Frontier but Frontier’s new management hasn’t had very long to make a go of it with that brand and it doesn’t seem like they would want to be consumed.
Alaska Airlines is very profitable and doing very well with its multiple relationships with various legacy and international airlines. They could be attractive to purchase but I think they would seriously resist overtures unless the economics just made their shareholders rich.
American Airlines has too many labor problems and is busy coordinating with its OneWorld partners at this time. This is an airline whose house is not in order and whose leadership is not really interested in acquisitions and who is not very visionary to begin with. Without new and radically different leadership, I presently see AA maintaining the status quo.
US Airways is pretty profitable and has their act together in many ways operationally speaking. They, too, have labor problems but somehow management manages to sit back and let labor fight among themselves while earning profits. This is another airline that could stand to grow and the most attractive place to grow would be internationally. The bad news is that they don’t have any long haul aircraft on order except the A350 and that isn’t due for quite some time. What’s worse, there is no internationally strong airline for them to target for another purchase. Obtaining long haul aircraft isn’t financially easy to do presently due to constrained credit markets and the popularity of their choice in long haul equipment (the A330.)
In addition, in light of the uncertainty that fuel prices and the economy present, I think that any growth that airlines choose to do will be slow, methodical and very cautious. It will be organic and through upsizing aircraft rather than many new routes.
The merger game of this decade is still undecided. Certainly Delta appears to have done well although their profits still seem very dependent on fuel prices. But United is far from complete and they’re already experiencing more problems than Delta ever did. Southwest and Airtran are working hard to consummate their relationship but Southwest has stumbled as much as they have succeeded in the past 2 years. There is nothing to say that SWA will execute their merger with Airtran smoothly so far. We hope they will but we don’t know they will.
Look for it to be quiet in the merger and acquisition game for the next 12 to 24 months absent the possibility of a few small acquisitions. I expect well see the alliances spark up a bit more in the near future, however.
It’s common for a variety of friends and family to ask me about obtaining a “cheap” fare to some destination throughout the year. It’s a frequent request as we approach spring but this year what I’m hearing most is the comment that fares are “way up” compared to what they usually are.
Yes, they are. Air fares have been rising steadily over the past several weeks with one airline bidding up the fare(s) and the others following with increases of their own. Typical fares are much higher and often as much as 25% higher than this time last year.
In addition, airlines are returning to the fee game and several have recently tweaked their fees to get more revenue in the door especially in advance of leisure travel that usually finds people checking more luggage. JetBlue just raised its 2nd bag checked fee to $35 and American Airlines has added a “booking fee”.
And now we’re hearing about fuel surcharges. These are, in some ways, the most irritating fees attached to base fares around. While they must be specified prior to booking, these fuel surcharges aren’t necessarily advertised as a part of the base fare. In addition, they’re often a one fuel surcharge fits all flights approach. That means a $20 fuel surcharge is supposedly covering fuel costs on both that 500 mile flight as well as that 2300 mile trans-continental flight.
Is this about fuel? Yes, it is. When oil prices rise such as they have over the past 2 months, jet fuel prices actually rise faster and higher. They are not proportionate to the cost of a barrel of fuel and that has to do with how a barrel of oil is refined into various types of fuels and other products. Fuel prices are skyrocketing and they threaten the airlines in two ways: in demand as well as costs.
The airlines well know that rising fares can cost them passengers and that is evident in the fact that airlines are already announcing reductions in their plans to grow capacity over this calendar year. American Airlines announced it was going to bring back several hundred flight attendants as well as hire new flight attendants (with special skills for international flights) just a few months ago. Now it is announcing that it will offer several hundred flight attendants the opportunity of a leave of absence because it will not grow its capacity quite as much as planned.
Cuts in capacity are designed to improve how much someone is willing to pay for a seat. It’s simple economics: if there are 100 seats but 110 potential customers, the airline is liable to get a premium price for its seats. If there are 100 seats and just 90 customers available at a particular price, those seats will either fly empty or the airline has to cut prices to get them filled. It’s a difficult balancing act because those seats fly every day whether there is a body in the or not. If you cut your prices too much, you’re liable to fly that aircraft (even full) at a loss. If you raise your prices too much, you’re liable to fly that aircraft at a loss as well due to empty seats.
The various fees that legacy airlines charge are designed to boost the average fare and maintain profitability. It’s notable that US Airways has said that but for their additional revenue from these ancillary fees, they would be unprofitable. For an industry that has seen exceptional losses over the past 20 years, those fees represent a new era of profitability and survival.
Are they fair? Reasonable? In many cases, I think not. I think the approach to fees has been poorly executed and has potentially driven away customers because of airline clumsiness in instituting them. Airlines are rather new at the game of marketing value added to their business. The entire industry was founded on and run by the maxim of providing the best value added product for over 70 years. Now, they’re expected to figure out how to earn more profit by charging for value added items and their novice approach is very noticeable.
The notable exception to this is two airlines: Southwest Airlines and jetBlue. These airlines haven’t ignored fees but they have paid attention to the game better than most. When you pay a fee on one of these airlines, there is added value and the customer perceives added value. The profitability and increased revenues that Southwest has experienced is firm proof of that.
The FAA is hoping to give its NextGen air traffic system a boost by paying jetBlue over $4million to equip 35 jetBlue aircraft with new navigation systems. It’s hoped that by giving this push, the rest of the industry will embrace adopting these systems quicker and in greater quantity.
So far, many airlines have argued that the FAA should pay them to install these systems. I think the airline industry has had enough government support for the last decade and its time to get going on investing in their business. (Not for nothing, this is what happens when you continually save airlines from liquidation via government loans and liberal bankruptcy laws.)
The FAA’s NextGen GPS based system will have a system of ground stations covering the country by 2013 and all airlines will be required to use the system by 2020. But the FAA also recognizes that if it can get airlines to buy into the improvements sooner than later, it can pull its schedule forward and realize some real gains now rather than later.
Here’s the best reason to adopt these new systems: they pay for themselves. Southwest is already making use of this kind of system to better orchestrate its own operations and now expects annual savings of up to $60 million / year. You can equip a lot of aircraft for $60 million in found money.
Virgin America has announced its intentions to order 60 new Airbus A320 aircraft with 30 being the A320NEO (New Engine Option) with deliveries taking place until 2019. That means Virgin America will triple the size of its fleet (or more) over the next 8 years.
While VA already signaled that they planned to buy 40 new aircraft, an additional 20 reflects a certain confidence that it is going to be earning solid profits going forward. I’m sure that some of the new aircraft (probably the last ones) will replace some original aircraft in this scheme but it reflects a plan for heavy growth between now and the end of the decade.
Let’s put that growth in perspective. jetBlue has about 160 aircraft presently serving 63 destinations after being in business for about 11 years. In that fleet, there are about 115 A320 aircraft (with no orders on the books) and 45 Embraer E-190 aircraft (with an additional 60 aircraft). I use jetBlue as an example because they are somewhat similar airlines with similar service products.
So, Virgin America thinks it can grow its mainline fleet to about the same size as jetBlue over about the same period of time. However, jetBlue got to its size in part by using the E-190s to “feed” traffic into their system from smaller destinations. This would seem to imply that VA will have to think about a similar strategy.
I suspect VA will start looking at how to build its network around its focus regions. There is some opportunity on the West Coast but I think they’ll have to look to feed their system in other places as well. Places such as DFW, Chicago and on the East Coast into New York City and Washington D.C.
Why order now? Well, Virgin America is solidly in the Airbus camp and now they know what Airbus will be doing with its product line for the next 10 to 15 years. With that knowledge in hand, it was an opportune time to make that order since Airbus will be very interested in getting airlines onboard with their decision to re-engine the A320 series. In other words, they probably got a good deal.
Why the A320NEO? That goes to efficiency. Again, VA knows what Airbus’ strategy will be for the next decade and a half and that means they know what kind of efficiency will be offered. It only makes sense to get the most fuel efficient aircraft possible when competing here in the United States. Even those that aren’t NEO aircraft will give VA an advantage in that they’ll be new engines with the latest upgrades available and that translates into money saved against the competition.
And they get one more advantage: They’re at the head of the line when it comes to other potential buyers in the United States such as Delta or United airlines. Virgin will be receiving the best, most efficient aircraft available as soon as or even sooner than most of its competition. American Airlines has no new plans for aircraft other than to keep taking on 737-800s at present. So on VA’s transcontinental flights, it will likely have the most fuel efficient aircraft available and having that advantage in that competitive marketplace means a greater chance of profitability and competitive advantage when it comes to fares.
Virgin has 2 or 3 years to go when it comes to considering how to feed its network with smaller aircraft. I wouldn’t look for an order in that area for some time to come. However, when they do start looking, I suspect the Bombardier CS series will be strong contenders for that airline if VA selects the new Pratt & Whitney GTF engines since Bombardier is offering a similiar engine on that aircraft product line.
Expedia has made another move against American Airlines in removing them from their system altogether now. That means that American is no longer listed on 2 of the 3 biggest online travel agencies: Orbitz and Expedia. As I write this, they remain on Travelocity.
American says that they aren’t experiencing any decline in business and that may remain the truth for now as they’ve been in the media enough to remind people to go directly to their website for booking passage to a destination. But that doesn’t mean this works for AA in the long run. It’s notable that neither Delta nor United nor any other airline has decided to remove their listings from the big 3 agencies and that might just be because they are enjoying even better bookings all of the sudden.
American says this is about offering a better experience for the consumer by offering their direction connection that will tailor flights to the person shopping. Online travel agencies says that that methodology means that American controls what the shopper sees instead of giving the shopper the chance to see the lowest fares.
The truth is, the online travel agencies are more “right” in this fight than AA is. This is about raising revenues by only letting the customer see what AA wants them to see based on their history.
Airlines such as Southwest and jetBlue have made their business rely upon their own websites for booking historically and they have done fine with that approach. Now both airlines are seeing value in being listed alongside others on some of these sites and that is as much based on accessing a larger audience as it is the fact that they have competitive fares.
I suspect we may see a different set of results from either party in another 2 to 4 weeks. Both sides have to determine the real impact to their business models and then decide if the lost revenue (and believe me when I say both sides are losing money over this spat) is worth it in the short term.
American Airlines has announced that they’ll be enjoying an even closer relationship now. In addition to their codeshare/interline agreement, they’ll be adding additional flights including one from JFK to Budapest, Hungary.
Even more exciting, they’ll have a reciprocal frequent flier agreement. (and that’s why moving your reservations system to something real like Sabre is a good idea. Are you listening Southwest?)
I was a somewhat early adopter of Airtran starting with some flights in the late 1990’s and for a variety of reasons, the airline just worked for me. No one would describe Airtran as having a luxurious service product but, somehow, it was a service product that found a fan base.
Now there are many Airtran Fans who are lamenting the merger between Airtran and Southwest Airlines and what it means for Business Class. Right now, it means it’ll be going away.
I think that’s a mistake. The way Airtran operated their business class was somewhat unique and was a great upsell for many passengers including me. I have often arrived for a flight and paid the upgrade fees at the spur of the moment although I have to say that buying that upgrade at the last minute has gotten to be pretty difficult.
Airtran’s business class is a bit special. It’s really more a decent seat, a few free drinks and a ride at the front of the bus. It isn’t a luxurious “total experience” that a SuperLegacy might offer but it does embody the 3 best parts of riding in a business class product.
And at the price it was offered at, it not only made money for Airtran, it also didn’t tax Airtran’s LCC service model either. Airtran didn’t have to dedicate one of the cabin crew to that section to rub the toes of those passengers and it didn’t have to carry meals either. They did their drink service and when in the front of the bus, they didn’t charge for the first couple of alcoholic drinks.
What I’m really saying is that Airtran’s business class actually *does* embody the Southwest service model. It is the Southwest service model translated by Airtran into a business class product.
In fact, I think you could retain it and toss assigned seating to the wind and few, if any, would even pause over that.
But here is the thing: it’s time to get over the idea that Southwest is the champion of the little people and it’s time to get over the idea that Southwest is completely egalitarian.
They are neither and, in some respects, they never were. Southwest was successful in Texas because it offered fast travel between city centers for the new breed of businessmen: entrepreneurs. It is true that Southwest did stimulate first time travel in people as it grew across the country but those days are over too. The 1980’s were a period when air travel became accessible and it was solidified in the 1990’s but the idea that there are a great number of people in various markets who have never considered air travel until Southwest (or other LCCs) showed up is disingenuous at best.
More to the point, an Airtran business class product is well suited to the Southwest frequency model that is still employed today. Imagine the revenue opportunities that exist in their newest markets from New York City to destinations like Chicago, Baltimore, Washington DC and Houston.
Southwest has matured in many ways and all for the better. Retaining a business class product like Airtran’s offers far more opportunity than it does risks and for SWA to dismiss it out of hand is a flawed move. Keep it, play with it and look for advantages. Use it to start eroding the appeal that newer LCC models like jetBlue and Virgin America have built up. If you think it’s the in-flight entertainment those airlines offer that is driving their business, you’re kidding yourself. It’s the better seat at the better price where they compete against legacy and SuperLegacy airlines.
Southwest’s quick move to announce it would go away struck me as inflexible and particularly so given their agility in most things. Yes, they are slow adopters, experimenters and generally an airline that waits for scale to develop before they make a move. The scale is there, Airtran is a ready experimentation and they’ve already adopted a number of features to better accommodate business travelers.
For all you Airtran Business Class Fans, I’m with you. It’s worth keeping not just because you like it but because it has all the appearances of being a solid business choice.
It’s been announced that jetBlue and Emirates will have an interline agreement functioning through JFK airport and within the next few days, it will be possible to buy thru passage to destinations between the two airlines. JetBlue has been arranging and aligning itself with a number of airline partners through this type of agreement and Emirates makes the seventh such agreement. American Airlines was announced just a few months ago and jetBlue has been enjoying an arrangement with Lufthansa (a major shareholder with seats on the board) for some time now.
CEO Dave Barger has described this as an open architecture and that means they are doing deals with whoever it makes sense to do a deal with. The problem is the potential for conflict among the various partners. For instance, one can only imagine how amused Lufthansa was to learn of this since their CEO has been a vocal critic of the advantages that Emirates enjoys in international travel.
This isn’t exactly new. Alaska Airlines has been engaged in similar practices with a variety of partners both domestic and international for years. In Alaska Airlines’ case, it’s made sense and worked to a fair degree although in part because Seattle, it’s hub, is not a hub or really a focus city for anyone else. However, over time, Alaska did business with so many partners who were competing with each other individually, it began to annoy some. For instance, AA has been gradually drifting away from its partnership with Alaska and Delta has been strengthening this partnership.
Ultimately, Alaska has found that it really does, in a sense, have to dance with the partner who is making a difference to their bottom line. Of late, that’s been Delta and when one airline substantially bigger than you starts contributing significant revenues to your balance sheet, it is only a matter of time before it starts conditioning those results upon receiving certain concessions.
JetBlue sees opportunity and there is opportunity at present from all of its partners. However, over time, someone is going to start making a bigger difference to the bottom line than someone else. Emirates has great potential for this as does American Airlines. Just between AA, Emiratese and Lufthansa, you have two airlines aligned with different alliances and one airline who isn’t but who knows how to provide massive long haul feed. The potential for conflict is huge in the future.
Maintaining some kind of balance between its partners is going to be key to keeping this open architecture. Like any business, dependence upon one partner can lead to inequalities that drive your business in directions you never wanted to go in. The size of airlines that jetBlue is partnering with indicates just how massive that potential is and no one should ever make the mistake that a huge airline won’t one day decide to use its influence to diminish the influence of other airlines its competing with.
Frankly, I think it benefits a small airline to pick a dance partner and stick with it. If jetBlue wanted to enjoy feed from other airlines, it would have been better served to have chosen an alliance and worked within its system where there is some understanding that picking apart a partner is counterproductive. Under the current model, no one partner has any great incentive to remain loyal if the competitive environment evolves.
jetBlue has announced its intentions on flying from Long Beach, California to Anchorage, Alaska next summer and, yes, this probably has some people rubbing their eyes to see if they read this right.
It’s an odd choice in my opinion since flying to Alaska requires a bit more general pilot knowledge and jetBlue doesn’t have any other traffic there. That means they have to establish themselves in the city even if with contractors and without more flights headed there, I don’t know why one would do it.
One possibility is that this is about aircraft utilization. Alaska flights are one of those things where you can get away with strange(ish) flight departures and arrivals. Alaskans don’t seem to mind odd times and I wonder if this isn’t a flight that will depart late afternoon, arrive in Alaska in the evening and then do a quick(ish) turnaround for a “redeye” back to Long Beach where it will likely be used to fly a different flight during the day. The flights times would make it work.
It’s notable that right now, Alaska Airlines doesn’t have a non-stop between LA and Anchorage. In fact, it appears no one does. That might just make the whole effort worth it or it might point out that there is a reason why nobody is doing it.
After the merger announcement between Southwest Airlines and Airtran last week, there was quite a bit of speculation on who would be relieved by the announcement and who would be on edge over it. Conventional wisdom (which includes me) saw this move as relieving Southwest of some burdensome competition in some markets such as in the NorthEast and in Milwaukee. Airtran competed effectively to drive down pricing with their flights.
Some have said Delta has nothing to worry about and Frontier has been foolish enough to see this as an improvement for them. I think Delta needs to worry a lot and Frontier is made weaker from this merger.
In Atlanta, Delta won’t see much change in Atlanta, I agree. It’s possible that in the regional area near Atlanta, Delta may even do better in the short run. However, Southwest has something Airtran didn’t: frequency. I think that Delta will discover that when Southwest’s capacity for frequency is deployed on traditional Delta / Airtran routes, competition is going to get a bit stiffer. The truth is, Airtran had many destinations but not always that much frequency. It’s one reason they were tolerated by many legacy airlines.
However, legacy airlines have generally always defended routes from other carries including LCC carriers by the ability to add frequency. That’s never worked well against Southwest . Southwest doesn’t go into a market with the idea of being a small player. They enter routes where they can deploy reasonable frequency right off the bat and they know how to schedule flights just as well or better than most legacies. Southwest’s size is already formidable weapon and it got a lot more formidable when the Airtran merger got announced.
Frontier and other LCC carriers (Hi jetBlue!) shouldn’t feel relief either. It’s that same frequency with an additional weapon that can spell hard days ahead for them, too. Southwest can compete with anybody’s frequency and I can think of just one LCC in just one area that has the frequency and capability to match what Southwest can ultimately deploy. jetBlue has that in the New York City area. But that’s it and Southwest is clearly building momemtum to be a bigger player in the NYC area.
That additional weapon? Network. Yes, Southwest isn’t a traditional hub and spoke carrier but they do know how to make their network work for the consumer. People aren’t adverse to connections if the price is right and the risk is relatively low. Southwest has lots of focus cities / hubs to provide network access to destinations that the other LCC carriers just don’t have.
Frontier has Denver and Milwaukee and is spread thinly in many cases. While they compete against Southwest in Denver, that’s changing slowly. They’ll never compete against Southwest in Milwaukee because Southwest is already capable of offering a network of destinations that Frontier can’t begin to approach.
Southwest has also done something that other LCC carriers have foolishly ignored. They covered the midwest. It isn’t sexy territory but it’s territory with lots of industry and commerce and need to get from point a to point b. It’s an area that appreciates a frugal approach to life and it’s an area with lots of family connections between cities. It’s also an area that has a strong attraction to the leisure areas that Southwest is strong in such as Florida and Arizona and California.
And now Southwest will have international capability to those same kinds of attractive leisure destinations in the Caribbean and Mexico. Frankly, I think Frontier should be very scared of what Southwest can bring to the table because it potentially spells their demise. I think jetBlue needs to start thinking about how they can grow their network and quite adding flights to the Florida and the Caribbean from the NorthEast.
jetBlue is also weak in another respect. They’re building focus operations in cities that are notoriously difficult to operate from in weather. Their operations can be significantly impacted in New York City, Boston and Baltimore-Washington by the very same storm system. All three of those are focus cities for them. Southwest doesn’t have those same weaknesses. They fly in the same areas and they’ll no doubt grow in those same areas but they continue to manage their risk by operating flights from those areas to other focus cities that are far less likely to be impacted by the same storm system.
And Atlanta will just add to that capability. I’m not saying Southwest’s system is perfectly isolated from risk but it is far more insulated from risk than other carriers like jetBlue and even the SuperLegacies.
Southwest is scarier because it has lots of resources and can operate in a very agile manner. The LCC’s can’t and the SuperLegacies can only do so much within the limitations of their hub style operations.
With the Southwest/Airtran merger announcement, there has been a lot of rampant speculation on what US Airways or American Airlines should do in the face of this industry consolidation. Many see them about to come under pressure from financial markets and shareholders to find a pathway to play in this consolidation game.
While you could argue that US Airways is at a disadvantage to any of the SuperLegacy airlines now, I don’t think that AA is so much at a disadvantage that they *must* do something. In fact, their problem is that a merger doesn’t bring much to the table for them since they would be the surviving entity and they already have high costs. US Airways is doing just fine for now and I think they can afford to be cagey for a while at the least.
The truth is, I think jetBlue will be under more pressure than any other airline. Their growth is largely stalled right now and then continue to re-trench in existing markets. They’re busy defending NYC, Boston and, to a lesser extent, the Northeast. While I admire how jetBlue got its foothold by operating out of JFK airport, I also think that they’ve begun to forget just how much the Atlantic seaboard chews up airlines.
Yes, they’ve got their nifty trans-continental routes to the west coast and they appear to do pretty good with those on some level. What jetBlue doesn’t have is a clearly defined pathway forward. What’s their stategy? The status quo? More and more trans-continental routes that don’t offer all that great aircraft utility? More flights from the Northeast to Florida? More flights from Florida to Caribbean leisure destinations? None of that sounds very attractive.
Lest you think I’m speculating, read this story quoting CEO Dave Barger. He states they’ll continue to focus on their “growth plan” for Boston and the Caribbean. I’ll point out that Southwest Airlines is already a national airline with a hole in their network. That changes with the addition of Airtran and they become *much* more competitive with jetBlue upon completion of the merger. Yes, I think SWA will stumble some during integration but I do not think that will inhibit their ultimate success.
Contrary to popular belief, there is some low hanging fruit out there for the right airline. jetBlue has the right service product, labor costs and, frankly, network to go take advantage of that. But there is no vision for that kind of growth.
I suspect one thing that is inhibiting such growth is aircraft financing. It’s a tight credit market out there and good terms on aircraft aren’t nearly as easy to acquire as they once were. However, there are airlines out there with plenty of the right equipment and who could possibly be bought for the right price.
I think it’s jetBlue that finds itself under pressure for an acquisition and/or merger. It can’t continue to grow in its existing markets. There isn’t any room to grow without a bruising and expensive battle. I think it is going to take new leadership at jetBlue. Dave Barger does a great job of keeping operations going and maintaining the status quo but he has done a poor job of setting a vision for growth into new markets. There is plenty of opportunity out there and many airlines are seeing it and executing a strategy for it. That is going to put a lot of pressure on jetBlue in the next year or two to find a way to articulate what their next plan is.
