JetBlue Airways

Delta launches attack on JetBlue through new leisure push from New York

Delta Air Lines is targeting JetBlue Airways through new and bolstered flights being introduced to Florida and the Caribbean from New York’s LaGuardia and JFK airports in late 2012 and early 2013. Delta’s move is a departure from its recent New York strategy of using slots obtained at LaGuardia to capture business travellers from smaller markets that prefer the convenience of getting in and out of the airport closest to downtown Manhattan. But in its latest offensive Delta is targeting leisure markets where JetBlue is deeply entrenched, and in some cases breaking JetBlue’s monopoly on those routes.

Delta in Mar-2012 introduced new flights from LaGuardia to 15 markets as it began developing the airport into a hub after gaining 132 slot pairs at the facility from US Airways. Delta is scheduled to complete the new market phase-in during Jul-2012 when it launches 26 additional markets from LaGuardia.

Alaska, Delta and JetBlue zero in on managing seasonality in an attempt to preserve profitability

US carriers are fine-tuning their revenue management mechanisms to better manage seasonally weak periods and avoid climbing out of losses recorded during those times. By shifting their networks into higher revenue generating markets during slow travel periods they are starting to challenge the historical status quo of losing money during low demand periods. Both low cost and legacy carriers alike are changing their strategies for managing down periods to flatten out the peak and trough patterns that have wreaked havoc on their attempts to remain profitable during the more challenging off-peak times of the year.

Alaska Airlines, Delta Air Lines and JetBlue Airways are three such carriers making specific changes during off-peak periods to increase profitability. Alaska Airlines has shifted away from west coast routes to focus on Hawaii, Delta has bucked industry trends to decrease trans-Atlantic capacity while JetBlue has focussed on its Boston hub to drive corporate traffic.

JetBlue continues to see benefits and growth opportunities from its hybrid business model

Since its inception more than 12 years ago, JetBlue has undergone a fundamental shift in its business model to become one of the few carriers to achieve true hybrid status: low fares with frills. It has firmly entrenched itself in luring business travellers through a small corporate sales force and built up its network in Boston to largely cater to the more lucrative corporate traveller. This shift in strategy was primarily undertaken to even out the dramatic peaks and troughs JetBlue experienced with its leisure-focused model, and was also accompanied by a push into Latin American and the Caribbean to introduce markets with a strong base of visiting friends and relatives traffic (VFR) that JetBlue concludes is somewhat recession proof. At the same time, it has aggressively added interline partners that help to boost its passenger numbers and smooth out the revenue troughs it can experience during slow travel periods.

But that strategy is not without critics. JetBlue’s growth rates during the last few years have raised eyebrows when most carriers have constantly refined their capacity growth to near zero or have actually shrank their supply.

American Eagle’s exit from San Juan leaves gap in small intra-Caribbean markets

American Eagle appears closer to ending a 41-year era with the planned phase-out of its base in San Juan as part of a network overhaul in the Chapter 11 restructuring of its parent American Airlines. Closing San Juan was becoming more apparent as the fleet supporting its operations in the Caribbean – the ATR 72 – is being phased out at the end of next year. But other carriers could capitalise on American’s exit either through backfilling the flights or forging partnerships to feed the islands.

The carrier has sent out a announcement to employees in San Juan explaining the base would be closing during a phase-out period ending in March 2013, CAPA has learned.

The cuts are only being applied to American Eagle’s operations in San Juan, not American’s mainline operations.

American Airlines defends USD1 billion revenue growth plan

American Airlines has been under pressure to explain how it will increase annual revenue by USD1 billion by 2017. While the number may be daunting, it represents only a 4.2% increase in 2011's overall revenue of USD23 billion. Additionally, American has made revenue leaps before: a USD1.8 billion increase from 2010 to 2011 and USD2.3 billion from 2009 to 2010. It is difficult to separate out previous adverse trading conditions from structural changes, but American has outlined a very achievable agenda independent of revenue growth from any possible merger or acquisition.

US airlines’ ancillary revenues continue to grow, but at a slower pace for legacy carriers

The US Department of Transportation (DoT), through the Bureau of Transportation Statistics (BTS), has released second quarter data which provides some interesting numbers for consideration. Looking at the ancillary revenue collected by carriers, we find that the amounts collected continue to grow, but for most legacy airlines at a slower pace. The overall year-on-year total increased only 5%.

However, passengers flying Spirit had a quite different experience and despite its general “no fees” image, Southwest has increased its take from fees by 10% over the year.