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JetBlue Heats Up Battle for Western Travelers

June 08, 2002|JAMES F. PELTZ | TIMES STAFF WRITER

Coming this fall to the West: An aerial dogfight for travelers wanting to pay cheap fares.

Plans by the upstart, low-price carrier JetBlue Airways to begin frequent service from Long Beach to Oakland in September and from Long Beach to Las Vegas in October will ratchet up the already heated competition for passengers in California and other Western states.

On the crowded path from the Los Angeles Basin to the San Francisco Bay Area, JetBlue will fly into the teeth of low-fare king Southwest Airlines, which has 22 flights a day between Los Angeles International Airport and Oakland alone, and giant United Airlines, the UAL Corp. unit that counts Los Angeles and San Francisco as two of its hubs.

And on the Southern California-Las Vegas circuit, JetBlue will go up against not only Southwest but another low-fare carrier, America West, whose schedule includes eight daily flights from LAX to Las Vegas.

"This ought to be really interesting," said Ron Kuhlmann, vice president of airline consulting firm Unisys R2A in Hayward, Calif. Until now, Southwest and America West typically stood out as the low-fare alternatives to the big network airlines, but with JetBlue's push into their routes, "all of a sudden we have two or more guys playing by the same rules in the same markets," he said.

And consumers will reap the benefits because, with the heightened competition, "the chances of upward pressure on fares in the L.A. Basin-Bay Area market are zilch to none," Kuhlmann said. Most of the competitors' fares between Southern California and Oakland and Las Vegas already are under $100 one way, with some under $50.

But while JetBlue's move is a boon for travelers, it also calls into question whether the 2-year-old carrier--which recently got a rousing reception on Wall Street for its initial stock sale--is expanding too fast, a strategy that has doomed many other fledgling airlines since the industry was deregulated in 1978.

After going public at $27 a share, JetBlue's stock closed Friday at $47.40 a share, up 82 cents, on Nasdaq. Wall Street now places a total value on JetBlue of $1.9 billion--the same as UAL's United and Northwest Airlines combined.

Though profitable JetBlue has been successful, "competing head-to-head with Southwest Airlines is a different challenge," said Michael Allen, chief operating officer of Back Aviation Solutions, a consulting firm in New Haven, Conn. "I don't think they intended on doing this so early in their history."

JetBlue's push into the West came sooner than expected, sparked by a dispute at Long Beach Airport that has embroiled the New York-based airline. Last year, when few other airlines were interested in Long Beach, JetBlue secured the airport's 27 remaining slots even though most weren't going to be used until 2003. (Long Beach's total slots are limited to 41 for noise reasons.)

But this year, American Airlines is demanding four more permanent slots at Long Beach--especially since JetBlue wasn't yet using most of its space--and American, a unit of AMR Corp., is threatening to sue the airport if its request is rejected. Alaska Airlines also is asking for three permanent slots at Long Beach for service to Seattle.

Looking to protect its base, JetBlue last month moved up its plans to start using its slots and announced it's now selling tickets for nine daily flights to Oakland starting Sept. 6 and six daily flights to Las Vegas starting Oct. 10.

But JetBlue's rivals are waiting with their own ammunition. Southwest and United, for instance, have more frequent service in the West that appeals to business travelers, frequent-flier mileage programs (which JetBlue doesn't yet have), strong brand loyalty and the ability to connect passengers to flights nationwide.

"We do have respect for them [JetBlue] as a competitor," said Richard Sweet, Southwest's senior director of marketing and sales. But in terms of responding with additional marketing or more flights, Sweet said no. "We're quite comfortable at this point with what we have out there and what we're doing."

There's also the question of whether JetBlue's move--during a slump in overall air travel--will create more airline seats than there are passengers who want to fly those routes and, if so, whether all the rival airlines can keep making money on their Western service.

But Kuhlmann, the consultant, said JetBlue chose "two of the largest markets that exist"--California and Las Vegas--"where they have a good chance of success and of best utilizing the aircraft they have."

The airline also dismisses concerns that it's growing too rapidly. "We're not betting the farm" on the Long Beach expansion, said JetBlue spokesman Gareth Edmondson-Jones, noting that the new flights will represent only 5% of JetBlue's total capacity.

JetBlue currently flies from New York to California and Florida.

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