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JetBlue, Virgin America announce low fares from LAX to East Coast

The rival carriers begin offering $105 one-way fares to Boston and New York, setting the lowest such prices in recent memory for high-demand summer travel.

February 05, 2009|Peter Pae

A transcontinental fare war has erupted at Los Angeles International Airport, where JetBlue Airways on Wednesday began offering a $105 one-way price to Boston and New York.

With taxes and fees, a Southern California traveler will be able to fly nonstop to the East Coast for as little as $231 round trip this summer. It's the lowest such price the industry has seen in recent memory for high-demand summer travel.

"I haven't seen anything like this in years," said Tom Parsons, chief executive of online travel guide Bestfares.com. "I've been telling people they need to be careful booking flights for June and July this early, but if you are finding $231 fares coast to coast, you don't want to wait."

Similar summer flights on American Airlines and United Airlines were averaging about $400 round trip before the fare war ignited Wednesday.

JetBlue's deal, timed to the launch of its new service at LAX on June 17, came as rival low-fare carrier Virgin America was gearing up to start its LAX-to-Boston service next week with offers of $149 one way.

Virgin America quickly matched JetBlue's $105 one-way offers Wednesday. United and American, which also offer nonstop flights to Boston and New York from LAX, are likely to drop their fares in response, analysts said.

Travelers were delighted at the news.

"That's fantastic," said Bob Covington, a Mid-Wilshire resident who flies out of LAX 25 to 30 times a year because of his job as an event technology manager for photo agency Getty Images. Like other frequent business travelers, Covington has been asked by his company to find the cheapest fare possible. "In this environment, anything you can do to cut costs and remain efficient is welcomed."

A fare war has been a typical outcome since Virgin America began flying in 2007, first for flights along the West Coast from LAX to San Francisco and Seattle and now to the East Coast.

Last week the airline ignited a fare war after it announced that it would begin flights between Orange County's John Wayne Airport and San Francisco International Airport. Fares between the two cities dipped to $49 one way.

Offering low fares to steal passengers away from other airlines has been costly for Virgin America. In its first financial disclosure, the airline said this week that it lost $275 million in the first 14 months of operation.

But the airline's top executive, David Cush, said in an interview that the airline could post its first quarterly profit this year.

Despite slumping demand that is hurting other airlines, Cush said he expected the carrier to have "one or two profitable quarters" in 2009 before posting a full-year profit next year.

"We are quite happy with the way things are going," Cush said in a telephone interview shortly after some of the airline's financial data were disclosed.

The airline, a brainchild of British billionaire Richard Branson, is privately controlled and not required by the Securities and Exchange Commission to issue quarterly financial statements.

But the airline was unable to fend off calls for disclosure of some financial data mandated by the Department of Transportation for commercial carriers operating in the U.S.

As such, the airline reluctantly disclosed that it had revenue of $312 million in the first 14 months of operation while expenses topped $574 million as it started up service and then began expanding along the West Coast.

Virgin America, headquartered in Burlingame near San Francisco, has made the Los Angeles area a key market. It currently has nonstop service to New York, Washington, Seattle and San Francisco from LAX.

The financial data showed that losses steadily narrowed as Virgin America's planes got fuller. Load factor, or the percentage of the plane filled with passengers, grew from 56% in the first quarter of last year to 80% by the end of October, the most recent figures available.

By October, Virgin was flying 237,000 passengers a month, up sharply from 39,000 in its first month of operation in August 2007.

With a general decline in airline passengers, Virgin America has been growing by taking fliers away from major carriers such as United and American, and not from other discount carriers such as JetBlue and Southwest Airlines, Cush said.

Some analysts have said United and American are most vulnerable to new entrants such as Virgin America because the big carriers have been cutting back on flights, operate older planes and have been switching to smaller regional jets that are disliked by business travelers. Both Virgin America and JetBlue offer newer planes with video screens at every seat, a popular feature that has helped the carriers lure passengers.

"In terms of revenue and traffic, most of our market share is coming from American and United," Cush said.

The airline, with 28 Airbus A320 jets, is now flying about twice as many planes as JetBlue flew in its first year and a half of operations, Cush said. JetBlue, with a loyal following at Long Beach Airport, is considered one of the more successful airlines to begin service in the last decade.

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peter.pae@latimes.com

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