Following up on last week’s Virgin America post and LinkedIn discussions, it still remains to be seen whether Virgin is trying to compete primarily with United, Southwest, JetBlue, or all three. Regardless, with the new JetBlue summer sale that just launched today, it’s clear that JetBlue is feeling the pinch on intra-California flights, and has responded with fares between it’s SoCal hub in Long Beach and all three Bay Area airports for just $29 + tax.
As is the standard gimmick with most airline fare sales, there’s always a catch. These ultra-low fares are only available on Tuesdays & Wednesdays, however fares on other dates start at just $49 each way. They’re also valid throughout the summer, specifically 6/2-9/9, when fares are typically highest.
I’m sure that other airlines will follow suit soon enough. Currently the best RT fares on other NorCal-SoCal routes go for about $117 w/tax. JetBlue’s sale fares price out to just $79 RT total, so they pass the smell test as far as value goes.
The bigger question is whether this will help JetBlue recover any of its lost market share on the world’s busiest air corridor. After shaking up the system by establishing an Low Cost Carrier with a hub in JFK (which was considered too congested and expensive for an LCC to even fly to, let alone use as its primary hub), JetBlue set up similar regional hubs at East Coast airports that Southwest had avoided, such as Boston (Logan) in favor of Manchester or Providence, and Dulles in favor of BWI.
Most industry insiders and local alike will tell you that it worked great. Depending on what suburb you lived in, many people were willing to drive the extra 20-30 miles to those other airports for Southwest’s fares, and in many cases those other airports are even closer than Logan is. At the very least they’re less crowded.
However, those airports lack appeal to city-dwellers who live in the some of the country’s biggest and most affluent urban areas. Whatever fare savings exist out of Manchester or Islip instead of Logan or JFK are far more than offset by the opportunity cost of having to head out to what many Bostonians or New Yorkers would consider to be the boonies.
That’s why JetBlue completely surprised everyone even more when they took basically the complete opposite approach on the West Coast, establishing hubs in Oakland instead of SFO, and Long Beach instead of LAX.
Long Beach had some potential logic to it, as it was the one SoCal airport where they could easily draw market share away from Southwest and United, primarily because it had been a fairly limited market. As the dominant player at nearby John Wayne (SNA), Southwest had proven that Orange County was a lucrative market, and Long Beach was arguably untapped potential.
Results out of SoCal proved to be mixed. JetBlue was able to establish some limited success on transcon routes, where they generally had no nonstop competition out of Long Beach, although LGB never proved to be an attractive LAX alternative in the minds of locals that the carrier had hoped for.
The airline fared slightly better out of NorCal, first with flights exclusively out of OAK, then SJC, then finally SFO. At one point JetBlue actually offerred more nonstop flights from the Bay Area to New York than any other airline – even United.
Even stubborn San Francisco city-dwellers like me were more than happy to head acorss the Bay to OAK take advantage of JetBlue’s cheap fares, but perhaps even more importantly, their superior inflight entertainment, specifically DirecTV. A lifelong Red Sox fan, I’m proud to say that I watched Jason Varitek’s classic smackdown of A-Rod in 2004 flying back from Boston on JetBlue. Editor’s note: Most die-hard Sox fans will tell you that it was at that very moment, not in that following magical postseason, when The Curse was actually broken.
For airlines, there’s one major problem with transcon flights – they’re not necessarily profitable. JetBlue was offering fares from $129-$159 each way on those flights when they launched. The legacy carriers don’t make their money on those types of fares, they make it on premium business and first class passengers, or by using them as feeders to onward connecting flights to Europe. Since JetBlue has neither business first/class, nor flights to Europe, those options were out. As fuel prices began to rise a couple years back, so did fares, often costing at least $249 each way for transcon flights on JetBlue. I remember a few other colleagues in the airline industry even question if they were still an LCC.
Combine that with bad ice storm PR, and JetBlue began to lose appeal. And if anything competing on price on trancon routes is a race to the bottom, which by definition is a race that isn’t worth winning. JetBlue slowly began cutting back transcon service, eliminating such routes as SFO-BOS where other pseudo-LCC’s such as Song and even America West had briefly tried out nonstop service before realizing that it could never be profitable.
And as far as intra-California flights went, what was the point? People might have been willing to spend more time locally to get to a less ideal airport on a long-haul flight, but for short-haul there were already too many other options. United was still the preferred airline for those loyal to legacy carriers. Southwest offered the most flights, as well as a substantial hub at LAX, making it an attractive choice for both leisure and thrifty business travelers.
Enter Virgin America.
The well-funded startup entered the market in late 2007 by offering JetBlue had been offering (low fares, superior inflight entertainment, lack of snob factor faced when flying United but not being a 1K Premier Exec), and more. Specifically, it began with SFO-LAX flights, which proved to be a far more popular option than OAK-LGB ever was on JetBlue. And Southwest, which had previously avoided SFO due to congestion, quick entered the market competing on such routes as LAX, SAN, LAS, PHX, etc.
I remember seeing the ad campaigns for JetBlue’s OAK-LGB service when it began. To fly transcon out of those airports to save money and enjoy some live ESPN on a 5-6 hour flight made sense, but who possibly needs to fly between those two cities? As major shipping ports, I’m sure that there are some people in the logistics and supply chain field who might…but that’s about it. Even among JetBlue supporters in California, the typical reaction to the announcement of that flight was, “So what?”
Virgin America knocked JetBlue completely out of the picture on that corridor. By flying between the two major airports, they were going directly after United. When they surprised everyone with their new SFO-SNA flights, they showed that they were also going directly after Southwest at one of its niche hubs (not to mention a fairly affluent region). Prior to that they made a significant dent in JetBlue’s transcon market share by establishing routes from SFO to BOS, JFK and IAD, services which JetBlue had either trimmed down or discontinued.
Critics will tell you that Virgin is losing money on those long-haul routes. And they do have a point, given that LAX-BOS fares have typically been the lowest fares in terms of Price Per Mile (PPM) across all airlines since Virgin established that service a few months ago.
But there’s still plenty of money to be made on short-haul routes, where airlines can maximize number of passengers, not to mention potential ancillary revenue such as baggage fees, onboard snack sales, etc.
Unfortunately for JetBlue, they’re now a distant afterthought for intra-California flights. United is still the choice for those who prefer legacy carriers, specifically business travelers and mileage program junkies. Southwest still has its loyal fan base. And Virgin America is the flashy new guy on the block, offering even better amenities than JetBlue, and with a corporate image on the way up instead of on the way down. And most importantly, they’re not flying to Long Beach.
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