theflightguy

JetBlue takes the gloves off with $29 fares…but will it matter?

In Uncategorized on May 18, 2009 at 7:13 pm

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.

Flights to Japan for $455 w/tax…plus a stop in Vancouver

In Asia Tips, Canada Tips, Flight Tips, Stopover Tips on May 15, 2009 at 7:21 pm

While I can’t unequivocally say that these are the lowest fares to Japan ever…these are the lowest fares to Japan ever.  At least the lowest that I’ve ever seen.

Air Canada has deals on sale (fare basis SXJPMAY & SWJPMAY if that means anything to you) for departures through June from multiple West Coast gateways including Seattle, Portland, San Francisco, Sacramento, Los Angeles, San Diego and Las Vegas.  Fares start at $382 + tax, or as low as $445 total.  These deals are $200 cheaper than anything else to Asia right now, and fares in July are almost double.  Even fares for next winter (typically low season) are over $700, so this is a great chance to take advantage of the warmer weather and scenery.

Since these are published fares, you’re best off booking through Air Canada directly.  They do offer a decent flexible-date search, although you may have some better luck with that on some of the other OTA’s or metas.

Unfortunately this fare doesn’t allow for stopovers in Vancouver, one of TFG’s favorite cities.  However, one definite advantage I found to searching on AC directly is that it returns results for itineraries that allow for ways to spend a night and almost an entire day there.  Since many OTA’s and metas only return results with shorter layovers (typically 8-12 hours maximum), your best bet to find this loophole is by booking with the airline directly.

For example, check out this option departing SFO on June 14:

1
AC5111
14:15 16:35 0 Vancouver
(YVR)
<!–
/** manage of onclick event using the prototype library Event object, which is more compliant with different browser
Event.observe(id, eventype, action)
*/
Event.observe(‘rdo_PA0FL1FF0′,’click’, function(){
FFPOBuilder.selectRadioFlight(‘OUTBOUND’,'PA0FL1FF0′, ‘FTOURIST’, false);
FFPOForm.showSeatmapLink(‘0′,’1′,’0′);
FFPOForm.setDateChoice(‘OUTBOUND’, ‘200906161555′);
});
// –> $ 457
<!–
/** manage of onclick event using the prototype library Event object, which is more compliant with different browser
Event.observe(id, eventype, action)
*/
Event.observe(‘rdo_PA0FL1FF1′,’click’, function(){
FFPOBuilder.selectRadioFlight(‘OUTBOUND’,'PA0FL1FF1′, ‘FLEISURE’, false);
FFPOForm.showSeatmapLink(‘0′,’1′,’1′);
FFPOForm.setDateChoice(‘OUTBOUND’, ‘200906161555′);
});
// –> $ 191
<!–
/** manage of onclick event using the prototype library Event object, which is more compliant with different browser
Event.observe(id, eventype, action)
*/
Event.observe(‘rdo_PA0FL1FF2′,’click’, function(){
FFPOBuilder.selectRadioFlight(‘OUTBOUND’,'PA0FL1FF2′, ‘FLATITUDEP’, false);
FFPOForm.showSeatmapLink(‘0′,’1′,’2′);
FFPOForm.setDateChoice(‘OUTBOUND’, ‘200906161555′);
});
// –> $ 1686
<!–
/** manage of onclick event using the prototype library Event object, which is more compliant with different browser
Event.observe(id, eventype, action)
*/
Event.observe(‘rdo_PA0FL1FF4′,’click’, function(){
FFPOBuilder.selectRadioFlight(‘OUTBOUND’,'PA0FL1FF4′, ‘FEXECREST’, false);
FFPOForm.showSeatmapLink(‘0′,’1′,’4′);
FFPOForm.setDateChoice(‘OUTBOUND’, ‘200906161555′);
});
// –> $ 1937
<!–
/** manage of onclick event using the prototype library Event object, which is more compliant with different browser
Event.observe(id, eventype, action)
*/
Event.observe(‘rdo_PA0FL1FF5′,’click’, function(){
FFPOBuilder.selectRadioFlight(‘OUTBOUND’,'PA0FL1FF5′, ‘FEXECFLEX’, false);
FFPOForm.showSeatmapLink(‘0′,’1′,’5′);
FFPOForm.setDateChoice(‘OUTBOUND’, ‘200906161555′);
});
// –> $ 5516
AC003
13:45
(15-Jun)
15:55
+ 1 day
0

AC 5111 (codeshare operated by United) departs SFO at 2:15 pm and arrives in Vancouver at 4:35 pm on Sunday.  That’s still plenty of time to enjoy lots of daylight as the sun doesn’t set there until after 9:00 pm in June.  Head out for a snack, take a ride through Stanley Park, grab a few drinks, crash, wake up, have a nice brunch, and you’ve still got plenty of time to catch your 1:45 pm flight to Tokyo on Monday.

Where Will Virgin America Fly Next?

In Uncategorized on May 12, 2009 at 6:57 pm

I’ve been a big fan of Virgin America since their launch.  The in-flight experience is top-notch, the service is great, they’re based at SFO (my home airport), their eleVAte rewards program is revolutionary, and best of all – they’ve got great fares.

And that’s just a consumer perspective.  From an airline industry perspective, all of those things are even more impressive.  Plus most of the colleagues I know who either work or have worked there are smarter than the average airline bear.  The bigger question is whether they can continue to offer more for less and still be profitable.  It wasn’t long ago that JetBlue was in a similar situation, and their decline has to do with more than just winter ice storms.

More on all of that later.  For now I wanted to focus on Virgin America as a Travel 2.0 company, and specifically how they’ve engaged social media.  They’ve done a great job building up followers on Facebook (over 20K fans) and Twitter (over 15K followers).  In comparison, that’s still not quite as many Twitter followers as JetBlue (503,671) or even Southwest (26,855), but substantially more than the world’s largest airline, Delta (just 749).

Keep in mind that Virgin America is a smaller and newer airline than any of those other carriers, but it’s creatively using Web 2.0 to help figure out where its new passengers will be coming from.  I’ve seen similar promotions from airlines in the past, but I can’t remember them ever sharing the results.

Virgin America did just that on their Facebook page yesterday, capping off a month where they’ve already held an in-flight online chat with Vegas techno act Crystal Method, as well as posting some fun photos from their recent SFO-SNA launch:

3270_75067744410_5832584410_1561713_7941429_n

The results (in order) are below, and can also be found here.

1. SFO- Chicago
2. SFO- Honolulu
3. SFO- Miami
4. LAX- Miami
5. SFO- Portland
6. LAX- Chicago
7. SFO- Phoenix
8. JFK- Miami
9. SFO- Denver
10.LAX- Portland

Here’s my 2 cents on when/if any of these new routes will take off:

1. SFO- Chicago
6. LAX- Chicago

I’m guessing many of these people are like me – San Francisco travelers who are sick of United.  I was eager to cash out my United miles and cast all my chips with Virgin as soon as eleVAte came out, and that’s turned out great – I promise that I’ll devote a whole blog to eleVAte sometime before the end of the week.  Anyway, this route is dominated by United (10 nonstops/day), followed by American (5) and Southwest (3).

United is generally very protective of this route, as it connects two of their hubs.  I heard a rumor from a reliable source last summer that this was going to be Virgin’s next flight, however they surprised everyone by starting SFO-Boston in February, followed shortly thereafter by LAX-Boston, and most recently last month’s Orange County launch, featuring Shaun White (above), MC Hammer and Lamar OdomEditor’s note: Not a single Boston route made the top ten on the proposed list.  This may or may not have something to do with MC Hammer’s absence from that launch party.

Verdict: I think this route is inevitable regardless, but don’t know when will it happen.  The SFO-SNA flights caught many people by surprise, and sent a strong signal that VA was looking to compete head-on with Southwest in one of their strongest markets (many Southwest sales specifically exclude SNA, given its dominance at that airport).

With the exception of Vegas, Virgin is currently only flying to East and West Coast cities (and Vegas is essentially West Coast), so they’re going to need to make inroads in to Middle America soon.  Also, given the nearly $100-drop in fares on this route over the past year, I think that other airlines see it coming.

I’ll predict that VA will at the very least announce service to CHI before the end of the year, although if the economy continues to struggle then I wouldn’t be surprised to see the flights not starting until 2010.  Given how they’ve rolled out their other flights, it’s safe to assume that SFO-CHI would come first, followed a few weeks later by LAX-CHI.

2. SFO- Honolulu

Interesting, but I’m not so sure about this.  VA did send a signal that it wants to compete on Mexico routes last February when it applied for rights to fly LAX-SJD.  Those rights were eventually awarded to United, and given the Swine Flu hysteria, I doubt that VA is rushing to get in there anytime soon.  That may mean that they’d be interested in flying to Hawaii instead, but I wouldn’t hold my breath.

Although this would be a popular leisure route, it’s not very lucrative for premium class travel (First Class and Main Cabin Select), and has limited inbound potential for HNL-SFO.  United already flies SFO-HNL daily, as well as to the other islands, and Hawaiian also flies to HNL from all 3 Bay Area airports, plus Sacramento.  Until the economy (and subsequently leisure travel) pick up, I wouldn’t count on this.  Just because people voted for this route doesn’t mean that they’ve got the time and money to actually take that trip.

3. SFO- Miami
4. LAX- Miami

In the interest of full disclosure, I voted in this survey myself, and I voted for SFO-MIA.  I don’t even have any real need or interest to fly that route, hence my feelings on those daydreamer SFO-HNL votes.  However, I did used to have to fly from the Bay Area to South Florida for work a couple of times of year at my old job, where my only nonstop options were American (SFO-MIA) and JetBlue (OAK-FLL).

I have nothing against American – they’re just mediocre, and if I have any loyalty to a mediocre airline it would be United since they offer more flights to/from SFO.  I prefer carriers such as JetBlue and Virgin that offer inflight entertainment, especially on long cross-country flights.

I live much closer to SFO than OAK, and one time I had a meeting right across the street from MIA.  I still chose to fly JetBlue home from FLL-OAK simply because it’s such a superior experience to carriers such as American, not to mention the fact that it was cheaper.  Plus it’s so much easier to return rental cars right inside the terminal at FLL as opposed to offsite at MIA, it arguably doesn’t take all that much longer on that end.

Prediction: Miami is a jet-set market that fits in perfectly with VA’s demographics.  It’s just as likely to be their destination as Chicago is.

5. SFO- Portland
10. LAX- Portland

Very interesting, because SFO-PDX has historically been one of the most overpriced routes on the West Coast, with fares ranging from $200-$275 over the past year.  In contrast, SFO-SEA fares now cost half as much, primarily because Virgin shattered the price floor when they began flying this route last spring, as they also did between LAX-SEA.

Unfortunately Portland isn’t nearly as big of a corporate market as SEA is, which limits the demand for lucrative high-yield seats (ie: First Class).  However, it shows that VA has done a great job of branding on the West Coast, and that California hipsters are fascinated by Portland.

I’ll admit that I’ve now lived in SF for 11 1/2 years and have never been to Oregon, mainly because it’s too far to drive for a weekend and usually too expensive to fly.  We’re heading to Seattle for Memorial Day Weekend because we got roundtrip flights for about $100/apiece, and if we could ever get something like that to PDX then we’d be up there in a heartbeat.

There are also plenty of Portlanders who’d gladly come visit California under the same logic.  Strictly from an anecdotal experience standpoint, Portlanders are some of the most well-travelled people per capita of any US city.  The local tourism boards in SF, LA and Portland would be wise to get together with VA to make these flights happen, as the other carriers have proven that they have no interest in promoting attractive leisure fares to/from PDX.

7. SFO- Phoenix

Given the number of flights already in the market to PHX from all 3 Bay Area airports on US Airways, Southwest and United, I definitely don’t see this happening in the current economy.  Of course I could say the same thing about PDX (where Alaska Airlines dominates the market locally), which is also much smaller than Phoenix and would thus arguably have less potential.

8. JFK- Miami

The most interesting route on the list, simply because it’s the only one not to/from the West Coast, where VA’s brand is clearly strongest.  This is also arguably an oversaturated market, especially when you consider all the flights out of Newark on Continental, not to mention plenty of other regional service such as JetBlue’s nonstop HPN-FLL flights.

While it is another potential jet-set route perfectly catered to VA’s target customers, the oversaturation creates unloyal customers who are focused on price.  VA has certainly shown the willingness to be extremely aggressive on that front on similar West Coast markets such as SFO-LAS, but that was arguably more of a marketing/branding decision as much as it was a revenue decision.

VA currently flies from both SFO & LAX to 3 East Coast cities (New York, Boston and DC), as well as JFK-Vegas.  It appears that JFK would likely wind up being their East Coast hub, but expect an official decision to be made on that first before they announce what would potentially be their first non-West Coast flight.

With three proposed routes in the top ten, things are looking good for MIA to be VA’s next new destination.  It’s reasonable to assume that SFO-MIA & LAX-MIA would come first, but you never know in this business.

9. SFO- Denver

Like SFO-ORD, this is another route dominated by United, and has thus been traditionally overpriced.  Even with Denver-based Frontier Airlines (a supposed Low Cost Carrier) flying to all 3 Bay Area airports (plus Sacramento), fares prior to 2007 were typically well over $200, if not $300 roundtrip.  That started to change 2 years ago when Southwest began flying between Denver and Oakland, finally dropping them under $200.  As Southwest expanded its network to also include both DEN-OAK as well as DEN-SJC service, the price floor was again shattered.

However, I’m not so sure how well that’s doing for them.  I flew Southwest to/from Denver recently, and the flighst were maybe half full, even during peak leisure weekend hours.  I wouldn’t expect VA to start this route if Southwest is already struggling with it, even while offering the lowest rates for it in years.