The Rise of Cheap Airlines

BreakingViews has launched its Poor Getting Poorer index, complete with predictable members such as Walmart and pawnbrokers EZCorp (EZPW). But there's also JetBlue (JBLU):

Though leisure travel will take a hit, discount carriers like JetBlue will attract those willing to take 3 a.m. flights from obscure airports.

I'm not sure that JetBlue really fits into the euro-style "3am flights from obscure airports" category; for one thing, its hub is at New York's JFK, where it has a very shiny new terminal complete with massage service, a steakhouse, and free wifi.

But with oil prices in the $40 range and an enormous number of airplanes being mothballed by downsizing major airlines, there would seem to be an opportunity for someone like Ryanair CEO Michael O'Leary to start up precisely that kind of discount airline.

JetBlue isn't really a discounter: I just asked Orbitz for quotes for non-stop flights from New York JFK to San Francisco SFO leaving on Saturday and coming back a week later. Virgin America and Alaska Airlines will both do it for $665; Delta is $745; JetBlue is in fourth place on $755. American is more, at $1,050, and US Airways and United don't seem interested in competing at all: they both charge $1,825.

And more generally, JetBlue has never offered the ultracheap flights which built the businesses of the likes of Ryanair and Easyjet. Could it happen here? I don't see why not, especially if the big airlines continue their long and seemingly inevitable decline. Once the frequent fliers lose their loyalty -- something which has already started -- I can't see why a bunch of smaller, nimbler mammals shouldn't be able to see off the dinosaurs once and for all.

Already JetBlue and Virgin America are trying to position themselves at the high end of in-flight service and quality, with mixed results. They're more likely to want to stay there than they are to go downmarket and compete with bucket shops.

Comments

[AirBoss:]

After importing former USAirways revenue management staff, JetBlue has become like any other airline. They price gouge when the opportunity presents, do not have a true low cost structure when full maintenance and ownership costs are realized, and earlier growth followed by recent stagnation have not been kind to their JFK and out-station customer facing service.

2008 Dec 30 08:20 AM

[bosun.j:]

$755 JFK to SFO? Thats nuts. I can fly return from BKK to anywhere in Europe on a FIVE STAR airline for the same amount. Pleasant attractive and attentive flight attendants instead of AirHags like in America.

2008 Dec 30 08:46 AM

[Roger Knights:]

He was talking about a round-trip fare.

2008 Dec 30 12:32 PM

[33Nick:]

JetBlue was nice in the beginning but I will fly Virginia America next. I always fly on Virgin Atlantic because of the great experience I've always had. I think flying the Virgin America makes sense from now on.

That's the beauty of our societies, we can actually chose and vote with our wallets...

2008 Dec 30 12:50 PM

[bosun.j:]

@Roger:

Yes I know! He flies a crappy airline with crappy service and AirHags 5000 miles round trip (return) for $755. I fly a FIVE STAR airline with pleasant attractive and attentive flight attendants return 14000 miles for $691.

On Dec 30 12:32 PM Roger Knights wrote:

> He was talking about a round-trip fare.

2008 Dec 30 02:54 PM

[Grim:]

Your full of it. We have always had to pay full maintenance cost (that was a rumor.) And we are leasing like every other airline and were able to pay a substantial amount of debt last year. We have a true low cost structure implemented from the beginning and we are doing just fine at out stations and JFK. As a matter of fact as a sinking american pulls out of San Juan Guess who has stepped in and taken over routes. Yep, you guessed it, JetBlue. Our growth has not hurt us that much. True, we tried to go big too quick but have since scaled back and we are primed to make a Huge profit this year. We have not and will not become just another "AIRLINE" We have a great product, free drinks, food and TV's on every flight, Free WIFI and Great customer service. Take a look at all the awards and accolades. Don't hate us because we rock.


On Dec 30 08:20 AM AirBoss wrote:

> After importing former USAirways revenue management staff, JetBlue
> has become like any other airline. They price gouge when the opportunity
> presents, do not have a true low cost structure when full maintenance
> and ownership costs are realized, and earlier growth followed by
> recent stagnation have not been kind to their JFK and out-station
> customer facing service.

Jan 03 07:59 PM