JetBlue Retains The Lead Among Low-Cost Carriers

JetBlue Airways, for the second consecutive year, earned top marks among smaller U.S. carriers from corporate and travel agency buyers, driven by high scores in customer support categories, a strong value proposition and generally positive perceptions around the industry. Its margin of victory remained just a fraction of a point, but this year AirTran Airways moved into the runner-up spot, dramatically improving its overall score versus last year. Given the rapid growth of these two carriers, next year they likely will be included among the major carrier ranks.

Though Midwest Airlines finished with a higher score than last year, it dropped to third place. Frontier Airlines' modestly improved performance tied with ATA's substantially improved performance for fourth place.

As would be expected, the smaller carriers as a group—which generally can be referred to as low-cost competition—excelled in the price value category, as each of the five finished with scores higher than all major carriers, aside from fellow low-cost carriers America West and Southwest. The smaller carriers also performed well in the transient pricing category—driven not by willingness to negotiate corporate discounts but by their low fares, which generally are matched by majors—and posted solid scores for complaint and problem resolution.

"The low-cost carriers have been doing a very good job attracting clients to their products," according to Ovation Corporate Travel executive vice president Michael Steiner. "Our customers, historically, have been among the most demanding and we have seen them incorporate LCCs into their programs, in some cases mandating usage in certain city pairs."

Survey respondents as a group, however, used each smaller carrier in 2004 less than in 2003. Similar usage trends were observed among major carriers.

Nevertheless, travel buyers in increasing numbers are at least exploring use of LCCs and rating them more favorably than the major carriers. The aggregate overall score for the five smaller carriers this year was 3.17, up from 2.92 one year ago. By comparison, the aggregate average score for the nine major carriers rose to 3.13 from 3.03 in 2003.

"This suggests even more turbulence for the majors as the perception is that the smaller airlines compete primarily on transient price. However, this shows that to be incorrect," said Mark Walton, principal of Consulting Strategies. "If I were a major airline, this would add to my already considerable concern."

"Value is influencing the results," according to a Carlson Wagonlit Travel Solutions Group statement, "and there still appears to be a double standard. Travelers expect the legacy carriers to offer full service at a competitive price. However, travelers feel good from the outset about the price of the low-cost carriers and any service received is a bonus to be rewarded with high marks."

At the same time, travel managers questioning the value of preferred contracts with network carriers are taking a closer look at the smaller players.

"The low-cost carriers no longer are flashes in the pan and we have to deal with it," said an East Coast travel manager. "With discounts off full Y so tight—and hardly anyone buying full Y—am I really getting value for my company? Where is my allegiance? After the actions of Northwest [to try to add fees on bookings through the corporate travel agent distribution channel], it is clear they are not looking out for me."

Especially on the East Coast, but also in California and many points in between, JetBlue is drawing corporate interest. The carrier's overall score of 3.29 was an improvement on last year's rating and places the carrier second among all 14 carriers in both segments of the survey. It gained higher scores in nine of 10 categories, including first-place rankings (among all 14 airlines) for complaint and problem resolution and quality of airline communication. Its only declining score, for overall price value, fell to a still-impressive 3.90, good for fourth among all 14 airlines surveyed.

Survey respondents also hailed the carrier for its professional staff and straightforward frequent flyer program.

"JetBlue has simplified the mess that legacy carriers created," said vice president of sales and marketing Amy Curtis-McIntyre, speaking this summer at the National Business Travel Association annual convention in Orlando.

The carrier has delved deeper into the corporate market by launching the CompanyBlue portal for business clients—which now claims more than 800 registered corporate clients—and doubling its salesforce.

"Three years ago, it was just me," said director of sales Noreen Courtney-Wilds. "Now we can cover more ground."

Though JetBlue focuses on major markets, Courtney-Wilds said awareness is growing of the carrier in the middle of the country. Some companies headquartered outside JetBlue markets, she said, have enrolled in CompanyBlue.

JetBlue is exploring a meetings program and working to incorporate its content into more corporate self-booking tools. "The relevancy of JetBlue really will be seen over the next year," said WorldTravel BTI executive vice president Dee Runyan. "It still is a tiny fraction of our sales—and growing—but its influence already can be seen in growing marketshare."

For its part, AirTran Airways posted dramatic improvement to finish a hair behind JetBlue. It secured higher scores in nine of 10 categories, including first- place ratings among all smaller carriers in three. Its 4.13 mark for overall price value was the highest score for any airline in any category.

Should its proposed acquisition of ATA Airlines assets in Chicago, New York and Washington, D.C., progress as planned, AirTran would become a relevant player for more corporate buyers.

On the flip side, that development would minimize ATA's penetration in the corporate market. Though the carrier showed the largest improvement among the five smaller carriers, picking up nearly half a point from last year, it still languished in the basement.

Meanwhile, usage levels at both Frontier and Midwest Airlines slipped below 10 percent of the survey base. Both had improved overall scores, but neither beat the overall industry average.

Among the five smaller carriers, Frontier Airlines tied for first in the meeting pricing category and improved in every other, including a 3.93 for overall price value. Midwest took top honors for value of sales rep visits, contract performance data and services/amenities, but took a step back in five of the 10 categories.