Three low-cost carriers are seeking to descend on San Francisco International Airport as soon as this year, altering the competitive landscape on several citypairs. JetBlue Airways in May is scheduled to launch service from the airport to Boston and New York, Southwest Airlines this fall plans to launch several undisclosed routes, while San Francisco-based Virgin America seeks to launch its flagship route between SFO and New York's John F. Kennedy International Airport this summer—pending the resolution of its ongoing approval process with U.S. regulators.
The expansion of low-cost carriers to San Francisco International Airport is viewed as a potential boon for corporate travel buyers in the area. "Speaking as a buyer, the history with low-cost carriers coming into any airport tends to lower the fares. I would expect that to be the case at SFO," said Rick Wakida, global travel manager at Gilead Sciences, which is headquartered in Foster City, Calif.
"We're right in between SFO and San Jose, but we're a little closer to San Francisco," Wakida said. "Because it's closer, because of the carrier makeup there and since it is the primary international gateway, many of our travelers fly from SFO."
With service to the East Coast already established from other Bay Area airports in Oakland and San Jose, JetBlue said that through the new service from SFO to JFK, it "will offer the most nonstop flights between New York City and the Bay Area."
"San Franciscans have been loyal to JetBlue since 2000, when we first launched service to Oakland International Airport," said JetBlue CEO David Neeleman in a statement. "Our customers continually asked for more service from more airports."
Southwest last month also said it plans to inaugurate new San Francisco International Airport service. The carrier, however, would not specify routes or frequencies, saying only that it is "currently in discussions with the airport and that it aims to return to the West Bay in a meaningful way in the early fall." Like JetBlue, "San Francisco International is the only major Bay Area airport we don't currently serve," Southwest said in a statement. The carrier in 2001 pulled its operations from the airport after 20 years. "Today, SFO has improved operationally and is a more cost-efficient airport, and Southwest is a far larger airline than it was in 2001 and better able to support this type of operation," Southwest CEO Gary Kelly said in a statement.
"There's plenty of gate space available" to accommodate the low-cost influx, a San Francisco International Airport spokesperson said, noting that airlines rent gates from the airport. The spokesperson said Southwest likely would rent three gates; JetBlue has yet to determine the number of gates it would occupy and Virgin America has not secured an agreement with the airport, "because they're not an airline yet."
American Airlines—an entrenched carrier on the New York-San Francisco route—said it also would expand service as the new kids enter the block. American in August plans to allocate an additional Boeing 767 for its San Francisco route, bringing service from five to six daily flights, senior vice president of global sales David Cush said last month.
"This is a competitive response to JetBlue," Cush said. "We do very well on that route with our five 767s today. We were able to go in with some of our efficiencies that we've been gaining in our operations and free up another 767. This looked like the place to put it. In general, what happens when you get a low-cost entrant into these markets, it does stimulate a lot of traffic and we'll be there to absorb the demand." Cush noted that American Airlines is offering corporate travelers "a strong front of the cabin proposition on that route" with an upgraded premium product coming on board.
Virgin America is hoping to launch its inaugural service between SFO and JFK this summer—and said it is not discouraged by JetBlue's move to get the jump on the route. A spokesperson said that fares have been historically high in San Francisco and, like Cush, said that the influx of new carriers will stimulate demand in the market, leaving enough demand for San Francisco's new entrants.
Although still mired in tribulations with U.S. regulators in its preparations for takeoff, Virgin America last month said it seeks to serve up to 30 cities within five years. The nascent carrier confirmed plans to serve San Francisco; Washington, D.C.; Los Angeles; San Diego and Las Vegas.
DOT in December rejected Virgin America's bid to fly, claiming the carrier had not demonstrated that it was at least 75 percent owned and controlled by U.S. citizens (BTN, Jan. 22).
After the airline retooled its structure and refiled with DOT, a spokesperson last month said, "We hope that we should hear back in the next couple of months and obviously we feel we were always U.S.-owned and -operated, but with the changes we've made we've clearly demonstrated that." The carrier last month also secured $30 million in additional equity and debt investment from U.S. investors, including Cyrus Capital Partners and Black Canyon Capital.