Low-cost carriers continue to add flights in markets once dominated by large network carriers as they position themselves to capitalize on an ongoing business travel rebound and prepare to increase their fleets significantly. JetBlue in the coming months will add waves of transcontinental flights and possibly routes in the business-heavy Northeast corridor, while AirTran and Southwest in May will launch fresh attacks on US Airways' hubs.
Meanwhile, low-cost carriers on several other continents are developing strategies to become more relevant to the corporate travel community.
The latest developments again underscore how aggressively these low-cost carriers are growing and adapting business plans. At the same time, legacy carriers Delta and United are expanding their own low-fare operations to protect domestic market share.
By this summer, JetBlue will operate nonstop service to nine West Coast cities from its primary station at New York JFK and secondary stations in Washington and Boston
(BTNonline, Feb. 24). The newest destinations on the carrier's route map are Portland, Ore., and Burbank, its seventh city in California and third in the Los Angeles basin. JetBlue's transcon expansion has included both breadth and depth as it adds frequencies on several citypairs and builds a schedule more attractive to business travelers.
"The legacy carriers did not stop JetBlue's growth in the transcon market and they, along with America West, have since retreated," said a recent research report issued by analysts at Raymond James & Associates.
The report also indicated JetBlue would build a hub-and-spoke operation centered at New York JFK as the carrier later this year begins taking delivery of 100-seat Embraer 190 jets, its second fleet type. As the launch customer for that new plane, JetBlue likely would enter several smaller and midsize markets. "With low fares and a superior product, JetBlue will capture a substantial share of the legacy airlines' traffic in medium to lower density markets," Raymond James analysts said.
It also is likely to compete against several major carriers for northeastern business travelers, with fares potentially as low as $100. "It is probable," said a JetBlue spokesperson, referring to the possible autumn entry of JetBlue in the Boston-New York JFK route. The airline also is building operations at Washington Dulles.
Both Delta and US Airways provide shuttle services between Boston, New York and Washington and American and Continental also fly frequently between the three cities.
Meanwhile, on May 4, US Airways will be harassed by lower-cost competitors on two sides, as Southwest initiates service from Pittsburgh and AirTran lands in Charlotte.
Southwest has grown quickly at Philadelphia, announced new service from Pittsburgh and is focused on Chicago Midway, while AirTran may have beat Southwest to the punch in Charlotte, given the market's comparably high fares. Regardless of Southwest's intentions in Charlotte, if any, AirTran will launch four daily flights to its Atlanta hub and two daily flights to Baltimore/Washington International.
"Charlotte has been plagued by the highest fares in the country for years," said AirTran president and COO Robert Fornaro. "That changes on May 4."
Though US Airways recently announced schedule cuts, including one less daily frequency between Atlanta and Charlotte, it still has a schedule advantage from its Charlotte hub to both destinations targeted by AirTran.
AirTran this spring also will launch new service to Indianapolis, including three daily flights to Atlanta, and will add more frequencies to Las Vegas and Los Angeles from both Atlanta and Dallas Fort Worth. It intends to announce further network expansion into markets this year "that are either underserved or overpriced by major airlines," AirTran said last week in its annual report.
Meanwhile, AirTran and automated travel and expense management provider Outtask this month said a direct connection between the two companies now is active. Announced last summer
(BTN, Aug, 16, 2004), the link enables users of the Outtask Cliqbook corporate booking system to access AirTran's fares and inventory, which are not available through traditional global distribution systems.
AirTran said business travelers accounted for 39 percent of 2004 revenues. Nearly two-thirds of total bookings were processed through Internet channels, compared with 13 percent processed by traditional travel agencies.
Southwest on May 4 will begin operations in Pittsburgh with a total of 10 daily nonstop flights to Chicago Midway, Las Vegas, Orlando and, interestingly, Philadelphia, another US Airways hub. Connecting service will be available to another 37 destinations. Travel managers welcomed new competition in the market
(BTN, Jan. 17).Southwest this month also opened a new eight-gate concourse at Phoenix Sky Harbor International Airport and placed its code on ATA Airlines' service from Phoenix to Honolulu and Maui.
"Legacy airlines are not going to become cost-competitive with low-cost airlines, even through Chapter 11 bankruptcy," said the Raymond James report. "We expect LCC market share to increase to above 45 percent in 2009."
To prevent that from happening, Delta and United each are expanding their separately branded low-fare operations. United said it will reallocate nine mainline Airbus A320s to Ted, bringing fleet size to 56. Ted's growth will be focused on routes from United hubs in Chicago, Denver and Washington Dulles to Florida and other leisure destinations. Ted already flies 27,000 daily passengers on 214 flights.
Meanwhile, Delta's Song this summer will grow to include transcontinental routes
(BTN, Feb. 7).Low-cost carrier expansion has made certain players more relevant to companies on several continents. For example, corporate customers of Business Travel International later this year will have the ability to integrate bookings on U.K.-based low-cost carrier EasyJet, under a deal announced this month between the travel management company and the airline. The companies initially will launch a pilot program connecting BTI directly into the EasyJet reservations system for bookings made at U.K. points of sale. If successful, the program would roll out to other countries where EasyJet offers service.
EasyJet said it plans to develop similar connections with other travel management companies and BTI said it would seek opportunities to integrate other low-cost carriers.
"BTI U.K. first encouraged EasyJet and other low-cost/no-frills carriers to take such an approach over two years ago, highlighting its concerns that their reservation systems, whilst keeping costs down for the carriers themselves, were not appropriate for the corporate client and that their inflexibility and prescriptive booking methods did not sit well within the total travel management process," the travel management company said in a statement.
The arrangement enables BTI to display EasyJet inventory alongside all other inventory now available within its system and self-booking systems managed by BTI's corporate travel clients to help integrate billing and management information and promote travel policy compliance. "Taking this approach ensures that such flights are identified, managed and controlled as part of a comprehensive approach to clients' total travel management programs," said Mike Platt, Managing Director of BTI U.K.
EasyJet, which serves 60 European airports, expects to increase its share of the corporate travel market by diversifying its distribution outlets, but has no plans to change its pricing structures nor offer special deals to BTI customers.
The deal mirrors efforts by U.S. LCCs to attract a broader customer base in a more cost-efficient manner and by U.S.-based travel agencies to offer corporate accounts the widest possible selection of suppliers. "It is extremely important that travel management companies have open platforms with access to all content and the ability to capture all the data, and to know where travelers are at all times," said Thomas Chermack, vice president of information technology at Ultramar Travel Management, during that agency's industry roundtable held last month. "It is critical to keep systems independent from GDSs, but also work well with the GDSs."
Australia's Virgin Blue this month also announced offerings for the corporate market. Unlike all other Virgin Blue fares, Blue Plus fares are fully refundable—minus a fee—and can either be changed to a different itinerary of switched to another traveler's name without penalty. The product also includes access to airport lounges, priority checkin and preferred seating.
Brazil's Gol is another low-cost carrier claiming rapidly growing corporate market share. By year-end 2004, the airline said it had captured 24 percent of the domestic Brazilian corporate market. It flies to 37 destinations and plans further expansion. Gol operates a single fleet type and processes most reservations through Internet channels. It said 80 percent of 2004 sales were generated through its Web site.
North of the border, the scenario is quite different for one LCC: Canada's Jetsgo this month abruptly ended service, stranding thousands and leaving Canjet and WestJet as the only competitors for Air Canada.