In the latest among a string of transcontinental air service developments that undoubtedly will bring more choices and lower fares to business travelers, as well as fresh challenges to major airlines, discount carriers JetBlue Airways and America West Airlines last week each spelled out new growth plans for their coast-to-coast services. The transcon market had been one of the few remaining bastions of higher-price routes served predominantly by major network carriers, but recently has become a hotbed for price competition.
Though positive on the surface—Corporate America certainly likes the idea of cheaper air travel costs—the new transcon services operated by low-cost carriers represent yet another quandary for travel managers trying to juggle budgetary constraints and preferred agreements with legacy carriers.
JetBlue's latest expansion of transcontinental service kicks in May 4 and includes new nonstop service between Washington Dulles International Airport and Sacramento and new, twice-daily nonstop flights between Boston and Oakland. On that day, the carrier also will add a fourth daily flight between Dulles and Long Beach, Calif., and a third daily flight from Dulles to Oakland. On June 10, JetBlue will launch daily nonstop service between its New York JFK base and San Jose, its sixth destination in California and 25th overall.
The airline last week inaugurated nonstop service between New York JFK and Sacramento. Continental Airlines on May 2 will enter the market with a daily nonstop flight to Sacramento from its Newark hub.
Meanwhile, discount carrier America West also is expanding coast-to-coast services. Effective June 1, it will add a third daily nonstop flight from Los Angeles to both Boston and New York JFK. It launched its first-ever nonstop transcon services in October
(BTN, Aug. 25, 2003)."This is a young transition, and the concern is how long it will last," said a Boston-area travel manager referring to the influx of transcon services at Logan Airport. "America West is more of an issue for us than JetBlue because it's seen as more of a traditional carrier in the eyes of the business traveler."
Meanwhile, in the Washington area, one travel manager said she has not yet seen preferred supplier United Airlines match JetBlue's lower fares to the West Coast, as American Airlines has from New York. "I am not going to tell our travelers not to take the cheaper ticket on JetBlue," she said, noting a cultural change in Corporate America that has "pounded cost savings" into employees' minds. "Our marketshare is going down in our agreements, and United has alluded to changes to our contract. To their credit, they also are scheduling meetings on a monthly basis, which they never had done before."
American also will move deeper into the coast-to-coast battle. On May 1, it will add a fifth daily nonstop from New York JFK to San Francisco, followed by a second daily nonstop both from JFK to Seattle and from Boston to San Jose, effective June 10.
Delta also is expanding transcon flying from New York JFK, including a new route to San Diego, effective July 1, and additional frequencies to Los Angeles, San Francisco and Seattle, effective April 4
(BTN, Feb. 9).J.P. Morgan Securities analyst Jamie Baker, in a research note, said the transcontinental environment is "getting worse" from an airline revenue perspective. "While we continue to believe someone will ultimately blink," he said, "no carriers show any sign of capitulation."
Continental, in part, blamed "poor performance this year of the very competitive transcontinental markets" for an estimated systemwide decrease of 2.5 percent to 3.5 percent in February unit revenues. The carrier also noted that transcon flying last month represented 12.3 percent of its domestic capacity, compared with 9.8 percent a year earlier.
Continental, however, survived a direct attack by ATA Airlines on the Newark-San Francisco route. ATA next week will cease services in the market less than five months after launching what had been its first-ever, nonstop transcontinental route.
"At launch, there were 24 flights per day between the New York City area and the San Francisco Bay area. Shortly thereafter, the number jumped to 35 per day," said John Happ, ATA senior vice president of marketing and sales. "It was a real boon in the short-term for travelers and corporate accounts, but how long that lasts remains to be seen."
Said J.P. Morgan's Baker, "It will be interesting to see if Continental restores its $1,233 walk-up fare, which fell to under $200 when ATA entered the route."