JetBlue Raises Transcon Stakes

JetBlue Airways today announced three new transcontinental routes, including an entirely new destination in its growing network, and America West Airlines yesterday confirmed an expansion of its transcontinental services. These developments will bring already fierce transcontinental competition to new levels, translating to more choices and lower fares for consumers but challenging times for legacy carriers, some of which have added new transcontinental flying to defend marketshare.

JetBlue's service expansion to the West Coast 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.

JetBlue 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. American Airlines also will move deeper into the battle. On May 1, it will add a fifth daily nonstop from New York JFK to San Francisco, followed by a second daily nonstop from JFK to Seattle, effective June 10.

J.P. Morgan Securities analyst Jamie Baker, in a research note issued last week, 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, in a recent interview with Business Travel News. "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."