prairiegirl
6th Aug 2009, 23:03
I am not a pilot, however am involved in the aviation industry. I'd like to hear peoples comments on how a paradigm shift of this magnitude in other parts of the world affects cultural and industry norms in Australia.
Thanks!
http://online.wsj.com/img/wsj_print.gif
THE MIDDLE SEAT (http://online.wsj.com/public/search?article-doc-type=%7BThe+Middle+Seat%7D&HEADER_TEXT=the+middle+seat)
AUGUST 6, 2009, 11:00 A.M. ET Southwest Lands at Logan, Bringing Low Fares Mainstream
By SCOTT MCCARTNEY http://online.wsj.com/img/renocol_ScottMcCartney.gif
Next week Southwest Airlines (http://online.wsj.com/public/quotes/main.html?type=djn&symbol=LUV) Co. will do something that Herbert Kelleher, its legendary former chief executive, said would never happen: The airline will offer flights at Boston’s Logan International Airport.
Long viewed as a congested, expensive big-city airport, Logan is now the darling of discounters, boasting a new terminal, new runway, new parking and easy access through a new harbor tunnel. JetBlue Airways (http://online.wsj.com/public/quotes/main.html?type=djn&symbol=JBLU) Corp. is now the biggest airline there in terms of flights and nonstop destinations, and has been gobbling up customers from American, Delta Air Lines and other airlines. Virgin America, AirTran, Sun Country and Spirit all land at Logan, as well.
“JetBlue changed the whole image of Boston as a place where discount carriers could do well,” says Thomas Kinton, chief executive of the Massachusetts Port Authority, which operates Logan. “It sends a signal to the rest of the air-carrier world.”
Logan’s transformation coincides with a major shift in the airline industry. Discount carriers once favored secondary, suburban airports that were cheaper and easier to serve. Customers were willing to drive farther for lower airfare.
But cheap fares have become the norm, not the exception. As discounters have grown– Southwest is now the largest domestic airline in terms of passengers–incumbent airlines have to match prices and live off discount airfares on most domestic routes. And now discounters are increasingly flying into the heart of cities, landing where customers are instead of expecting them to drive to cheaper airports.
http://s.wsj.net/public/resources/images/PJ-AQ819_MIDSEA_DV_20090805172655.jpg Associated Press JetBlue’s arrival at Logan sent a signal.
This summer, Southwest also began service at New York’s LaGuardia Airport, which has a limited number of takeoff and landing slots and is plagued by horrendous delays. LaGuardia was another on Mr. Kelleher’s “no-fly” list that Southwest decided it better buckle up and serve.
“Some things in the industry have changed and some things about Southwest Airlines have changed,” says Bob Jordan, executive vice president for strategy and planning. “Twenty years ago the low-fare carrier side of the market was a niche. Today, the airline industry is a low-fare industry.”
Southwest previously tried to ring Boston, serving Providence, R.I., and Manchester, N.H., and paying to become the official airline of the Boston Celtics basketball team. But that wasn’t enough—too many Bostonians preferred Logan, especially after the mammoth “Big Dig” construction project made driving to the airport far easier and a modernization program at the airport renovated terminals, increased parking and reduced flight delays.
“We were the beneficiary of the Big Dig,” says Ed Freni, aviation director of the Massachusetts Port Authority, which operates Logan.
Fred Graff flies every week for his pharmaceutical company and now is loyal to JetBlue. He likes the low fares, in-flight live television, chance to buy extra legroom and customer service. And he likes Logan better, too.
“Logan has really changed. It’s much more convenient now. It was always a hassle before,” he says.
Making Room for JetBlue
After the 2001 terrorism attacks, as air travel declined rapidly, Massport decided to go ahead with plans to knock down and rebuild Terminal A, the old Eastern Air Lines terminal. The travel downturn created room to move airlines out of Terminal A to other terminals. Moving them back to the new facility created room for JetBlue to expand, growing from two gates in 2004 to 13 gates today. It has an eye toward a lot more expansion in a concourse where UAL Corp.’s United Airlines has been retrenching.
“Southwest’s decision vindicates the decision we made to go in there five years ago. The lion’s share of the traffic comes from the Boston metropolitan area,” says Martin St. George, JetBlue’s senior vice president of marketing and strategy.
Mr. St. George, who grew up in Boston, says JetBlue is starting to gain traction with corporate accounts in Boston, and has pushed its way into the hearts and minds of Bostonians by becoming the official airline of the Boston Red Sox baseball team.
“We call Boston our second home,” he says.
In terms of passengers, JetBlue grew to 14.3% of traffic at Logan in 2008, close behind American, Delta and US Airways, according to Massport. American and Delta both had about 22% of the market in 2003, before JetBlue entered, but by last year American had fallen to 16.5% and Delta to 15.5%. (Acquiring Northwest gives Delta an added 5.7% of passengers.) US Airways dipped slightly to 15.3% of passengers from 15.7% over that period.
At American, executive vice president Dan Garton says Boston is a “fragmented but still quite vital market” that’s key to the airline, especially because there’s a high concentration of business travelers. Delta spokesman Kent Landers says that with Northwest, it serves more customers than any other airline “and we expect that to continue.” Delta’s strategy is to focus on feeding passengers to seven different hubs plus the New York shuttle and a few cities with enough local traffic to support direct flights, he says.
Pulling Together the Plan
The JetBlue battle plan was actually the airport’s idea. Mr. Kinton says JetBlue founder David Neeleman (http://topics.wsj.com/person/n/david-neeleman/131) approached him before 2001 about flying between Boston and JetBlue’s home base, New York’s Kennedy International Airport. But with rampant delays and shuttle service to New York every 30 minutes, “the last thing this airport needed was another service to New York,” Mr. Kinton says. Logan had no available gates, and JetBlue dropped the idea.
After 2001, Logan went to JetBlue with hat in hand—and a plan developed with aviation consultants Simat Helliesen & Eichner Inc. “I went down with a proposal and said, ‘You can be king in Boston. There’s no low-cost carrier here,’” says Mr. Kinton.
Fares Fall in Line
In terms of fares, Boston passengers historically have paid well more than the national average, according to the Department of Transportation. Fares got as high as 40% over the national average in the third quarter of 1997, but fell dramatically after JetBlue arrived in 2004. By the third quarter of 2004, fares at Logan equaled the national average.
“Legacy carriers had to become discount carriers, too. JetBlue causes American and United to bring prices down,” says Mr. Kinton.
More recently, fares have climbed a bit relative to the rest of the country. In the first quarter this year, Boston fares were 9.1% higher than the national average. Logan officials expect fares to decline further as Southwest ramps up.
Southwest’s Mr. Jordan says the airline realized it wasn’t pulling nearly as many passengers as it could from the city of Boston proper, and lots of Southwest customers in other cities wanted to fly to Logan instead of the smaller outlying airports. So far, Manchester and Providence bookings have been holding up since the carrier opened up bookings for Logan flights, he says.
“There are places on the map that are just hard to ignore,” Mr. Jordan says. “If we want to serve the market, we need to be there.”
Write to Scott McCartney at [email protected]
Thanks!
http://online.wsj.com/img/wsj_print.gif
THE MIDDLE SEAT (http://online.wsj.com/public/search?article-doc-type=%7BThe+Middle+Seat%7D&HEADER_TEXT=the+middle+seat)
AUGUST 6, 2009, 11:00 A.M. ET Southwest Lands at Logan, Bringing Low Fares Mainstream
By SCOTT MCCARTNEY http://online.wsj.com/img/renocol_ScottMcCartney.gif
Next week Southwest Airlines (http://online.wsj.com/public/quotes/main.html?type=djn&symbol=LUV) Co. will do something that Herbert Kelleher, its legendary former chief executive, said would never happen: The airline will offer flights at Boston’s Logan International Airport.
Long viewed as a congested, expensive big-city airport, Logan is now the darling of discounters, boasting a new terminal, new runway, new parking and easy access through a new harbor tunnel. JetBlue Airways (http://online.wsj.com/public/quotes/main.html?type=djn&symbol=JBLU) Corp. is now the biggest airline there in terms of flights and nonstop destinations, and has been gobbling up customers from American, Delta Air Lines and other airlines. Virgin America, AirTran, Sun Country and Spirit all land at Logan, as well.
“JetBlue changed the whole image of Boston as a place where discount carriers could do well,” says Thomas Kinton, chief executive of the Massachusetts Port Authority, which operates Logan. “It sends a signal to the rest of the air-carrier world.”
Logan’s transformation coincides with a major shift in the airline industry. Discount carriers once favored secondary, suburban airports that were cheaper and easier to serve. Customers were willing to drive farther for lower airfare.
But cheap fares have become the norm, not the exception. As discounters have grown– Southwest is now the largest domestic airline in terms of passengers–incumbent airlines have to match prices and live off discount airfares on most domestic routes. And now discounters are increasingly flying into the heart of cities, landing where customers are instead of expecting them to drive to cheaper airports.
http://s.wsj.net/public/resources/images/PJ-AQ819_MIDSEA_DV_20090805172655.jpg Associated Press JetBlue’s arrival at Logan sent a signal.
This summer, Southwest also began service at New York’s LaGuardia Airport, which has a limited number of takeoff and landing slots and is plagued by horrendous delays. LaGuardia was another on Mr. Kelleher’s “no-fly” list that Southwest decided it better buckle up and serve.
“Some things in the industry have changed and some things about Southwest Airlines have changed,” says Bob Jordan, executive vice president for strategy and planning. “Twenty years ago the low-fare carrier side of the market was a niche. Today, the airline industry is a low-fare industry.”
Southwest previously tried to ring Boston, serving Providence, R.I., and Manchester, N.H., and paying to become the official airline of the Boston Celtics basketball team. But that wasn’t enough—too many Bostonians preferred Logan, especially after the mammoth “Big Dig” construction project made driving to the airport far easier and a modernization program at the airport renovated terminals, increased parking and reduced flight delays.
“We were the beneficiary of the Big Dig,” says Ed Freni, aviation director of the Massachusetts Port Authority, which operates Logan.
Fred Graff flies every week for his pharmaceutical company and now is loyal to JetBlue. He likes the low fares, in-flight live television, chance to buy extra legroom and customer service. And he likes Logan better, too.
“Logan has really changed. It’s much more convenient now. It was always a hassle before,” he says.
Making Room for JetBlue
After the 2001 terrorism attacks, as air travel declined rapidly, Massport decided to go ahead with plans to knock down and rebuild Terminal A, the old Eastern Air Lines terminal. The travel downturn created room to move airlines out of Terminal A to other terminals. Moving them back to the new facility created room for JetBlue to expand, growing from two gates in 2004 to 13 gates today. It has an eye toward a lot more expansion in a concourse where UAL Corp.’s United Airlines has been retrenching.
“Southwest’s decision vindicates the decision we made to go in there five years ago. The lion’s share of the traffic comes from the Boston metropolitan area,” says Martin St. George, JetBlue’s senior vice president of marketing and strategy.
Mr. St. George, who grew up in Boston, says JetBlue is starting to gain traction with corporate accounts in Boston, and has pushed its way into the hearts and minds of Bostonians by becoming the official airline of the Boston Red Sox baseball team.
“We call Boston our second home,” he says.
In terms of passengers, JetBlue grew to 14.3% of traffic at Logan in 2008, close behind American, Delta and US Airways, according to Massport. American and Delta both had about 22% of the market in 2003, before JetBlue entered, but by last year American had fallen to 16.5% and Delta to 15.5%. (Acquiring Northwest gives Delta an added 5.7% of passengers.) US Airways dipped slightly to 15.3% of passengers from 15.7% over that period.
At American, executive vice president Dan Garton says Boston is a “fragmented but still quite vital market” that’s key to the airline, especially because there’s a high concentration of business travelers. Delta spokesman Kent Landers says that with Northwest, it serves more customers than any other airline “and we expect that to continue.” Delta’s strategy is to focus on feeding passengers to seven different hubs plus the New York shuttle and a few cities with enough local traffic to support direct flights, he says.
Pulling Together the Plan
The JetBlue battle plan was actually the airport’s idea. Mr. Kinton says JetBlue founder David Neeleman (http://topics.wsj.com/person/n/david-neeleman/131) approached him before 2001 about flying between Boston and JetBlue’s home base, New York’s Kennedy International Airport. But with rampant delays and shuttle service to New York every 30 minutes, “the last thing this airport needed was another service to New York,” Mr. Kinton says. Logan had no available gates, and JetBlue dropped the idea.
After 2001, Logan went to JetBlue with hat in hand—and a plan developed with aviation consultants Simat Helliesen & Eichner Inc. “I went down with a proposal and said, ‘You can be king in Boston. There’s no low-cost carrier here,’” says Mr. Kinton.
Fares Fall in Line
In terms of fares, Boston passengers historically have paid well more than the national average, according to the Department of Transportation. Fares got as high as 40% over the national average in the third quarter of 1997, but fell dramatically after JetBlue arrived in 2004. By the third quarter of 2004, fares at Logan equaled the national average.
“Legacy carriers had to become discount carriers, too. JetBlue causes American and United to bring prices down,” says Mr. Kinton.
More recently, fares have climbed a bit relative to the rest of the country. In the first quarter this year, Boston fares were 9.1% higher than the national average. Logan officials expect fares to decline further as Southwest ramps up.
Southwest’s Mr. Jordan says the airline realized it wasn’t pulling nearly as many passengers as it could from the city of Boston proper, and lots of Southwest customers in other cities wanted to fly to Logan instead of the smaller outlying airports. So far, Manchester and Providence bookings have been holding up since the carrier opened up bookings for Logan flights, he says.
“There are places on the map that are just hard to ignore,” Mr. Jordan says. “If we want to serve the market, we need to be there.”
Write to Scott McCartney at [email protected]