Checking it Out
Veteran
- Apr 3, 2003
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JetBlue, Southwest in low-cost dogfight
Full Story, Will the Legacy Carriers Survive as they duke it out?
Big guys on the defensive
The big carriers, losing money for years, are going to have to find ways to reinvent themselves to compete, airline industry experts say, adding that a major hurdle is dealing with their unions.
"For whatever reasons, the unions find it hard to believe that the traditional carriers could go out of business," said Michael E. Levine, a former airline executive and now an adjunct professor at Yale Law School. "For them, waiting for business to turn around is not going to work this time."
Chuck Imhof, managing director in the metropolitan area for American Airlines -- which employs 8,500 in the region, about 1,500 more than JetBlue does across the country -- said American is competitive with all other carriers.
"We have the largest network in the world," Imhof said. "We make sure we have more routes, better schedules. We fly to places people want to fly to."
So far, JetBlue and other low-cost airlines have been judicious in picking routes, choosing mostly to undercut the big carriers and avoid battling one another. But that situation is going to change, said Robert Mann, an independent airline industry analyst and consultant in Port Washington.
Time to make money
For low-cost carriers going up against high-cost airlines, "there are bigger pickings now," Mann said. "But eventually, it will be the case that the number of markets where there's a single carrier present will start to diminish and multicarrier competition will be the norm" among the low-cost airlines.
Low-cost airlines have already begun battling one another, said Betsy Snyder, who follows the industry for Standard & Poor's in New York. In January, she noted, JetBlue added a number of transcontinental flights. "Everybody else went in after them," Snyder said.
JetBlue is already preparing for the battles ahead. Last year, the airline ordered 100 midsized jets from Brazil's Embraer SA in a deal valued at $3billion. The addition of the 100-seat Embraer 190s to JetBlue's 61 Airbus A320s, which seat 156 each, will allow JetBlue to aggressively go after new markets, although Neeleman said virtually all of its operations will be domestic. Deliveries are to begin next year.
Neeleman said he expects JetBlue to have a little more than 300 jets in the next two decades. Last month, Neeleman handed analysts at a Merrill Lynch conference a list of 38 possible locations for future growth but said there is no time frame for launching service to those areas, which included many cities in the West and the Midwest, such as Chicago, Cincinnati and Dallas/Fort Worth.
The ambitious plans have led people to compare JetBlue to People Express, which burst onto the scene in the 1980s, offering inexpensive fares and a youthful staff. Even though it had become a $1billion business, People Express went bust in six years, the victim of too-rapid expansion.
Additionally, some analysts worry that JetBlue will have difficulty introducing the 100 Embraers to its fleet and flight crews, who will need training to operate the new planes. Industry observers predict other growing pains, as well. As JetBlue's new airplanes grow older, they will need increasing maintenance, which will raise the airline's costs.
The boss isn't worried
Neeleman professes not to worry.
For one thing, he said, the atmosphere at People Express was "chaotic," unlike that of JetBlue. JetBlue's sales last year were $998.4 million, a 57 percent increase from the previous year.
The company said profits were $103.9 million, an 89 percent increase over 2002. Neeleman said the airline has about $600million cash on hand. He said he has the right staff and employees to handle expansion. If there's anything to worry about, Neeleman said, it's the competition.
"You worry about irrational competitors, the competitors who will fly anywhere, thinking they can make money," he said. But Neeleman concedes such a course of action is highly likely and something JetBlue will have to face. "You've got to make money to be around," he said
Full Story, Will the Legacy Carriers Survive as they duke it out?
Big guys on the defensive
The big carriers, losing money for years, are going to have to find ways to reinvent themselves to compete, airline industry experts say, adding that a major hurdle is dealing with their unions.
"For whatever reasons, the unions find it hard to believe that the traditional carriers could go out of business," said Michael E. Levine, a former airline executive and now an adjunct professor at Yale Law School. "For them, waiting for business to turn around is not going to work this time."
Chuck Imhof, managing director in the metropolitan area for American Airlines -- which employs 8,500 in the region, about 1,500 more than JetBlue does across the country -- said American is competitive with all other carriers.
"We have the largest network in the world," Imhof said. "We make sure we have more routes, better schedules. We fly to places people want to fly to."
So far, JetBlue and other low-cost airlines have been judicious in picking routes, choosing mostly to undercut the big carriers and avoid battling one another. But that situation is going to change, said Robert Mann, an independent airline industry analyst and consultant in Port Washington.
Time to make money
For low-cost carriers going up against high-cost airlines, "there are bigger pickings now," Mann said. "But eventually, it will be the case that the number of markets where there's a single carrier present will start to diminish and multicarrier competition will be the norm" among the low-cost airlines.
Low-cost airlines have already begun battling one another, said Betsy Snyder, who follows the industry for Standard & Poor's in New York. In January, she noted, JetBlue added a number of transcontinental flights. "Everybody else went in after them," Snyder said.
JetBlue is already preparing for the battles ahead. Last year, the airline ordered 100 midsized jets from Brazil's Embraer SA in a deal valued at $3billion. The addition of the 100-seat Embraer 190s to JetBlue's 61 Airbus A320s, which seat 156 each, will allow JetBlue to aggressively go after new markets, although Neeleman said virtually all of its operations will be domestic. Deliveries are to begin next year.
Neeleman said he expects JetBlue to have a little more than 300 jets in the next two decades. Last month, Neeleman handed analysts at a Merrill Lynch conference a list of 38 possible locations for future growth but said there is no time frame for launching service to those areas, which included many cities in the West and the Midwest, such as Chicago, Cincinnati and Dallas/Fort Worth.
The ambitious plans have led people to compare JetBlue to People Express, which burst onto the scene in the 1980s, offering inexpensive fares and a youthful staff. Even though it had become a $1billion business, People Express went bust in six years, the victim of too-rapid expansion.
Additionally, some analysts worry that JetBlue will have difficulty introducing the 100 Embraers to its fleet and flight crews, who will need training to operate the new planes. Industry observers predict other growing pains, as well. As JetBlue's new airplanes grow older, they will need increasing maintenance, which will raise the airline's costs.
The boss isn't worried
Neeleman professes not to worry.
For one thing, he said, the atmosphere at People Express was "chaotic," unlike that of JetBlue. JetBlue's sales last year were $998.4 million, a 57 percent increase from the previous year.
The company said profits were $103.9 million, an 89 percent increase over 2002. Neeleman said the airline has about $600million cash on hand. He said he has the right staff and employees to handle expansion. If there's anything to worry about, Neeleman said, it's the competition.
"You worry about irrational competitors, the competitors who will fly anywhere, thinking they can make money," he said. But Neeleman concedes such a course of action is highly likely and something JetBlue will have to face. "You've got to make money to be around," he said
