JetBlue's Surprise: Florida, Florida, Florida
NEW YORK (
) -- After paying $72 million for eight slot pairs at congested LaGuardia Airport,
JetBlue
(JBLU) - Get Report
is unexpectedly committing the slots to five Florida destinations.
Florida routes are generally considered to be low-yield routes flown for leisure travelers, who aren't overly choosy as long as they can get low fares. Typically, airlines use high-value, limited access airports such as LaGuardia for markets (such as Boston and Chicago) where business travelers want frequent service and are willing to pay for it.
JetBlue plans to use valuable LaGuardia slots to fly leisure routes to Florida, rather than higher-yield business routes. |
JetBlue said Monday that, starting June 11, it will add three LaGuardia destinations: Fort Myers, Sarasota and Tampa (twice daily). Additionally, it will add additional flights to Fort Lauderdale, Orlando (twice daily) and West Palm Beach. The carrier already serves all six destinations from Kennedy International Airport. Florida is "where we see the most opportunity and demand," JetBlue spokesman Bryan Baldwin says.
The slots became available only because the U.S. Department of Transportation demanded that
Delta
(DAL) - Get Report
and
US Airways
(LCC)
auction off slots at La Guardia and Washington Reagan National Airport to low-fare carriers in return for approval of a deal in which they traded dozens of slots at the two airports, making Delta bigger at LaGuardia and US Airways bigger at National.
Few expected JetBlue's new slots to serve the snowbirds.
"It doesn't make a lot of sense to me," aviation consultant Bob Mann says. "JetBlue has a surplus of Florida capacity right now, and I can't believe that Florida is the highest and best use of their capacity."
Avondale Partners
airline analyst Bob McAdoo says the explanation may be that for JetBlue, Kennedy slots have more value than LaGuardia slots because JetBlue operates a Kennedy hub and is leveraging that into partnerships with a wide assortment of carriers. Attaching less value to LaGuardia slots is counterintuitive, however. As former Pan Am and Eastern executive Marty Shugrue used to say, "You can make money flying from LaGuardia to anywhere."
But McAdoo notes that on Tuesday, JetBlue announced an interline partnership with
Japan Airlines
that will enable single bookings for connections between JetBlue and JAL at Kennedy, Boston and Los Angeles. "If I am trying to sell myself as a carrier with a great feeder system at JFK, one that is going to be attractive in partnerships with different international carriers, maybe I am better off with more JFK destinations rather than one more flight to Fort Lauderdale or Tampa," he says.
Of course, the wild card involves what will happen to the
American Airlines
(AAMRQ.PK)
pilot contract in bankruptcy court. The two carriers already have a partnership deal that includes reciprocal frequent flier miles and enables passengers to book connecting JetBlue flights on the American site. Contract changes could lead to an expanded relationship that includes a codeshare enabling passengers using both arilines to book on either. "That has to be something they are working on, although connecting between the terminals at JFK is a problem and agreeing on a deal would be tough," aviation consultant Sandy Rederer says.
In the meantime, some experts see value in JetBlue's additional Florida routes from LaGuardia.
"JetBlue has good point of sale at either end," having built a strong presence in New York and Florida markets,
Wolfe Trahan
analyst Hunter Keay says. "They have an advantage in both."
Adds aviation consultant Stan Hula, "I think JetBlue is making a determined move to dominate the New York-Florida market. It's a very large market and one where they have a proven track record. The yields and seasonality are difficult but it's something they understand and have learned to manage well."
Moreover, business markets such as LaGuardia to Boston and Chicago already have ample service on various carriers."New York/Chicago is pretty competitive," Keay says. "JetBlue has never tried to market itself as a business airline. It seems market share-oriented and is probably more focused on growing where it can have a dominant presence."
-- Written by Ted Reed in Charlotte, N.C.
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