A Fight To The Death

[a320av8r]

Delta announced an ambitious expansion yesterday for its Song discount unit that would boost presence in several of rival JetBlue's strongest markets. On Nov. 1, Song will add nonstop flights between San Francisco (SFO) and Orlando and will also boost flights on existing routes to Florida from both New York and Boston. Perhaps not coincidentally, those Northeast-to-Florida routes have been some of JetBlue's strongest over the past years, and the increased competition is likely to pressure fares downward, Reuters predicts. The New York Times (free registration) reports Song will also add a second nonstop flight between Los Angeles and Fort Lauderdale, a route that closely matches the Long Beach-Fort Lauderdale service offered by JetBlue.

Delta's move to position Song more aggressively in JetBlue's strongest markets is a bold move, but one has to wonder if financially beleaguered Delta can withstand several rounds of fare wars against JetBlue and its stronger balance sheet. As for Song's new San Francisco-Orlando flight, that's part of an increased presence at SFO for the discount carrier … something that's meant to at least partially counter the large base JetBlue has built up across the bay in Oakland. In addition to the pending Orlando service, Song also flies from SFO to New York JFK, and will add nonstop flights to Boston in September, according to the San Francisco Chronicle. Efficiency apparently played a role in the new flights. Air Transport World reports that 12 of the new flights were made possible after Song began turning its planes around more quickly at the gates. Quicker turnaround times allow airlines to squeeze more flying hours out of their planes.


Good Luck Delta.

 

[WorldTraveler]

Death is probably a little extreme but DL mgmt or creditors (if the company is forced into BK) might demand that DL assets be used where they can be profitable. DL is in something of a difficult spot: they need to diversify out of the Southeast but there aren't a whole lot of big profitable growth markets left. So DL has taken a low-cost approach and is fighting into markets, some of which AA has dominated and some which DL apparently foresee B6 as potentially entering. Either way, DL is probably the only legacy airline that can compete in some of thee markets because DL's costs are lower than AA's. AA doesn't appear to be in kamikaze mode, however, and may ultimately be forced out of a number of NYC leisure markets by either DL or B6.
DL won't go away, though. Too much of its network is tied up in Florida, including from the Northeast so they have to figure out a way to serve it somehow. If they don't, someone else will so they are better off figuring out how to make it work.

 

[artiefufkin]

There's been some good developemnts at Song over the last year.

Theve' been able to maintain a smal RASM advantage over Jetblue in BOS, unlike when Delta Express was bowled over in JFK

The average fare gap between JB/Song JFK has gone from $20+ for a one-way fare to around $5. I don't have the load factor info, but I'm sure JB has an advantage here.

Load factors which trailed Jetblue by 20 points at first, then leveled off at 8 points are down to only a 4 point gap since LAX transcons were started.

Jetblue had a 91% load factor this last Month, Song 87%

And of course with the new routes, Song's daily utilization will go up even more. It was already at JB's level.


And not to knock Jetblue, as they represent the ultimate LCC model, but maintenance costs and labor costs are expected to exceed revenue growth. I've read figures estimating this would add another half cent to their non-fuel CASM.

 

[markkus757]

You're forgetting two major components to jetBlue's growth going forward. While everyone sat back and tried to figure out what to do with jetBlue, they were building brand loyalty like Southwest does. The second problem for them is that they are going to overrun the regionals that currently feed Delta when the E190 is deployed. Again, Delta playing from behind and playing catch-up. This will kill them if they go into BK this fall.

 

[artiefufkin]

Delta has more pressing needs right now than buying their own 100 seaters and staffing them. I'm sure that is on the agenda.

Jetblue is getting 8 100 seaters this year and 18 next year. Not exactly a tidelwave of seats into the market.