Big Carriers Call Out Jetblue
- Thread starter scot
- Start date
Quote from the article:
"The carrier wants to return to its original plan to serve mostly midsized cities from Kennedy, "to go back to the beginnings before we got enamored with all this capacity to Florida and East-West," CEO David Neeleman said earlier this month".
Sounds like flying to some of the higher fares/yield cities is a smarter plan, or a plan alltogether
Just wondering if any airline is making money flying between the NE and the great State of Florida? (Except a few weeks before Easter.)
HPearlyretiree
Veteran
- Nov 6, 2002
- 1,881
- 1,614
Sounds like the big legacies have lowered their costs and are in a position to kick Jet Blue while they are weak.
Welcome to the big leagues Jet Blue.
Welcome to the big leagues Jet Blue.
luvthe9
Veteran
- Aug 30, 2002
- 9,464
- 14,119
Sure, After destroying thousands of dedicated Airline careers you now have a better idea. RAISE FARES!
"BRILLIANT"
Z Man
The Beginning of the End for Discount Airlines?
Written on 03/06/06
Not so long ago, the JetBlue story seemed almost like an airline fairy tale - improbable rise from modest beginnings to sharing a seat of honor at the king's table (JFK Airport), leading naturally to the happily ever after ending.
But of course all fairy tales need some adversity, which came in the form of fuel price increases, Hurricane Katrina, and Q4 2005 - in which the airline posted a $42.4 million loss. JetBlue was running an airline based on a fuel price of $50/barrel, JetBlue founder and CEO David Neeleman told a JP Morgan transportation investor's gathering last week. To make up the shortfall, JetBlue plans to increase fares on select high-volume flights by around $10 each way.
At the same conference, Southwest CFO Laura Wright noted that Southwest's prescient hedging on fuel prices a few years back had spared the airline big losses, but those deals will start to expire over the next few years, necessitating likely fare increases at Southwest, which remains pretty much the industry's only consistently profitable company of any size. By the time Wright was at the podium, however, Southwest had quietly raised fares in the $3-10 range in recent weeks.
The Beginning of the End for Discount Airlines?
What is going on here - both JetBlue and Southwest talking about losses and fare increases?!? Does the caving of the discount airlines to price increases herald the end of the recent High Period of these nimble upstarts, or even the end of bargain basement fares as we have come to know (and love) them?
A fare hike in response to a significant increase in a single line item may not herald a sea change in airfares, but it is a telling indicator that the discount airlines cannot defy forever the same issues that plague the so-called "legacy" airlines (to use an especially unsavory and probably unjustly aggrandizing term - given that their latest legacy is decimated pensions of loyal workers and dumping their business obligations to American taxpayers).
On the first question - is this the beginning of the end for the best discount airlines - my bet is in the negative; I don't think anyone really sees JetBlue and Southwest, or the business model by which they have posted steady profit and growth, disappearing from the airline business entirely. What are they going to do, adopt the practices of a long list of bankrupt major airlines?
On the second question - are rock bottom fares largely a thing of the recent past - I say let's hope so. I see only one win-win scenario in which the airlines and consumers alike will benefit - sensible, consistent, and reliable airline prices.
What is more likely, and considerably more desirable, would be if fuel prices inspire a "stop the insanity" trend in rollercoaster airfare pricing, as we have discussed repeatedly in the past in this space. I have gone over the classical competitive scenario here many times in past columns:
a discount airline launches a new route at very good prices;
the "majors" match or more often undercut prices in that market only while increasing prices on routes where they have no competition to offset losses;
discount airline cannot get a foothold on the route, and folds/cuts back/discontinues flights;
major airline jacks prices back up to old levels.
(Sometimes it goes the other way; on many of the same routes on which JetBlue is likely to raise fares, Delta has announced it will cut flights (although not as soon or as dramatically as first reported: Delta Air says error caused flight cutback reports)
Selling Too Low, and Too High
I'm not alone in this assessment; Neeleman recently stated that the practice of selling seats at very low and very high prices led to more empty seats and lower revenue overall.
The frequently very candid Mr. Neeleman "told an investor conference last week that JetBlue had set prices too high on top-end fares, failing to sell some seats, and too low on some bottom-end fares, selling out but at too low a price" (see In Search of Profitability, JetBlue Increases Prices. In other words, the cheapest fares were way too low, and the most expensive fares too high. Exactly.
Put into hard numbers, Neeleman said that the airline had sold a lot of $69 tickets on their Florida routes, as well as a lot of $299 tickets. The average sale price, however, came out to $94-95, a price point at which the airline loses money on the flight. "We should have had more $129's and $139's," he said, according to thestreet.com.
Which seem to me a perfect example of sensible, consistent, and reliable airline prices.
(Neeleman's candor, and real-life examples, are almost astounding given the major/legacy airlines current lobbying onslaught against truth in advertising in the industry: A Move to Add Still More Fine Print to Advertised Airfares)
The Beginning of the End for Discount Airlines?
Written on 03/06/06
What Do We Care About? Not the Twenty Bucks
Airline analysts who have engaged in hand wringing over the increases should talk to Joe Webbooker (of whose ilk I definitely count myself) before shedding any crocodile tears over a $10 increase in each direction on popular, affordable routes. Here's the thing about the $20 - we don't care!
What we do care about is obvious, unadulterated price gouging - which is still the correct name for what passes for airfare pricing strategies, somewhat unbelievably to me.
My most recent example: I needed to fly from my location in central New Jersey, which is about equidistant from Newark and Philadelphia, giving me a bit more choice than most travelers. I priced out fares from the two airports, which ranged from right around $300 roundtrip out of Philadelphia to over $650 roundtrip out of Newark. Is the Newark flight really worth more than twice the Philadelphia flight? Note that the Philadelphia flight is longer by a few miles, to boot.
Obviously I flew out of Philadelphia - but chose a flight that was exactly $20 more than the lowest-priced flight due to a better departure time. I was happy to pay $20 for one extra hour of sleep, and to avoid rush hour traffic As above, the $20 meant little to me - but $650 was a deal-breaker. I could have flown to Hawaii from Newark for less than I could to Boston on a Saturday morning; I can't imagine I will ever pay $650 to fly to Boston. Do the airlines not want our business?
While the preceding anecdote makes my point about the $20, it feels almost too obvious even to write it out here. I am sure I don't have to offer you a specific recent example to make this point; you see it yourself almost every time you try to book a flight. Every traveler I know has an identical story, all of which peg airline pricing as more mysterious and trust-shattering than haggling over rugs while drinking mint tea in the medina in Tangier. And every traveler I know says the same thing - we don't care about the twenty bucks!
What we care about is having at least some clue about how much it will cost to get from one place to another. There is absolutely no way to convince me that it is okay that when Jane Webbooker logs on to a travel booking site to fly the same flight to her in-laws that she does four times every year, she has absolutely no idea what price is going to come back when she hits "Search For Flights."
This is no minor issue, as by this point, air travel in America is arguably no longer a nonessential luxury item. It is almost required to do business, to find and keep jobs, even to stay in touch with your immediate family.
Regrets, They Had A Few
Which brings me to an interesting aside from last week's headlines; Robert Byrd of West Virginia, who with 47 years in the Senate is America's longest-serving Senator, recently listed only four actions he regrets in his career: filibustering the 1964 Civil Rights Act, voting to expand the Vietnam War, mostly recently backing the Patriot Act, and, sure enough, backing airline deregulation.
(He is not alone - one of the architects of the late 70s airline deregulation said last week it would never have passed had lawmakers known how things would turn out: Free flow: An airline deregulator has second thoughts.)
I'm not quite recommending reregulation - the genie is probably out of the bottle forever on this one. But let's look at it: civil rights, war, perceived threats to the Bill of Rights - and airline deregulation. That is some heady company for our favorite topic here - but it does underscore my point that this industry's business and pricing practices are out of step with the values of the customers - not to mention We The People - they are supposed to serve.
To discuss this and other Traveler's Ed articles, visit the Traveler's Ed Message Board.
Go Anyway,
Ed Hewitt
[email protected]
Features Editor
The Independent Traveler
"BRILLIANT"
Z Man
The Beginning of the End for Discount Airlines?
Written on 03/06/06
Not so long ago, the JetBlue story seemed almost like an airline fairy tale - improbable rise from modest beginnings to sharing a seat of honor at the king's table (JFK Airport), leading naturally to the happily ever after ending.
But of course all fairy tales need some adversity, which came in the form of fuel price increases, Hurricane Katrina, and Q4 2005 - in which the airline posted a $42.4 million loss. JetBlue was running an airline based on a fuel price of $50/barrel, JetBlue founder and CEO David Neeleman told a JP Morgan transportation investor's gathering last week. To make up the shortfall, JetBlue plans to increase fares on select high-volume flights by around $10 each way.
At the same conference, Southwest CFO Laura Wright noted that Southwest's prescient hedging on fuel prices a few years back had spared the airline big losses, but those deals will start to expire over the next few years, necessitating likely fare increases at Southwest, which remains pretty much the industry's only consistently profitable company of any size. By the time Wright was at the podium, however, Southwest had quietly raised fares in the $3-10 range in recent weeks.
The Beginning of the End for Discount Airlines?
What is going on here - both JetBlue and Southwest talking about losses and fare increases?!? Does the caving of the discount airlines to price increases herald the end of the recent High Period of these nimble upstarts, or even the end of bargain basement fares as we have come to know (and love) them?
A fare hike in response to a significant increase in a single line item may not herald a sea change in airfares, but it is a telling indicator that the discount airlines cannot defy forever the same issues that plague the so-called "legacy" airlines (to use an especially unsavory and probably unjustly aggrandizing term - given that their latest legacy is decimated pensions of loyal workers and dumping their business obligations to American taxpayers).
On the first question - is this the beginning of the end for the best discount airlines - my bet is in the negative; I don't think anyone really sees JetBlue and Southwest, or the business model by which they have posted steady profit and growth, disappearing from the airline business entirely. What are they going to do, adopt the practices of a long list of bankrupt major airlines?
On the second question - are rock bottom fares largely a thing of the recent past - I say let's hope so. I see only one win-win scenario in which the airlines and consumers alike will benefit - sensible, consistent, and reliable airline prices.
What is more likely, and considerably more desirable, would be if fuel prices inspire a "stop the insanity" trend in rollercoaster airfare pricing, as we have discussed repeatedly in the past in this space. I have gone over the classical competitive scenario here many times in past columns:
a discount airline launches a new route at very good prices;
the "majors" match or more often undercut prices in that market only while increasing prices on routes where they have no competition to offset losses;
discount airline cannot get a foothold on the route, and folds/cuts back/discontinues flights;
major airline jacks prices back up to old levels.
(Sometimes it goes the other way; on many of the same routes on which JetBlue is likely to raise fares, Delta has announced it will cut flights (although not as soon or as dramatically as first reported: Delta Air says error caused flight cutback reports)
Selling Too Low, and Too High
I'm not alone in this assessment; Neeleman recently stated that the practice of selling seats at very low and very high prices led to more empty seats and lower revenue overall.
The frequently very candid Mr. Neeleman "told an investor conference last week that JetBlue had set prices too high on top-end fares, failing to sell some seats, and too low on some bottom-end fares, selling out but at too low a price" (see In Search of Profitability, JetBlue Increases Prices. In other words, the cheapest fares were way too low, and the most expensive fares too high. Exactly.
Put into hard numbers, Neeleman said that the airline had sold a lot of $69 tickets on their Florida routes, as well as a lot of $299 tickets. The average sale price, however, came out to $94-95, a price point at which the airline loses money on the flight. "We should have had more $129's and $139's," he said, according to thestreet.com.
Which seem to me a perfect example of sensible, consistent, and reliable airline prices.
(Neeleman's candor, and real-life examples, are almost astounding given the major/legacy airlines current lobbying onslaught against truth in advertising in the industry: A Move to Add Still More Fine Print to Advertised Airfares)
The Beginning of the End for Discount Airlines?
Written on 03/06/06
What Do We Care About? Not the Twenty Bucks
Airline analysts who have engaged in hand wringing over the increases should talk to Joe Webbooker (of whose ilk I definitely count myself) before shedding any crocodile tears over a $10 increase in each direction on popular, affordable routes. Here's the thing about the $20 - we don't care!
What we do care about is obvious, unadulterated price gouging - which is still the correct name for what passes for airfare pricing strategies, somewhat unbelievably to me.
My most recent example: I needed to fly from my location in central New Jersey, which is about equidistant from Newark and Philadelphia, giving me a bit more choice than most travelers. I priced out fares from the two airports, which ranged from right around $300 roundtrip out of Philadelphia to over $650 roundtrip out of Newark. Is the Newark flight really worth more than twice the Philadelphia flight? Note that the Philadelphia flight is longer by a few miles, to boot.
Obviously I flew out of Philadelphia - but chose a flight that was exactly $20 more than the lowest-priced flight due to a better departure time. I was happy to pay $20 for one extra hour of sleep, and to avoid rush hour traffic As above, the $20 meant little to me - but $650 was a deal-breaker. I could have flown to Hawaii from Newark for less than I could to Boston on a Saturday morning; I can't imagine I will ever pay $650 to fly to Boston. Do the airlines not want our business?
While the preceding anecdote makes my point about the $20, it feels almost too obvious even to write it out here. I am sure I don't have to offer you a specific recent example to make this point; you see it yourself almost every time you try to book a flight. Every traveler I know has an identical story, all of which peg airline pricing as more mysterious and trust-shattering than haggling over rugs while drinking mint tea in the medina in Tangier. And every traveler I know says the same thing - we don't care about the twenty bucks!
What we care about is having at least some clue about how much it will cost to get from one place to another. There is absolutely no way to convince me that it is okay that when Jane Webbooker logs on to a travel booking site to fly the same flight to her in-laws that she does four times every year, she has absolutely no idea what price is going to come back when she hits "Search For Flights."
This is no minor issue, as by this point, air travel in America is arguably no longer a nonessential luxury item. It is almost required to do business, to find and keep jobs, even to stay in touch with your immediate family.
Regrets, They Had A Few
Which brings me to an interesting aside from last week's headlines; Robert Byrd of West Virginia, who with 47 years in the Senate is America's longest-serving Senator, recently listed only four actions he regrets in his career: filibustering the 1964 Civil Rights Act, voting to expand the Vietnam War, mostly recently backing the Patriot Act, and, sure enough, backing airline deregulation.
(He is not alone - one of the architects of the late 70s airline deregulation said last week it would never have passed had lawmakers known how things would turn out: Free flow: An airline deregulator has second thoughts.)
I'm not quite recommending reregulation - the genie is probably out of the bottle forever on this one. But let's look at it: civil rights, war, perceived threats to the Bill of Rights - and airline deregulation. That is some heady company for our favorite topic here - but it does underscore my point that this industry's business and pricing practices are out of step with the values of the customers - not to mention We The People - they are supposed to serve.
To discuss this and other Traveler's Ed articles, visit the Traveler's Ed Message Board.
Go Anyway,
Ed Hewitt
[email protected]
Features Editor
The Independent Traveler
luv2fly
Veteran
Why raise tickets prices $5 to $10 . Didn't Neeleman claim he could make money with oil at $100 a barrel? :down:
