JetBlue’s Strong Performance Has Spirit on the Run

Spirit has been aggressively growing Dallas/Ft Worth service lately, but not all routes have been successful. Notably, DFW to Boston hasn’t worked out well. For the Fall, it is being re-timed to operate during the day and then it stops completely for the winter. This got me thinking about whether JetBlue might be a Spirit-killer.

In Boston, I kept thinking that JetBlue’s new 3 daily flights were having an impact, so I decided to dig deeper into that by looking at other markets where the two go head to head. The result? It does appear that Spirit is running away from the Blue Crew despite lower fares and lower costs.

I figured the best place to look would be in Ft Lauderdale, where Spirit has long had a big operation. JetBlue has been building its presence there over the last few years as well. I started with schedule data to see if there was a pattern.

Spirit Cuts Where JetBlue Grows
I took July Ft Lauderdale schedules for the last four years and started crunching. There are ten routes that have Spirit and JetBlue competing head-to-head. They are Bogota, Boston, Cancun, Washington/National, Kingston, LAX, New York/LaGuardia, Nassau, Santo Domingo, and San Juan. How did capacity fare? Take a look at this chart.

July Ft  Lauderdale Spirit vs JetBlue

As you can tell, Spirit has been slowly growing the markets where it doesn’t compete with JetBlue. Contrast that with the head-to-head routes where Spirit has shrunk dramatically. We should refine the data further before just coming to a conclusion, however.

Bogota and Kingston have only recently seen JetBlue start service so it’s probably too early to see any impact there. And we can throw out Washington/National as well. Even though that route has seen growth from Spirit in this chart, it’s now gone. In another sign that Southwest is far from the scary competitor it used to be, Spirit has decided to walk away from National and its 3 daily flights each on both JetBlue and US Airways in favor of Baltimore, where it will face Southwest and AirTran’s now 10 daily flights.

If we look at the remaining seven markets, the results have been pretty clear. In six of those markets, Spirit has cut capacity dramatically (only LAX has been flat). If we look at July 2012 vs July 2011, Spirit had 8 routes from Ft Lauderdale that saw capacity drop more than 25 percent. Five of those routes were head-to-head with JetBlue. (The others were Charleston, WV, which was dropped after one year, Aguadilla, PR, and Saint Maarten.)

Spirit Usually Loves Competition
Now, I know the natural response here. “Well of course Spirit is cutting flights where there’s a lot of competition. It’s better off going where there’s none.” That would make sense if we were talking about Allegiant, an airline which generally shies away from competition. But Spirit has done the exact opposite. It thrives on routes that are already served.

This is the airline that went into the Vegas to LA market, one that’s served by American, Delta, Southwest, and United. (Even US Airways served it at the time.) It has been rapidly growing in Dallas where it goes head-to-head with American pretty much everywhere. And as I just mentioned, it left Washington/National to go head to head with Southwest from Baltimore to Ft Lauderdale.

Of course, for Spirit, this all makes sense. It goes in with low frequencies in many of these markets and says it isn’t competing with the incumbent carrier. It’s going in with rock bottom fares to help those who care about price above all to fly. This strategy even works with Southwest. That won’t come as a surprise to anyone who has seen Southwest’s costs and its fares climb over the last few years.

Spirit’s Fare Troubles
But JetBlue appears to be a more formidable competitor for Spirit for some reason. The natural question is whether or not JetBlue is actually a tough competitor or if the airline is just irrational and Spirit wants to avoid going up against that type of behavior. Maybe JetBlue is flooding the market with too much capacity and is losing a ton of money. I figured I had to look at the fares.

Unfortunately, government fare data is only domestic. It’s also quarterly and only goes through the end of 2011 at this point, so I looked at fares flown during the third quarter of 2009-2011 to match the summer season capacity numbers. This data is notoriously buggy, but I’ve tried to clean it best I could.

Since the data doesn’t include international, there weren’t many good routes to look at here but I grabbed a cross section for my first look. I had long time competitive routes to San Juan, Boston, and LaGuardia. I included more recent competitive routes at LAX and National. Then I threw in Spirit routes without JetBlue as well to Atlantic City and Atlanta. Here’s what I found when I looked at year-over-year fare change in Q3.

Spirit Ft Lauderdale Fare Performance

And look at that. Atlanta and Atlantic City saw strong fare growth, which would mean we shouldn’t be surprised to see the big capacity increases in 2012. LAX did fairly well too. That may have some real impact from Virgin America being in that market, but either way, we don’t see Spirit cutting capacity there. National is middling but at the bottom we see the hottest competitive routes with JetBlue where Spirit is cutting seats. Boston, LaGuardia, and San Juan all saw lower fares in summer 2011 than in 2010 on Spirit and now, capacity is going down further.

But is JetBlue Winning?
The picture is getting a little more clear here. Fares haven’t been holding up as well in these JetBlue-competitive markets so Spirit is cutting back. But are fares not holding up as well for both airlines? Or is this Spirit feeling the heat because JetBlue is thriving?

I decided that the best markets to look at would be LaGuardia and San Juan. The results are pretty telling. Let’s start with LaGuardia.

Ft Lauderdale LaGuardia JetBlue vs Spirit

This shows available seat miles (ASMs) which are the best measure of capacity in the market. It also shows average fare. In LaGuardia, JetBlue kept capacity relatively flat last year but fares rose. This year, it added a bunch of capacity and Spirit walked away. But LaGuardia is somewhat constrained by slots, so I really view San Juan as the purest route since it doesn’t have capacity constraints and they are the only two players.

Ft Lauderdale San Juan JetBlue vs Spirit

In 2010, they were both really steady compared to 2009. But in 2010, JetBlue bumped up capacity a lot and Spirit cut it. JetBlue’s fares started to climb while Spirit’s fell. That led Spirit to cut capacity even more in 2012 while JetBlue grew.

We don’t have perfect data, but from what I see, it looks like Spirit is running from markets where JetBlue dominates. It isn’t happening everywhere – LA for example, but it appears to be happening in a lot of places. That’s a strange thing since Spirit has much lower fares and much lower costs as well. But maybe people are gravitating toward the far superior onboard product with JetBlue.

As JetBlue continues to expand from Florida and in the Caribbean, I wouldn’t be surprised to see Spirit cut back further and move to other cities where it is better able to compete. This would seem to say that it’s not ALL about price. JetBlue is giving Spirit a run for its money.

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