Long Beach May Lose in the Brewing Southwest vs JetBlue War

It’s amazing how much news such a little airport like Long Beach can generate. Now of course, since I live in the shadows of the airport, it’s amplified for me. But watching JetBlue and Southwest duke it out over access is something usually reserved for a large, constrained, and desirable airport. JetBlue, the longstanding majority slot-holder, is facing a real challenge here. Most recently Southwest has added pressure by temporarily using JetBlue’s slots that go under-used today. This might sound like a great thing for competition, but it could end badly for Long Beach. It certainly puts a whole lot more pressure on JetBlue, an airline that has stuck with Long Beach despite the airport’s revenue under-performance.

JetBlue and Juice in the LBC

Long Beach Airport is fantastic for travelers, but for airlines not so much. See, being wedged in between LAX and Orange County means that it has a small catchment area. Further while convenience is great, when LAX has nonstops to every destination, it makes it even harder for Long Beach to attract people. And that’s one of the reasons that Long Beach consistently has some of the lowest fares in the nation. Travelers love that, but airlines don’t.

Over the years, JetBlue has tried several different strategies to make the airport more profitable. First it ran up to 8 daily flights to New York, focusing on long-haul. Then it shifted to a short-haul strategy around the west. Finally, it opted to just use slots less and reduce capacity. That balance created a decently profitable operation in Long Beach but one that lagged behind the rest of the airline’s system. Still, it seemed as if JetBlue thought it was good enough. Then all hell broke loose.

One of the unique features in Long Beach is that it has a noise ordinance which had kept big commercial jets operating only 41 flights out every day. But the complex formula for calculating the noise limit meant that as aircraft became quieter, more slots would be added to keep the noise near constant. As MD-80s have disappeared over the years, noise has plummeted. And with noise levels down, the airport just added 9 more slots.

This is when Southwest decided to surprise everyone and launch service in Long Beach. Southwest was able to nab four of the new slots and started flying to Oakland. This service sat right on top of JetBlue, undoubtedly hurting the performance of that route and further weakening JetBlue’s already mild performance in Long Beach.

But Southwest wasn’t done. There is a rule at the airport that airlines have to file their proposed schedules each month looking forward 180 days. That allows the airport to find if there’s going to be slack, and it can let other airlines use those slots on a temporary basis. This has been commonly used in Long Beach for a long time, primarily during the holidays when UPS and FedEx ramp up to meet demand. (Yes, cargo carriers use the same pool of slots.)

After JetBlue gave the airport its schedules through the end of the year, Southwest came in and decided it wanted in on some of the slack. So the airport announced Southwest would get 3 slots to use from October through December. Southwest will use these to fly to Vegas 3 times a day, another JetBlue route.

This sounds great for travelers, but that’s short-term thinking. While we don’t know JetBlue’s attitude toward the long-term future of Long Beach, we do know that Long Beach has under-performed other markets in JetBlue’s system. Piling on this service from Southwest into Oakland and Vegas adds further pressure. And Southwest’s decision to use temporary slots ratchets up the pressure even more.

JetBlue has two options at this point.

  1. Start better utilizing its slots, further hurting profitability, to prevent Southwest from being able to temporarily use those slots.
  2. Let Southwest continue to use those slots, further hurting JetBlue’s performance in its markets.

Either way, JetBlue’s performance is going to get worse in an airport where it was never really all that great. Now, JetBlue may decide it’s worth sticking around until it can finish its effort to get a customs facility at the airport. If that succeeds, then JetBlue will have the ability to shift capacity and better utilize its slots heading south of the border.

It has said it thinks this strategy will work in Long Beach, but this isn’t something that’s going to happen soon. Some of the locals are rising up, treating this as if JetBlue has threatened to murder their children. The city is being very cautious as it approaches this idea. If it does happen, it’s still several years away. Will JetBlue be willing to wait it out for several more years? It seems that JetBlue was happy to do that before Southwest entered the market. But with the additional capacity and fare pressure, I wonder if that changes things. Or maybe it forces JetBlue to pursue a new strategy in Long Beach. That might be the best possible outcome.

What about Southwest? Why is it doing this? Well, Southwest wants to cement its status as California’s airline in the face of American and Delta adding service while Alaska/Virgin America combine forces. Southwest thinks that serving all these secondary airports adds to its utility. In other words, if someone in Long Beach needs to go to Oakland, then Southwest is going to have a leg up on that passenger when he flies elsewhere in the country from LAX or Orange County. It helps with loyalty. And because of its presence in secondary markets within California, Southwest thinks it can do better than JetBlue can in Long Beach.

Whether any of this is true remains to be seen, but Southwest appears determined to push forward. If JetBlue were to walk away, then what would that mean? I imagine Southwest would try to make Long Beach look more like Ontario or Burbank. Those airports have plentiful flights to the Bay Area, Sacramento, Vegas, and Phoenix with a sprinkling of Denver, Dallas, and Chicago. Southwest could try that, but it’s likely to find that the catchment areas in Burbank and Ontario are larger than in Long Beach and have less overlap. If it doesn’t work, Southwest might walk away. Who knows?

Maybe I’m wrong, and Southwest proves that its strategy in Long Beach is much more sustainable. But if it’s not, then Long Beach could be left without much of anything in the long run. Or maybe this pushes JetBlue to really examine its strategy in Long Beach and come up with something that works better. This is one big question mark, but Southwest is clearly trying to force JetBlue’s hand to get to an answer.

Update 7/26: Talk about coincidental timing. JetBlue announced this morning it will add 9 flights in Long Beach, details to come soon. That means it has chosen option #1 and will fight. Those Southwest Vegas flights will be short-lived, it seems.

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