The airline with the Eskimo on its tail has to be feeling a little uneasy right now after JetBlue announced it would enter Alaska’s flagship Seattle to Anchorage market. The motivations for this move seem a bit murky, but the payoff could be huge.
Friday morning, Alaska announced it would start flying from San Diego to Boston once a day beginning March 29. This is clearly part of Alaska’s plan to grow San Diego, since it has added several destinations lately from the city.
The only other airline in this market is JetBlue. It must be a decent market because JetBlue flies it twice a day. Of course, JetBlue appeals to the Boston crowd more. And though Alaska appeals to the San Diego crowd, its partnerships with Delta and American make that market attractive to a lot of frequent fliers on either end.
Where this gets interesting is that less than two hours later, JetBlue dropped the bomb that it would start flying from Anchorage to Seattle once a day beginning May 16.
Regardless of whether or not this is a retaliatory move, it’s bad news for Alaska. In fact, Alaska has to be feeling pretty nervous about this. Anchorage to Seattle is a great market and Alaska owns it. Even during the slow winter, Alaska flies 11 daily flights on a weekday. In the summer? You’re looking at basically hourly flights with 22 a day. These airplanes have a lot of people onboard, but they also are full with cargo in the belly. It’s a very good market.
But what’s even more remarkable is that this big market is largely competition-free. There used to be more flights before airlines had the range to fly nonstop from their hubs to Anchorage. But now most have walked away.
United still has one or two flights a day depending upon the season, but that’s it. And United is certainly not trying to be a pricing leader in this market. But JetBlue is a different story. Even though it’s only coming in with one flight a day, if Alaska ignores it, this service could grow quickly.
We don’t know what JetBlue pricing will look like. That’s another reason this announcement seemed a little suspicious with it’s timing. Fares aren’t filed and neither are flight schedules. No pricing was given in the press release; not even an introductory sale. But it’s safe to assume that JetBlue is going to come in and charge a lot less than what Alaska charges today.
How good is this market? For the first half of this year, the average nonstop fare in the market was $295 each way. (Alaska alone was a few bucks higher.) That was roughly the same average fare as we saw in the lucrative LAX to JFK market. These are total average nonstop fares, so that includes all the high dollar premium traffic flying between LA and New York. Oh, and the JFK to LA flight is 1,000 miles longer.
Sure, the Seattle to Anchorage market is smaller than LA to JFK by a factor of 10 from a passenger number perspective, that doesn’t mean there isn’t room for another airline to come in and make some good money.
Now to be sure, Alaska owns this market and that won’t change. It has all the cargo deals and it has locked up the business traffic that goes back and forth. JetBlue won’t change that with one or even a couple flights per day, and that’s why JetBlue won’t try to fly this market during the winter, at least to start. But JetBlue can get a lot of tourists to fly during the summer, and that’s exactly the plan.
With one flight, it’s not a threat to Alaska, but if it does well, Alaska can put more airplanes in there. And the threshold for success might be relatively low. JetBlue pulled in about $190 each way per person on its Anchorage to Long Beach route last year. That was more than $30 less than Alaska brought in from LAX, but JetBlue is bringing the route back again next summer for the third year in a row.
With higher fares and a bigger market, Seattle has to be attractive to JetBlue. Even if this is just a response to Alaska’s San Diego to Boston flight, it was just a matter of time before someone entered that market.
[Original photo via Shutterstock]
Perhaps that post-merger UA kept this pre-merger CO flight, rather than just relying on service from DEN, is a sign of how lucrative it is…
This is a great market, and it used to be heavily populated. Western, Wien, Northwest, Delta, AirCal, RenoAir, Markair, TWA, Continental, United, American, and America West have all plied this route over the last three decades. United once flew 767s and Northwest once advertised three 747s a day. America West, Reno Air, and most recently Continental all filled seats with bulk fare agreements with a local Anchorage travel agency; most recently Continental and Pre-Merger United were making good money on mail. The basement for fares was nailed at around $99 each way until roughly 2006. It’s time for some new blood.
I’m sure the JetBlue route will do fine, like most other airlines flights in the summer. But I don’t know how worried I’d be if I was Alaska. This is a red eye flight for starters. If you’re just flying SEA to ANC, you don’t need to take a red eye, so I think people are willing to pay a premium for a day flight. The other issue is loyalty. To say Alaska has a strong frequent flier base up there is an understatement. You can get miles for EVERYTHING. When I lived there, I used to get miles at the grocery store, with my phone bill, and the credit card. It made it easy to earn fast, which in turn kept me loyal. Like I said, I’m sure JetBlue will make money on this flight, because the summer demand is very strong. But to really win people over, they’re going to have to offer more flights, at better times, and offer them year round
I think this is also significant because it marks the return of red eye flights to the JetBlue network. There haven’t been many of these added in the past four or five years. Also, JetBlue originally had twice daily flights to San Diego but debuted with one for the summer. I am sure this will change however.
Agreed. B6 used to be the redeye king but kind of dropped off. I was hoping to see the return of SAN-IAD on B6, but my guess is Southwest will get to the redeyes before B6 does too much.
I don’t think the “home turf” concept applies as much as it did 5 years ago. We still have fortress hubs but the days of fighting tooth and nail for market share are done.
Red eye flights are already in the B6 network. One of their SAN-BOS flights is a redeye.
I flew this route this past winter, when it was one daily flight. It was a redeye, and rather than take that, I connected in JFK to get from SAN to BOS. My return flight was on the BOS-SAN nonstop.
One flight or a few would not hurt AS since the connection value using AS is to great for people to pass up. Also after all these years regular AS flyers will have to many miles built up to switch to another carrier.
Are airlines still stupid to play the in the your face game? Alaska starts SAN-BOS which Jetblue thinks it’s theirs so would they act like a baby with a rush in your face ANC-SEA flight? Right airlines have made millions playing that game…lol
I wonder if they just pushed up an announcement of a route they were already planning on.. I don’t think JetBlue would’ve announced it if it was otherwise..
You know the economy is getting better when spur of the moment, ego based route decisions are made. And, of course, spite routes never work. AK will crush B6 in ANC, they own the market.
Would be nice to see US do a non-hub SAN-BOS to complement their SAN-DCA, just to piss everyone off.
This is not retaliation for SAN-BOS, I dont’ see how it could be. A single summer red-eye flight as retaliation for a large daily transon route? Seems like if that is the case, JetBlue needs to learn how to compete better.
No, this flight I think was in the works well before AS announced SAN-BOS. A few things that come to mind – locate gate space, ground handling, staffing, etc – not something that can easily be done in a couple hours. While I know they already have/had a seasonal LGB-ANC, a second flight around the same time (I am guessing based on it being a red-eye) still may require an additional gate, and staff.
Even the very press release – something that probably takes at a minimum a couple hours to review and approve, by multiple people in multiple departments, actually likely was in draft form for days as each department affected reviewed it.
No, this was nothing more than coincidence.
I agree partially.
I don’t think launching the route is retaliation. Jetblue is a fierce competitor (see Spirit, Airtran in BOS), and if they wanted a “shot across the bow” they would have more muscle to flex (i.e. pounding west coast routes, EWR, FLL, MCO – SEA, etc.)
However, I think the more likely story is that the announcement was moved up ahead of schedule to be in the same news cycle as the AS story and draw attention. Probably earlier than they would have liked to announce, but not so significant that it was “unplanned retaliation”
This looks like utilization flying to me, i.e. they’re just using aircraft time that was sitting in SEA. The flight easily turns off the last arrival from LGB and gets back in time for the morning departure back to LGB. Same with the UA flying which meshes with their IAH pattern.
It’s nice to see the return of utilization flying…just hope they can overcome fuel costs. Similar story with the launch of ABQ. Yet, BUR red-eye got cut, so we’ll see…
When I lived in BOS (early 2000s), AA flew SAN-BOS daily, and I seem to recall it was an AS code share. So, this route addition by AS is not entirely unprecedented, and B6 hasn’t always had the exclusive (although, when AA flew it, it may have been before B6 went into the market).
On why the UA flights have done well – they connect to Houston (one is direct in the summer) and are stuffed full of oil field workers. They get off the Shared Services flights from Prudhoe and jump on the UA flights south; a scandalously large portion of Alaska’s oil field workers live out of state and can afford to fly back and forth for their two weeks on, two weeks off schedule. Scruffiest bunch of folks sitting in first class I’ve ever seen! :)
LOL – scruffy in 1st class. It is true even on AS flights.
From what I understand, the b6 LGB-ANC route was profitable due to tons of cargo (I think mostly fish), not passengers. If Jetblue thought they could expand the cargo business, they may like the flexibility of routing via SEA instead of LGB (opens east coast destinations without cost of flying extra distance, while maintaining *likely* same plane service to LGB for whatever goes there) and has the potential of more pax at higher yield.
Also, given the slot restrictions at LGB, a 2nd non-stop would likely mean having to cut something else
Random and somewhat tangential thought – would Alaska and JetBlue ever consider hooking up? If not a merger then perhaps some sort of codeshare?
I’m no aviation expert, but it would seem their cultures and route maps are more complementary than most of the other mergers seen or proposed over the last few years.
Was wondering about a merger between B6 &AS as well. The first concern of many in my mind is the fleet. B6 is mostly Airbus 320’s while As are a mixed bag of 737’s & MD 80’s. Second relates to As being a union shop & B6 isn’t unionized. If you can get past that, it could be interesting. The Seattle & Portland hubs are far less congested than Los Angeles or San Francisco & in the case with Seattle, good connections with Asian bound flights.
my personal take:
I dont think the fleets is the biggest issue. Sure it is a large one, but both airlines are big enough to fly 2-3 airplanes side by side and make it work without too much of a sacrifice.
External issue: The bigger issue is that both carriers are relatively overvalued. From a finance perspective, the combined carrier is not worth the sum of its parts. Each can grow profitably on their own, and a merger would cost a ton of money and each would put into the combined entity more money than they are worth individually.
Internal issue: Sure they dont overlap routes, but if they did merge, the codeshares with AA and DL would be gone, the cultures and product, while complimentary, do not necessarily blend easily, and the integration struggles would severly damage both brands, possibly to the point of being “average,” losing a ton of goodwill.
It reminds me of why no one will likely by VX: it simply isn’t worth the money
AS has no MD-80s. They divested those planes a few years ago. Horizon flies the Q400 and SkyWest took over the Bombardier RJs (5 I believe) and flies them under the Horizon/Alaska brand.
Maybe it’s just B6’s way of sort of expanding their West Coast presence. Seasonal service should be good for them. This was a big surprise to me. I also noticed they are starting service to Albuquerque (all be it from JFK only). Maybe it’s just B6’s way of sort of expanding their West Coast presence. Seasonal service should be good for them. This was a big surprise to me. I looked at their map and they already do LGB to ANC. I guess that leads me to think that this may be profitable for them. In no way would I think they would be crazy enough to take on Alaska. Jetblue has the East Coast and Alaska has the West Coast. That’s just the way things are. Anyone know if their LGB to ANC is doing good? I know Alaska makes a killing or they wouldn’t have so many flights per day. I doubt Jetblue is crazy enough to wrestle with Alaska on the West Coast.
@ Sean: AS only flies 737s now. They unloaded the MD80s years ago. Just FYI. The rest of your post is completely valid.
Thanks Steve Z for the info.
I might sound quite naive among you aviation sharks, but I would still like to add a thought. Both airlines (in my view as a potential passenger, no matter how remote) have one strong pont in their favour.
AS credits miles towards other airlines’ mileage programs, like DL’s SkyMiles. And in my personal experience this is huge. I am not rich, but every time I travel I do it mile-wise even though in most cases that means more expensive to choose SkyTeam over a mixture of airlines/alliances. So mileage-concerned would choose AS.
Yet B6 flies one checked-in bag for free. Even such a miles’ freak as I chose JetBlue on my MSY-JFK flight last year just because I got tired of paying for my checked-in luggage on DL. So, this is also a factor to consider for an average traveller, especially those who are either not strict alliance followers or fly various airlines and try to minimise their travel expenses.
So, it might be a 1:1 situation for travellers from their perspective as customers.
This new B6 route (ANC-SEA) will bring fares down on the ANC-SEA route, imho. That said, I’m not sure how much higher they could go. I just bought a ticket on Alaska Air for $545rt. And yes, UA is L-A-M-E on this route in terms of competitive presence. I’m confident Alaska Air takes this new flight seriously…witnesseth the carrier’s robust response on the ANC-LGB service. Prices to L.A. now settle in the $300-$400rt range. That’s about 40 percent less than the prevailing rate pre-B6.
I think the ANC market is ripe for competition — I fly between SEA and ANC several times a year and have never been able to fly jetBlue just due to the route network not going where I need to go. The Alaska passenger experience isn’t bad, but it is getting a little old. I would love to check out B6 and I know a few MVP Golds (and at least one Lifetime Gold) who feel the same way.
An excellent post, as always. Here’s what I think. I seriously doubt that JB could react that fast if this move was just retaliation. I also think they are a lot smarter than that. What they are really doing is skimming a bit of cream from Alaska’s Cash Cow, the Seattle-Anchorage route. One, or later flights each day is not a serious threat to Alaska Airlines, though JB’s small take will hit their profit a little bit. As CF and others have noted, this Alaska still owns that market, as they have for many years, especially when one considers their freight and bulk seat contracts. JB may undercut AS’s tourist seats by a few bucks, but I cannot imagine a serious impact upon AS’s route-based revenue. I also don’t see the basic, public fares changing more than a few dollars. Alaska may not respond at all. In the end, it is still cream skimming, a practice with which JB has considerable experience. While they do have a small presence on the West Coast and in Seattle, they are primarily and East Coast carrier. They don’t have the resources t o command the Seattle-Anchorage route and I don’t believe that they want to do so. have I mentioned Cream Skimming? While the practice may seem untoward to many, the industry has become very competitive and Cream Skimming is not uncommon. JB – and many others – can and will fly between city pairs with which they believe they can make a modest profit. For better or for worse, that seems to be their operating model. And yes, it will take a lot more than one or two JB flights to threated Alaska’s grip on a run that they have ‘owned’ for so many years. In the end, this seems to be a non-event.
B6 will stuff the 320’s with salmon for transfer to east coast, that’ll be the money maker.
To me, that sounds fishy. Sorry, couldn’t let that one slide.
Could we see the beginnings of another interlining agreement between B6 & AS? Yes I know AS codeshares with AA & DL, but an interline with B6 could further the AS brand into new markets without adding capasity.
With this new competition and increasing threats to its stability as a “family” style organization, one wonders how well AS can stand up to the threat. Although its customer service has been tops, decisions to cut away a large number of its family through outsourcing (i.e. ground crew) and the way it recruits CSAs (please read http://survivingtermination.wordpress.com/2013/03/15/double-tree-double-despair-alaska-airlines-cattle-call/) will not help the situation. Imagine living in LA, working for $10 -12 an hour and then having to pay union dues of $40 a month (which seems like a waste when you consider the firing of AS ground crew — what’s the use of a union that can’t help you keep your close-to minimum wage job?). Think about all that while you’re cruising along at 40,000 feet or entrusting your luggage to people even more desperate, destitute and transitory than the sorry souls who actually work for Alaska. And while you’re up there you might also want to think about the all those lost souls when AS plummeted into the Pacific because of lackluster aircraft maintenance (see http://en.wikipedia.org/wiki/Alaska_Airlines_Flight_261)