We have a two part Ask Cranky today. To be honest, I wasn’t going to address this on the blog, but I was surprised at the number of people asking similar questions. So it seemed like something that you all wanted to talk about. This question comes from someone who lives in Rhode Island and has a real interest in new service in Hartford, Providence, and the latest addition to the network, Worcester. Let’s get started with the first question.
First, when JetBlue has been opening cities such as Providence, Hartford, and Worcester they have only been running flights into Ft Lauderdale, and Orlando. Do you think this seems like a sustainable strategy? It seems to me that while Florida will definitely be successful for origin & destination passengers, it seems that it doesn’t offer many opportunities for connectivity, either to the Caribbean or transcon. I know JFK is off the table due to slot-constraints, is there another city you could foresee JetBlue using to try open up some connections within its network. I know Rhode Island for Providence, and Massport have worked hard to get JetBlue’s service, it’s a shame the service can’t be more useful.
Yes, I definitely think it’s a sustainable strategy. Look at a place like Hartford. There are a ton of people who want to go from there to Florida, but the only other airline that flies nonstop is Southwest. It’s a big market, and there’s room for a little competition. In this case, the ability to fly nonstop is important and since the flight is relatively short, there’s less tolerance for a connection. So JetBlue should do well.
JetBlue has decided to focus its network around Boston, New York, Florida, and the Caribbean. The flights down to Florida make a lot of sense from that perspective, but they also do provide connections into the Caribbean via Ft Lauderdale and Orlando. (And JetBlue does fly nonstop from Hartford to San Juan too.) What it doesn’t do is open up connections to other Continental US destinations. It would be too much of a backtrack to go via Florida while JFK and Boston are both too close to these cities to support service. JetBlue isn’t looking for a new focus city, so that means the airline has two options. It either doesn’t serve these markets or it serves Florida.
The flights can work, because Florida has a bunch of demand from the northeast. And those Caribbean connections don’t hurt.
Second, do you see JetBlue’s decision to serve Worcester as a legitimate business decision, or something which is being only done to appease Massport (the operator of Boston and Worcester)?
Remember what I just said above? Ok, so whether that applies to Worcester is very questionable. Providence and Hartford have good-sized metro areas with demand to Florida. Worcester is a decent-sized city but it doesn’t have a big metro area with people who prefer it as a primary airport.
Worcester is just 50 miles from Boston Logan, 50 miles from Providence, and 70 miles from Hartford’s airport. It’s convenient for some, but most people in that area have other airports they choose first.
Does this mean it’s destined for failure? Well, Direct Air couldn’t make it work, and they tried a lot of these kinds of markets. Allegiant pulled out as well, but that was a few years ago. Things are a little different with JetBlue. After all, JetBlue is the biggest airline in Boston, so it has some real loyalty building in the region. But is that going to be enough to make it work? Hmm, that’s a tough one.
Maybe something else is afoot. It is definitely true, as Daniel notes, that Massport operates both Boston and Worcester. And Massport has been trying to lure service to Worcester. So did JetBlue do this just to appease Massport? I have no clue, but if that is the case, it’s not a bad plan. Boston is hugely important to JetBlue, and if a couple of flights to Worcester makes the relationship better with Massport, then everybody is happy.
I’ll be interested to see how long it lasts.
JetBlue has remained really focused on providing point to point connectivity, yeah they’ll connect you over JFK, BOS, and FLL but that isn’t their focus.
B6 has stuck to their knitting by keeping with a premium(ish) product that minimizes connections which is where they’ve got pricing power.
Why do folks want B6 to be like every other network airline out there?
Whatever makes them money. They are not shy about pulling out of markets. I’ll be more interested to see how they pull of PHL to BOS.
Worcester raised my eyebrows too but I think it could work for B6 and, if not, it will be gone before we know it. This could also be driven primarily by the Massport relationship which might be paying other dividends for B6 at Logan that make a small Worcester station worthwhile.
Does it have to be Massport or Profit?
Certainly, they are trying to appease Massport, but that does not mean the service will not make money. I say this because there is a market as Cranky alluded to. However, it will never command the schedule and price to grow a whole lot, and serving another airport only adds cost. Given that, I doubt it is the most profitable, marginal route addition. But, if massport is happy, BOS can grow more easily.
Everyone wants b6 to open a mid-country hub, buy VX, or other industry nut ideas. However, they are too disciplined and too small to not put assets in places that make the most money.
Worcester has been a problematic site for years….it’s on the high side (elevation) of the city and as a result, is frequently fogged in. Part of the announcement is that Massport will be updating the instrumentation to allow instrument landings.
However, the other major issue with Worcester is access…the airport is 5+ miles off the major interstate and the route(s) run through some of the busiest streets. So it can take > 30 minutes to get to the airport which has been the larger issue…there weren’t any announced plans to address this. In the past, there has been discussion about creating a direct route from the highway but these went nowhere.
I’m only about 20 minutes from Worcester city limits and am in the process of switching my flights to b6 as I’ve become fed up w/ American’s propensity to cancel flights due to ‘mechanical problems’ and a severe cutback of non-stop service out of Boston (e.g. San Francisco, London).
Worcester provides another option for the wealthier community in the area so people don’t have to drive all the way to Boston. Kind of like Burbank and LAX.
Like was said, JetBlue is big in Boston, so people living in the Worcester area who would normally go to BOS may now use Worcester if they don’t have to pay higher then BOS fares.
B6 has publicly said BOS isn’t making money, so I honestly see no reason to blanket the area with competing service at PVD, let alone ORH, chasing after super elastic drive traffic when the fares out of BOS are already dreadful. And to all the people looking for more service to the Midwest or a hub in the middle of the country, just keep in mind you are below ORH in terms of priority.
But we don’t know the details behind BOS is losing money, and this is significant and lost on most comments.
A big terminal renovation is expensive, lots of new flights which have promotional / ramp up periods, new equipment and hanger, etc. Mature BOS markets likely make money, it’s even possible all BOS flights (as an aggregate) are cash flow positive, but not yet profitable due to these investments. My point is, before writing BOS off as a money-loser, we need to explore what is losing money and why, and how that will change over the next few years
We know–it’s hyper competitive, fragmented, and the fares are low, and there’s little to connect beyond BOS, particularly on B6. That said, B6 also said it anticipates to be profitable soon in BOS. I’d assume they’re already cash flow positive–if not then BOS is far worse than they’re letting everyone to believe.
But we also know from analyst day presentation that margin is up significantly (up ~3x 2009, last year was oddly negative likely due to growth) and that seat share is up 9% (to 24%) since 2009. It will take time to grow a hub, allow attractive connections, and capture business o/d traffic. But there is a trend towards b6 consolidation and fare premium. This will lead to further cuts by other airlines to non-hub cities. As other airlines drop routes that b6 competes on, yield can improve.
Someone said B6 came out and said that BOS isn’t making money. This is not correct. Boston makes more money than JFK does for B6. It’s a very highly profitable hub for B6. That’s why they’ve announced they’re going to 150 flights a day out of Boston.
If remeber correctly, it was jetBlue itself (on its last earnings call) that said it wasn’t making money in Boston at this point in time. But its lack of profitability was because of its rapid growth there, not inherent weakness in the market. Once things settle down, the airline expects Boston to be profitable. What I’m going to watch is how things shake out post US Airways / American merger when the “new” American will have almost as large a presence in Boston as jetBlue.
Don’t forget that jetBlue is also being given a lot of financial incentive to set service in Worcester. Waived/discounted landing fees and free marketing cash have a strange way of motivating business. And this time around the number is north of $400,000.
Discounted landing fees and marketing cash are nice, but they’re a drop in the bucket and generally don’t sway opinions on a single route that is likely to run $10-20+MM/year in revenue, let alone multiple routes.
Don’t forget that JetBlue serves dozens of markets from FLL and MCO, including some not served from JFK or BOS.
I know I’m being Captain Obvious here, but the only way to find out if jetBlue’s strategy makes sense is to try it out and see what happens.
Worcester is not the most conveniently situated airport access wise. But here’s what it opens up and consolidates for jetBlue – Western Mass, VT and NH.
Without flights from Worcester, residents of that area have to either go into Boston, fly SWA out of Manchester or go to Hartford. Worcester adds convenience and reduces the travel time for those residents outside of the BOS metropolitan area. Plus, by offering flights from Worcester, jB gets the additional benefit to pull customers that would otherwise head to Manchester and fly SWA.
Worcester clearly isn’t going to be game changer or major profit center for jetBlue, but there likely will be gains in their brand presence in MA. And I’m sure that Massport found a way to make this attractive for them as well.
I am sorry but I don’t see any of that being true. I live in southern NH and Worcester is an awful location for anyone not between Sturbridge and the western suburbs. I don’t see anyone being pulled from Manchester, Keen, Vermont, or the Springfield area. MHT has been actively pursuing B6 for at least a year or two now, and I don’t know about them but I take this as a direct slap in the face.
Reminds mekof the old Northeast Airlines route structure. Any speculation on why jetBlue has ignored MHT as part of this strategy?
Probably all the WN nonstops to DEN, LAS, MDW, FLL, MCO and TPA.
Even though MHT has lost about 30% of its business over the last five years ( both due to the economy but also since WN started flying out of BOS about three years ago ) I don’t know if there are any gates available in MHT . I’d like to see JetBlue there, as would others. Worcester seems to be the result, as others speculate, of a deal with Massport. Otherwise it doesn’t make sense. Its hard to get to, and MHT is closer for many people in metro Boston.
Even though MHT has lost about 30% of its traffic over the past five years due to the economy and WN starting flights out of Boston, I don’t know if there are any gates available.
Worcester just doesn’t make a lot of sense. For many people around Boston, MHT and TF Greene are easier to get to if one wants to avoid Logan.
Jetblue does or will serve TF Greene….
Look at B6’s LA, SF, and NYC area strategies strategy. They serve both the main airports, as well as the outlying, surrounding airports. While we can all question this decision, it is not uncharacteristic. It is possible MHT will get service, it just may be the last one as it is the most competitive and may be the hardest to make work. (and before you bash me on BOS being competitive, it has the traffic to support growth and a hub)
I’d love to see B6 start flying out of MHT, as I think at a minimum it would give WN some competition and force some prices down . They have been flying out of Portland ME for several years now, which is a different market to a certain extent, but probably lessened the need to open up MHT. I live in southern NH, almost due north of Worcester, but MHT is WAY easier to get to than Worcester .
Funny, remember when we wished for WN to start service because that would force prices down? The Southwest effect? Yeah, I think that’s pretty much dead! Now we need other airlines to force WN into price competition. This is a funny world we live in!
Rumor around the water cooler is that in order for B6 to take over all of terminal C in BOS, Massport wanted us to provide service from Worcester. Maybe it’s true, maybe it’s not, I don’t know. I do know that they want to be the largest carrier in the New England area within the next few years so I guess MHT is on the horizon but probably not for 2 years at least.
Take a look at White Plains. JetBlue flights are PACKED to FLL and MCO from HPN. It’s a mere 40 minutes to LGA and 50 minutes to JFK (with no traffic). I live 5 minutes from HPN, and am willing to pay JetBlue’s higher prices from there to get to FLL or MCO….as are a lot of people in the suburban NY area. I assume they’re thinking they will have similar results in Worcester?
I thought this was a well considered response to a (IMO) relatively simplistic question. There is a huge difference in business and life between appeasing and partnering with Massport. That partnership has resulted in improvements not only for JetBlue and Logan but for the traveling public in New England. Thank you for seeing beyond superficial concerns and seeing the bigger picture. I hope that more analysts will take the time to do that, not only with JetBlue but with the rest of the industry.
Aside: Hey any JetBlue officials. If you are reading this, please start nonstop BWI – Sarasota before SWA. I love your airline and fly this route now (with stops).
Now back to regular scheduled programming: Worcester is interesting. I am definitely surprised to see this, but I doubt it will ever amount to more than a few daily flights.
First off, thanks for helping getting word out on ORH and JetBlue. Couple things though, Direct Air had full flights all the time out of ORH, but Direct Air was more a Ponzi scheme then an airline. It will be a great episode on American Greed soon.
Allegiant also had high loads, but they left for other reasons. Although I have heard rumors,I think the main problem was the airport at the time was still owned by the City of Worcester.
This leads to the comment on ORH being “problematic”. This is true, but now that MassPort owns ORH, they have committed to 32 million in infrastructure improvements include Cat III landing system. As far as hard to get to , give me a break? Ever drive to Boston lately! Direction on the website, you can get to ORH in less then 15 minutes with no traffic from a major highway. Is it a direct access road? No, but it is very easy to get to without any traffic.
Lastly the analogy I have heard the most is that ORH is similar to White Plains. Do I see ORH drawing from Manchester or Vermont? I do see it keeping people within 20-30 of ORH going to ORH for leisure travel to Florida and points south. Easy airport, low parking fares etc.
Again thanks for covering ORH and JetBlue.
I think Bill covered the bulk of what I wanted to say, thank you. In terms of ORH vs. MHT, I was surprised by their choice, however I think that is all MassPort. I feel that JetBlue probably cut a deal with MassPort making Worcester very low risk for them. Though I have heard rumors about concerns with Southwest’s domination of MHT which does have some merit as well.
ORH is an overflow plan for MassPort for when Logan nears capacity (they can’t grow). I see it with multiple local hospitals that are owned by the same person. They can kinda mix and match with what goes where to keep things balanced out between them. I.E. MassPort may tell an airline that they can have these gates in Logan if they move these specific flights to Worcester, thereby taking some of the stress off of a packed BOS. Unfortunately, Massport can’t do that until ORH gets airlines and proves itself to be worth moving into. To do that, MassPort needed a successful airline to get the ball rolling. If JetBlue can show that their flights out of Worcester consistently pull a profit, MassPort will then have an easier time convincing other airlines to shuttle some of their traffic that way. That’s why MassPort made all of those concessions, makes ORH low risk. MassPort wins, Worcester wins, Logan wins, the airlines win, etc. Everyone wins except MHT (sorry).
In terms of size, you all seem to keep referring to Worcester as some average sized city. It is the second largest city in New England. North of NYC, the only place bigger is Boston. I honestly don’t know how far south of NYC you have to travel to find another larger city. While there are a lot of very successful airports near Worcester to draw from, there is still a huge demographic inside the city for a successful airport to sustain itself with. As Bill said, the problem with Direct Air was with themselves, not their customer base. Those planes were consistently full.
Now as for distances, I am in an interesting position. Traffic willing, I live relatively equidistant between Logan, Manchester, and Worcester. Probably closest to Manchester, I went to college and do some work in and around the Worcester area, and currently work in the North Shore/Greater Boston area, traveling into the city (and around Logan) several times a day. When we travel, we usually use MHT, but search MHT, BOS, PVD, and now ORH for the cheapest flights. From experience, I can tell you that MHT is the easiest ride ever. Boston is beyond painful, particularly during rush hour or other big event. Surprisingly Worcester isn’t all that bad. I have a few different ways to get there and they aren’t terrible, even with traffic. Not too much city driving unless I take the back way through Holden and Paxton, which is longer, but pretty uneventful, and the parking lot is right there. I have personally driven to all 3 airports and I would not mind driving to ORH. And if their flights are as good or cheaper than Southwest out of MHT, I’m sold and JetBlue has a new customer. Finally for those who say direct access road. Yes, it would be nice, but think about how and why MHT was very successful for a very ling time without one? You used to have to drive through Manchester to get to their airport and it seemed to work just fine. Thank you.
Wow. Well said… Holden and Paxton roads to access ORH. Actually good choice but you need to do have driven those roads before. On http://www.flyorh.com, i have a directions tab. Honestly under 15 minutes from Route 290 , you can be inside the terminal (no traffic, no tolls, no tunnel).
One other thing I thought of and you did a great job reminding people. Worcester is the 2nd largest city in New England. If JetBlue gets people loyal with JetBlue through True Blue and their AmEx card out of ORH to Florida, waht airline do you think they will fly when they need to fly to say, for example, California?
You think they will switch to another carrier? NFW!! JetBlue will lock this whole catchment area to them over any of the other carriers.