Long Beach Chooses Southwest Over JetBlue With Slot Rule Changes

Long Beach Airport should be a desirable place to fly.  After all, it’s only 20 miles down the (admittedly traffic-choked) 405 freeway from LAX, and it provides a far better passenger experience.  But historically, Long Beach just hasn’t performed well for any airline.  Recent history has been dominated by JetBlue, but the relationship has become rocky.  For years, it looked like no other airline would be interested in filling JetBlue’s shoes if the airline decided to walk… until Southwest entered a couple years ago.  Recent moves have left Long Beach in the very difficult position of having to choose which airline it likes best.   With the decision to change slot utilization rules last week, the city has clearly sided with Southwest.

Ever since coming to the airport back in 2001, JetBlue has been a dominant fixture that has snapped up slots every chance it got.  The airport’s noise ordinance is complex, but it guarantees a minimum of 41 big jet flight slot pairs per day.  Thanks to reduced noise from more modern aircraft, that number of daily slot pairs increased in practice to 50 a couple years.  At its peak, JetBlue topped out at having 35 of the 50 slots.  (Also, note that 2 of the remaining slots are used by cargo carriers FedEx and UPS, so there are really only 48 total used for passenger flights.)

The problem was that JetBlue wasn’t doing all that well flying those 35 slots.  It had tried several different strategies over the years ranging from long-haul to short-haul flying, but none of them had led the airline to riches.  A few years ago, JetBlue decided that the key to success would lie south of the border.  If it could get a customs and immigration facility in Long Beach, it could fly to places like Mexico or Central America.  But the Long Beach City Council refused to even properly consider the idea thanks to pressure from a small but loud group of fearmongers in the city.  JetBlue was once again left looking for a strategy.

The increase from 41 to 50 slots was a dagger.  JetBlue had been under-utilizing its slots to stem losses. The rules said an airline could use its slots just over half the time (actually 57 percent over a 180 day period) and still keep them.  When that happened, other airlines could have filled in the unused days temporarily, but nobody wanted to.  As soon as the number of slots went to 50, Southwest decided to pounce for the first time.  For the first time in years, there was actually more demand than supply for slot pairs in Long Beach.  If JetBlue didn’t fully utilize its slots, Southwest could step in temporarily. 

Having lost its battle for a customs/immigration facility, JetBlue couldn’t have been blamed for just pulling out of the airport entirely.  Considering how much JetBlue has invested in the community, the loss for the region would have been profound.  But JetBlue opted to stay and fight.  It began fully utilizing its slots, launching a slew of new frequencies to prevent Southwest from stepping in.  It was obvious that this strategy wasn’t going to work.

It tried to get creative.  When Hawaiian expressed an interest in flying to Long Beach, JetBlue knew it could give up a slot and not have it go to Southwest or any airline that would be a competitive threat.  It did that and slot-holdings dropped to 34.

But that was still too much.  Earlier this year, JetBlue announced it was slashing service, cutting frequencies in nearly all short-haul markets.  It threw out a Hail Mary… some sub-daily seasonal service in random markets like Bozeman and Steamboat Springs, but that hardly made up for the cuts elsewhere.  Daily departures would drop to 23 (further down to 22 once a later pull-out from the Ft Lauderdale market was announced).  The expectation was that JetBlue was going to release these slots so others could take over, but that didn’t happen.  Instead, JetBlue just went back to its old tricks and started under-utilizing its slots.  If you’d think that Southwest would step in and fill the void, you’d be right… sort of.

Southwest only has six of its own slots in Long Beach (currently used to fly four flights to Oakland and two to Sacramento), and it has made no secret of the fact that it wants more.  When JetBlue stopped fully utilizing its slots, Southwest did ramp up a bit by adding two more Sacramento flights and three to Vegas for a total of 11 daily flights.  It could have grown more, so why did it stop?

In its labor agreements, Southwest has committed that it will employ its own people at an airport where it has at least 12 daily flights.  Anything under that can be run by contractors.  Since Southwest technically has only six slots in Long Beach, it has to be hesitant about growing above 11 daily flights.  What if it does, hires a bunch of people to run the operation, and then JetBlue decides to utilize its slots fully again?  In that case, Southwest would have to staff its six measly flights with a full complement of employees.  That is not the way to run a profitable station.  (Some would argue flying to Long Beach at all is not a good way to run a profitable station, but I digress.)

That left the city of Long Beach at a crossroads.  It could maintain the status quo and keep JetBlue happy-ish, or it could change the utilization rules to try and give Southwest a better opportunity to get its hands on some more slots.  It chose the latter.

The new rules that passed the city council last week require an airline to fly 60 percent of its slots in a month, 70 percent in a quarter, and 85 percent in a year.  That allows for some seasonality, but it doesn’t allow JetBlue to keep doing what it has been doing.

Now, the ball is in JetBlue’s court.  Will it do what it probably should have done long ago and walk away from a seemingly ungrateful city?  Or will it ramp its flying up again to meet the new rules?  If it’s the latter, then service will likely sink deeper into the red.  If it’s the former, then the door will be wide open for Southwest to step in and turn Long Beach into a Burbank or Ontario clone.

On the surface, this seems like the wisest path for the city, especially since it prematurely shut the door on the customs facility discussion.  If there is more demand than supply for slots, then the city is right to try to maximize their usage.  But just because there’s a ton of demand today doesn’t mean it will be there tomorrow.  Long Beach is betting that Southwest wants to ramp up for the long-haul here.  If that happens and JetBlue walks away, we’ll see how people feel about having less New York and Boston and more Phoenix and San Jose.  But then, the city will again be in the position of having all its eggs in one basket.  It’s just a different basket this time.

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55 Responses to Long Beach Chooses Southwest Over JetBlue With Slot Rule Changes

  1. Long Beach deserves whatever it gets from this mess. It’s their mess.

  2. Mark says:

    I can’t fathom how one city council has so much power over an airport. How is this model a better form of airport governance than the more typical state/municipality run port authority?

    • Jim says:

      State-run airports are common in smaller states, but California is too big for that, so its airports are run by cities or counties. Whether it is by the city itself (as in Long Beach) or a separate agency created by the city (as in Los Angeles) doesn’t really make any difference.

      • B Mike says:

        I would point out that LAWA (LAX’s home agency) is still a department under the City of Los Angeles (the major appoints the board and the technical name is Department of Airports). A separate airport authority is something like the entity that runs Ontario or Burbank. It comes down to how that authority is structured and its governance makeup; if the governing body is made up of different municipalities or some other structure, you can see different results versus a city/county-run airport.

  3. A says:

    Clearly the City of Long Beach doesn’t want this airport to be a true secondary airport in a major metro thus we get more and more of this game of musical chairs. I know LGB is Cranky’s local airport and thus it gets a lot of attention but in this post he actually mentions it’s relative proximity to LAX. While I understand there is a lot of population density in the LA basin LGB still seems to me as a relic leftover from the Douglas Aircraft Company. To me SNA and LAX are more appropriately spaced to have as a primary & secondary airport for a major market like LA, while Burbank and Ontario can cover the valley and inland empire respectively. (I acknowledge there is NIMBY issues with SNA as well.) Across the continent NYC has its own airport issues but one can hardly say that JFK, LGA and EWR aren’t successful for the airlines….or MDW or DAL or HOU. LA doesn’t have what I’d consider a true secondary airport like any of those examples.

    • Matt D says:

      I definitely concur with this. Almost like the city wants to chase everyone out, then justify closing the airport and redevelop it a-la Denver Stapleton or Santa Monica. That real estate would be worth a fortune. So perhaps that’s their real goal. But it doesn’t explain why the relative warmth to Southwest. So maybe it’s purely a territorial/ego thing a-la Dallas/Ft Worth and GSW/DFW.

      It’s these *REAL*, unspoken factors that are always far more interesting….and usually closer to the truth than any meeting agenda or press release will ever say.

    • TMartin says:

      The mistake people make is drawing 3 circles around LAX/SNA/LGB around a 15 mile radius and see all the overlap. One has to know the market, and as someone who has done marketing, you can’t use circles…LGB’s catchment area is mostly ocean! Stretch the LGB circle more towards the northeast…Whittier, Fullerton /North OC, this area is too for LAX and LGB, and is closest to LGB, but nobody realizes this. Even as far as El Monte, LGB is most conveneient.

      LGB has to be market properly in order to be success. The major airlines never took the time to invest in LGB marketing. It took a ‘unique’ carrier like JetBlue to get LGB on the map – they marketed LGB. They could have been a great partner, but they exploited the fact there is no curfew at the airport and squatted slots to keep other airlines from growing or entering.

  4. Friend of Market says:

    Why the undertone of “competition is bad”? SNA doesn’t allow underusage and neither do the east coast slot airports. JetBlue wasn’t denied any opportunity to operate, just denied the opportunity to keep out others. Why the negativity on a pro-competition regulation? It’s odd from you.

    • CraigTPA says:

      Partially because this is less pro-competition than it might look at first glance. While it makes LGB more competitive, if you look at the greater LA market Southwest is already the market leader, with (by my quick calculations) 20% of the market (18% if you exclude ONT.) While this concentration doesn’t suggest major pricing power, the LA market is one of the few among the largest markets in the US that doesn’t have one or two dominant carriers, and it’d be good to keep it that way.

    • CF says:

      Friend of Market – This really is being between a rock and a hard place. For several years, LGB has talked about wanting to diversify its slot holdings and be less dependent upon a single carrier. Getting Southwest to come in was a huge win in that regard. But now this is tilting the other way. If JetBlue gets pushed out, then Southwest will end up being as dominant as JetBlue once was. So if the stated goal is to have diversity of tenants, then this isn’t a great move. If, however, the goal is to get as many passengers as possible, then this is the right move. Since the city had said it wanted the former, then this seems like an odd move.

      • Ron says:

        Why the assumption that JetBlue would walk away if they’re forced to hold on to only the slots they’re actually using?

        • CF says:

          Ron – Good question. I would imagine if JetBlue has to give back slots, we can expect to see more flights in markets that overlap JetBlue’s short haul network. If it wasn’t doing well before, then this will only make it look worse. At some point, JetBlue has to make a financial decision (I’d hope).

  5. MarylandDavid says:

    I think there are a lot of similarities between LGB and BUR. I fly out of BUR sometimes and it literally feels like it’s built into a suburban neighborhood. Both BUR and LGB seem to me to be prime redevelopment opportunities, even though I’d hate to see them go. SNA is a close third. They are definitely leftovers from another time.

    • Anthony says:

      But LGB is a better airport than SNA or BUR… it has longer runways.
      The city government made a smart move by favoring SWA. Although Jet Blue
      has a robust presence in the Northeast, it’s the sick man of California air travel.

    • CraigTPA says:

      The problem with this theory it that it seems to presume that you could close BUR and LGB and have the traffic go somewhere else. Where? LAX is up against constraints, any major growth at SNA would set off a NIMBY firestorm (the curfew already makes it a giant hassle), and ONT has the unfortunate problem of being in Ontario. Unless you want to bring up the Van Nuys proposal again (good luck with that), try to go around the LAX plan, get people to go to ONT, or just let prices go up, this is problematic to say the least.

  6. James says:

    JetBlue has been a terrible neighbor. It racks up hundreds of annual noise violations and now squats on the sots which can be utilized by others.
    JetBlue has done nothing more than play games with the city and community.

    • CraigTPA says:

      Do you think that Southwest will be able to run more flights without incurring more noise violations or cancelling a lot of flights? Since their flights will be coming in from closer destinations, they might do somewhat better, but they won’t be perfect.

      • CF says:

        There’s no question JetBlue has shot itself in the foot by running such a crappy operation. The number of noise violations is problematic, and it only galvanizes the part of the community that already wants to shut the airport down. Southwest should do better because it runs a better operation and it tends to fly from less congested airports. It won’t be flying redeyes that are scheduled to leave right before the curfew. So unless things change, I would think Southwest is likely to be more noise friendly.

  7. Paul says:

    City setting slot usage requirements is quite logical.
    Heck even IATA, the airline trade group says its a best practice and promotes a 80% use it or lose it threshold.

    • aaway says:

      I’m going to respectfully disagree due to context here. The IATA regime addresses slot usage at airports that were subject to extreme congestion due to airline traffic. In other words, the classic supply vs. demand conundrum.
      The slot program at LGB was established under the guise of a local, and since grandfathered, noise ordinance. LGB (and SNA) were allowed to retain their respective local ordinances – but, with the tacit understanding that changes to the local ordinances would possibly subject those airports to the less stringent federal noise regulations.
      Seems to me that this change in usage rules represents a material change in the ordinance. If that were to be interpreted as true, then the City of Long Beach should create more air carrier slots at LGB.

  8. I think it speaks volumes that JetBlue didn’t even bother sending a representative to the City Council meeting. Although not sure if that means they thought it was a foregone conclusion or that they plan to leave.

    Neither the linked article nor Cranky’s post say when the new rules will take effect. Does anyone know?

    • CF says:

      Chicago Chris – Good question. I don’t know the answer, but I’d imagine Jan 1. Still, not sure.

  9. LGB airport is in the Business of making money. JetBlues lack of using all of it’s slots causes a negative balance sheet for many business that depends on the LGB passengers traffic. LGB finally has an opportunity to generate better returns by reallocating unused slots.
    I’m wondering if Southwest is the only airline on the waiting list for the 13 available slots?

    • If the airport was really in the business of making money, it would not have an artificially low number of slots and allow for unfettered competition. The more flights it allows, the more landing fees it can collect.

    • CF says:

      Jaison – At last check, I believe Hawaiian still had the top spot on the waiting list, because as a new entrant it was entitled to two instead of just one that it got initially. But Hawaiian isn’t interested. I believe Delta is still on the list as is JetBlue because they’re just always on the list. It’s not that they want to add new service, but they just want to accumulate slots.

  10. Nathaniel says:

    Long Beach certainly seems worthy of a case study on how not to run an airport…

  11. Ron says:

    “less New York and Boston” — How much less can you go? Long Beach has just 2 daily flights to each. Not a huge loss.

    Cranky, I know you like to say that LGB fares are generally lower than LAX, but in my experience, when looking at comparable flights in coach, LGB is usually higher (dunno, maybe JetBlue makes a lot of money off Mint and has excess capacity in coach to LAX). My wife has to fly back from New York in January, and while she wanted to fly to LGB, that flight was $150 more than LAX and got in 1:30 hours later — two good reasons to fly into LAX (on JetBlue, as it happens). So yes, in principle it’s nice for LGB to have transcons, but they’re typically inferior to LAX in both price and schedule; and while I have in the past paid more for the convenience of traveling from LGB, the difference in price and schedule on transcons is such that I almost always end up using LAX.

    What would be nice at LGB is more one-stop possibilities going east, and that’s something Southwest can provide. Given enough slots, I expect they would offer a robust schedule to Vegas and Phoenix, and from there the options are endless.

  12. Mark Thorpe says:

    Brett: do you really see LGB becoming a “BUR or ONT clone”? Obviously, I am biased, but I don’t see ONT as being at all similar to either BUR or LGB from this point on into the future. ONT is already on a path to be one of the 5 busiest air cargo airports within the next decade, with infrastructure and capacity for growth that the other smaller airports in Southern California cannot (and don’t want to) match.

    • CF says:

      Mark – I should clarify. I mean it would be a BUR/ONT clone from how those look today in the Southwest system. The upside is much bigger for a place like ONT where it will only grow in the future.

  13. Why doesn’t the county take over who heard of a city deciding on regional transit?

    • CraigTPA says:

      The city owns the airport, just as LAX is owned by the City of Los Angeles (through LAWA) and Burbank is owned by the cities of Burbank, Glendale, and Pasadena through a joint authority. O’Hare and Midway are both owned by the City of Chicago, Atlanta is owned by the City of Atlanta, SFO is owned by the City and County of San Francisco (a single government), and so on.

      Many airports in this country are either owned by a single city or a relatively local joint authority. Even those owned by county governments aren’t truly “regional” – for example, my home airport of TPA is owned and run by Hillsborough County – it’s by far the main airport for the much larger Tampa Bay region, but the other counties in the area have zero control over it.

      Off the top of my head, the only airports I can think of that are truly regional in management are the three NYC airports, and I don’t think anyone would ever hold up the Port Authority of New York and New Jersey as a model of good management.

      • CF says:

        Yes, but LAX is very different. LAWA is an airport authority whereas Long Beach is actually just another city department like gas or building. So it is more tightly controlled.

        • Jim says:

          It’s not really much of a difference. LA is a much larger city, and the LA city council has a lot of stuff on their plates, so they appoint a board of airport commissioners to run it, but the city still effectively controls the airport. Long Beach is smaller so the city council can be more involved rather than appointing an intermediary board.

          Interestingly, in LA even electricity and water is a separate authority (LADWP) instead of a city department.

        • B Mike says:

          I chimed in above, but LAWA is not a true authority. It can be confusing, but LAWA employees are City of Los Angeles employees and the technical name is Department of Airports. The LAWA board reports to the mayor and the City Council does approve certain agreements. A true airport authority is more like BUR or ONT’s governing bodies which are separate legal entities under the law.

    • Jim says:

      Many airports in California are run by cities, including LAX, SFO, etc. The county can’t just “take over”.

  14. CraigTPA says:

    Frankly, if JetBlue can get more gates at LAX they should just either walk completely or downgrade LGB to a small spoke, like BUR or SMF. The faff over the CBP facility was the final straw – it wouldn’t have changed the “noise budget” at all.

    Can B6 expand any more at BUR?

    I think Long Beach will discover that Southwest isn’t the kindly, cooperative airline they think it is.

  15. JayB says:

    Long Beach is very lucky to have somebody like Cranky to write and opine about its airport and all that’s involved with that airport. Communities all across this country have Long Beach-like issues but seldom do you find someone who knows all the sides of the issues, or is willing to risk expressing opinions about them as Cranky seems to. You may not agree with him, or anyone on every issue, but I’m sure this country would be a better place if it had more such informed people. Just my opinion.

  16. FC says:

    Here is the part where people don’t see. SouthWest is bleeding money at LGB. It has lower yield than even JetBlue on most of its flights there. I’m sure the goal is they are hoping it will somehow become profitable if JetBlue leaves completely and they can get enough slots to run a schedule more comparable to BUR. But even if they have 35 slots, that split evenly between LAS/SMF/OAK/SJC along with some DEN/PHX would still leave a very weak schedule for the intra cali stuff. For flights like DEN/PHX, the yields are really poort compared to BUR/PHX. I don’t see how Southwest will make it work long term. Long beach will find very soon that once JetBlue leaves, it will be back to being an airport nobody wants to fly out of.

    • CraigTPA says:

      True, and another consideration for WN is that, depending what cities they choose to serve from LGB, they run the risk of cannibalizing traffic from LAX, since as Brett points out it is (by LA standards, at least) relatively close to LAX. There are only so many people who want to go to LAS, SMF, OAK, or SJC. (I’m not sure anyone ever really WANTS to go to SMF or OAK, but sometimes it is necessary. :-) )

      • Jim says:

        I bet that the majority of people flying to OAK are headed for San Francisco. The new BART connection to OAK makes it super easy. As for SMF, that’s mostly going to be government traffic.

        • CraigTPA says:

          You’re right – I flew in and out of OAK for Thanksgiving, it was fine (other than not being able to get breakfast before my early flight home.) I was just being snarky, but unless WN wants to stimulate traffic with lower fares (and trash yields are already the problem for B6 and WN at LGB) there are a finite number of people who want to fly to the Bay Area or Sacramento from Greater LA.

        • Tim says:

          There are 2.7 million people in the East Bay, compared with 850k in SF, so no, it is doubtful that the majority of OAK traffic is for SF

  17. Michael Jones says:

    I don’t understand what the people of Long Beach would fear from a Customs station at their airport. I would think they would welcome it with open arms because of the increased economic opportunity not to mention cultural and educational opportunities. We have had a U.S. Customs station at our airport, BRO, here on the Texas – Mexico border since 1929, we also have a sea port, rail, highway and now a spaceport. These are the life blood our our community and allow us to call ourselves the Crossroads of the Hemisphere. It makes no sense that Long Beach would not want this…

  18. Andrew M says:

    Kudos to Southwest for seeking to build up LGB. Its very much a natural evolution of plugging in another SoCal station to its active network. I am sure many WN fliers will enjoy having the additional choice.

    As far as JetBlue, in my mind, they are the ones that poisoned the relationship with the community and city. Year after year of endless curfew violations which the city has tried to quell with ever higher fines, yet the airline has continued to thumb its nose and kept breaking the regulations.

    As far as the slot usage policy, its no-brainer. Of course the airport should be able to ensure limited assets (slots) are properly utilized and carriers dont squat on them.

  19. Jim says:

    There is clearly very low demand for slots at LGB. I don’t see how increasing the utilization rules is going to help anything.

    Southwest already dominates most airports in the southland. Once they take over LGB, they will effectively have a monopoly on many routes, and prices will start to increase.

    The city should have approved the customs facility, but barring that, the next best option is to try and keep a balance rather than driving JetBlue out by making it harder to operate when they are already not doing that well to begin with.

  20. Darko79 says:

    Great! Now to fly JetBlue I’ll just drive up to lax. I am not going on a 3 leg stunt to get where I want to go on southwest. Plus their product falls way behind what JetBlue offers.
    The city of Long Beach and the airport managers are pathetically sad on how they treat their corporate customers. Shame on them. No insert here can’t be any successful carriers in Lgb. They get what they deserve. Southwest will continue to bleed money in Lgb until it too will retrench.

  21. MC says:

    I wonder if Hawaiian would be interested in flying to another island from LGB…..what other cities could JetBlue try that might work….

  22. It’s a false dichotomy to claim JetBlue has to either pull out of Long Beach completely or add flying that complies with the capricious dictates of the city council. I’m no attorney but from my understanding of legal precedent, changes to the existing slot control rules, especially ones that attempt to coerce carriers into more, not less flying, opens up those precious grandfathered rules to legal challenge. It seems the city may have finally overplayed its hand. The city can’t claim that all airline traffic is noisy, dirty and therefore bad, so they need to restrict the total number of flights in the interest of the public, BUT…. then simultaneously game the slot control rules to coerce more flying! Surely they can’t have it both ways? This is especially unfair after the council shutdown any discussion of a customs facility. The city council has lost the moral and the legal high ground, and I really hope JetBlue challenges the council’s horrible policy making in court. I suppose there’s probably some middle ground where JetBlue pulls down their flying even more, does a few trans-cons with decent yields out of LGB, while letting Southwest take more slots, but JetBlue does appear to have more than just two stark choices. Perhaps legal action on the part of JetBlue could spur some some fruitful negotiations with the council?

    A middle sized industrial city with a population similar to Miami or Kansas City, Long Beach ain’t Santa Monica, nor has It ever been. An oil and factory town from its inception, Long Beach is probably the most industrial city in all of LA County. Long Beach has the 2nd busiest cargo port in the country, the most polluted freeway, (the 710) numerous oil refineries and a dense network of petrochemical industry infrastructure, including pipelines and operational pumpjacks strangely interspersed throughout residental neighborhoods, city parks and shopping districts. To pretend that JetBlue’s small number of relatively clean, quite, narrow body aircraft are responsible for spoiling the serenity of some pastoral Eden is laughable. The high bypass turbofan engines of the A320 are but a whisper compared to the older, three and four turbine engine aircraft that McDonald Douglas used to routinely operate from LGB.

    You don’t like diesel fumes? Don’t move to the Wilmington waterfront. Don’t like freeway noise? Don’t buy property beside the 405. Sensitive to airplane noise? Don’t move to Los Altos. The historic Long Beach airport is older than the two small communities that sprung up underneath the prevailing LGB flight path, so I can’t find much sympathy for the few people in those neighborhoods that are virulently anti-airport. There’s no excuse for the city council sabotaging JetBlue and the airport, which ironically is probably the most environmentally friendly source of jobs and revenue the city can claim. I live in Rose Park, all of my neighbors that I know love the airport and JetBlue. We would all love a chance to hop on a direct flight to Mexico or Central America without having to endure the nightmare that is LAX. It’s crazy to punish all of Long Beach just to appease a small handful of nasty NIMBYs that will never be happy until LGB is completely shut down. If the HUSH NIMBYs succeed in destroying the airport what is next? The port? The 710 freeway? The dangerous and corrosive salt water in the ocean? The city council needs to get a backbone and do the right thing for the community at large, not a small, angry, vocal minority. Selfish NIMBYism in all of its various guises should be rejected. JetBlue should get its customs facility and the slot control should be lifted altogether or raised significantly. LGB could easily handle more traffic. Everyone wins except for the die-hard airport haters.

  23. Anthony says:

    Did Alaska ever fly to LGB?