3 Links I Love: JetBlue Walks a Tightrope, United at JFK, Vegas Renovations

LAS - Las Vegas, Links I Love

This week’s featured link

JetBlue extends, reduces blocked seats on board – PaxEx.Aero
I have a hard time with this one. You block middle seats, it’s an easy marketing pitch for customers. I’m not convinced it matters, but it’s at least a clear proposition that allows you to get a marketing benefit. But now just saying that you’ll only sell up to 70 percent of seats is too muddled. In this piece covering the change, you can see the exact numbers that will be blocked. People can sit next to others now, even if JetBlue says they won’t, especially on the Embraer 190 which had half its seats blocked before. It sounds like JetBlue is trying to walk a tightrope here — get the marketing benefit while also selling more seats. I think this could end poorly depending upon how it gets implemented. It would have been better to just rip the bandage off.

Image of the Week: If you read Airways Mag, you know there was a big feature on the L1011 this month, so I’ve had it on the brain. Here’s a great shot of an American Trans Air bird at Gander.

Two for the road

United eyes return to JFK next year after a more than 5-year absenceCNBC
I’ve wondered if we’d hear about this sooner rather than later. CEO Scott Kirby has said it was a mistake to leave in the first place, and with flying down, there could be opportunities. But who will give up the slots? Or is United hoping slot waivers end and opportunities present themselves? There is more to this story.

McCarran International Airport’s C Concourse to undergo renovationInternational Airport Review
I had no idea C was going to get a renovation, and it sure could use it. But this will be interesting to see Southwest putting most flights in B while it happens.

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23 comments on “3 Links I Love: JetBlue Walks a Tightrope, United at JFK, Vegas Renovations

  1. The big question for UA aside from where the slots are coming from is where are they going to fly out of? I don’t see going back to T7 as a long term solution since that terminal will get torn down soon. So I’d imagine T-4 might be where they end up, but DL will be really unhappy about it. Any UA move back to JFK would require probably at least 12 slot pairs, 2 to 3 gates, lounge space, dedicated check-in area. By the time they are ready to come back in 2021, JFK won’t be as empty as it is now.

    1. FC – a good question. I imagine that United may likely end up back in T7, at least for the short term. Long term, it does get interesting.

      Assuming JFK’s redevelopment goes ahead anywhere near “as planned” pre-COVID, then I would say that the NEW T1 gets the Star Alliance (including United), an EXPANDED T4 gets Sky Team, an EXPANDED T5 gets jetBlue, and an EXPANDED T8 gets One World + unaffiliated/unpartnered “cats and dogs”, as Cranky likes to say. Some other cats and dogs may be scattered among the remaining terminals, but I see most of them at an expanded T8 (don’t ask me why – just a gut feeling). (T2 and T7 are both demolished in the longer term plans – at least as far as current planning goes.)

      Of course, this is all dependent on slot availability as well. One thought: should Southwest, Spirit, Allegiant or any of the other “lower cost” carriers ever decide to venture into JFK, where would they go?

      And finally – anyone else serving JFK (or wanting to serve it) could be greatly impacted by whether or not the obsolete (in my opinion) perimeter rule at LGA is kept in place. I imagine if it were lifted, united might not want to even serve JFK. But if United serves JFK soon, then some pressure for lifting it is lessened (unfortunately, I feel).

    2. FC – Good question. I would assume T1 would be a good place for the airline, especially since Lufthansa is one of the owners. In the long run, this is perfect since T1 will more than double in size from its current gates. But in the short run, it’s not quite as easy. Still, most of the operations at T1 are Asia or Europe, so a United transcon pattern could very likely be threaded in there somehow. It might not be perfect, but it could very well be the best option.

      1. Brett, I believe the current T1 is not an option because it lacks domestic baggage handling. That was my initial thought too. Long term, I’d agree that a new expanded south terminal T1 to 3 would be the most logical place for UA. However, that will be far and away the most expensive terminal to operate in given how much money will have been spent in building it. They would be battling a whole host of international carrier with large widebodies that need to block gates for many hours at a time and large lounge space.

        It will be interesting to see how the JFK redevelopment shape out. With the likely slowdown in international travel for many years, how much money will the airlines have to start and complete these redevelopment. That I think will also have implications on where UA will end up and how many flights they can have.

        If i were JetBlue, I’d lobby to knockdown T7 as soon as possible in the name of starting their project. That would leave much fewer space for new entrant to come in.

  2. Glad you covered the potential return of UA to JFK.
    We haven’t seen how UA is planning to get to JFK but if they are pursuing slots as part of the AA/B6 “partnership” that has significant implications for the ability of AA/B6 to shift assets in the most difficult market in the world to access – NYC.
    UA clearly was pushed to move by B6′ buildup at EWR, itself a result of B6′ willingness to add new markets in the deepest financial downturn which may or may not work. UA’s move back to JFK – if it happens – will set off a wave of competitive changes in the industry.
    Delta is not about to sit on the sidelines while UA returns to a market which UA left – and where Delta and B6 split most of the transcon passengers that UA gave up. DL already has a presence at EWR, no slots, and flies to its hubs – so the clear markets left are the transcons, precisely what UA is most likely to add from JFK.
    Even with UA’s previous market adds to LGA and BOS, DL was likely rethinking its LAX strategy; it did not serve IAH, ORD, IAD, or EWR but flies to AUS, DFW and SAT, leaving IAH as a glaring omission. They fly (or flew) IAD to SEA but not LAX.
    AA will be the most negatively impacted by all of this. They clearly do not have the resources to fight a major transcon battle; they were dependent on B6 to help them in NYC. AA at best might buy a few seats on B6′ EWR flights but NYC hasn’t worked for AA in years and they can’t begin to think about growing – which will further marginalize them, perhaps part of UA’s strategy.
    UA is apparently willing to upside the NJ/NY division in the NYC market and open up a massive competitive battle even as AA and UA lay off tens of thousands of employees and beg for more federal aid.

    This will be very interesting to watch.

    As for B6 and seat blocking, while having an empty seat might not make much difference in a regular room, airplane cabins are not regular rooms from an airplane standpoint or even how close people would sit if given a choice.
    Delta’s CEO told its employees – as reported on multiple sites – that DL has a 33% share of the business travel market right now which is the largest it has ever had; while small but growing, corporate accounts say the number one factor they are giving their passengers is to book on airlines that block middle seats. B6 and DL are upping their capacity caps to allow family and known travelers to sit together while keeping middle seats open for solo travelers. AA and UA have been booking all seats for months while DL, WN and B6 have been most vocal about blocking some seats.
    Financial results for the 3rd quarter will start coming out in a little over a week. TSA stats show passenger growth even in a period when leisure travel is relatively slow. It will be very interesting to see which airlines got their strategies right about where to grow (or not) and what services to feature as part of their covid strategies.

    1. Tim – good points. A question for you: do you think “NYC” hasn’t worked for American, or more specifically JFK? I feel that at LGA American does pretty well (although that’s just my feeling – I haven’t looked at any stats online recently). With the Shuttle, the new western “pod” being all American’s et cetera, I feel their future at LGA is pretty secure post-COVID.

      1. good discussion.
        DOT average fare data shows that AA underperforms DL in most markets from LGA as well as most markets from JFK. JFKLAX is their star performer from an average fare basis but they use a very high CASM aircraft (the A321T) which means their profit margin is likely much lower than DL or B6 even in their best market.
        Internationally, JFKLHR is their gem but it isn’t enough to offset the other markets which they think they need to offer to be a competitor even at JFK.

        The data from NYC seems to suggest that size really does matter – just as it does in every other hub market. AA has tried to say it would be a niche carrier and pick off the highest value customers but average fare data says that has only worked at LHR, which is a highly restricted access market and where AA’s JV with BA makes it the largest carrier in that market.

        As for the question above about where UA could go at JFK, the Port Authority has plans as a federally funded airport as to where non-lease holding airlines can obtain gate space if they want to start service. I don’t know those details but UA will get some gate space if it wants to start JFK.
        The FAA controls slots but it is highly doubtful that they will be allowed to continue to grant usage exemptions if there are carriers at DCA, JFK or LGA that want to grow while other carriers are not using their full slot portfolio. I would expect by spring for the FAA to order airlines to publish schedules to use their slots and then use them by next summer or give up the slots. Of course, AA played games with its slots for a year – adding schedules and then cancelling them down a month or two out which is why the FAA has to enforce flown not scheduled flights.

        I believe UA will get into JFK in 2021 if it wants.

        And, depending on how AA does financially in 2021, they may file for Chapter 11 and reject their lease on their JFK terminal because it is a financial burden they need to get out from under. If they really think they can remain a player in NYC, they can find a way to keep enough space at JFK but I suspect they will decide it isn’t worth continuing to lose money in a market where they are dropping further and further back relative to their competitors.
        And if AA’s terminal becomes available for other carriers – as a supplement to T1 perhaps if T1 is expanded -then gate space at JFK is suddenly not as tight as it has been. AA has been underutilizing its JFK terminal for years but at great cost. Both will resolve themselves in the covid recovery period.

        1. Tim, keep in mind that DL fills a larger portion of its seat out of LGA with connection than AA does. When you adjust for that, AA actually gets higher yield from my analysis on a lot of those markets. But of course, AA also flies them on 50 seaters, which have higher CASM than DL’s 70/76 seaters. So this is where just looking at average fare doesn’t tell the full story.

          I think once BA and other OW carriers move into T8. It will provide AA a lot of additional rent money, which will be what they need to keep T8. However, given their rapidly shrinking footprint in JFK, they may not need to even work on the rather small T8 expansion project they announced. So, I don’t see UA ever moving in there.

          T4 will be interesting. I’d imagine the T4 expansion plan won’t go ahead for many years. As a result, I think DL will try to kick everyone out. Again, can Port Authority really force DL to take UA in there?

          I also think it’s quite likely that AS will get pushed out of JFK-LAX/SFO. They have not been competitive there since taking over from VX. It’s also possible that AA will give up on JFK-SFO and just let B6 do the hard work there.

          1. FC – As I understand it, T4 is not “owned” or “leased” from the Port Authority by Delta. An entity called (if I recall correctly) “JFKIAT”, for JFK International Air Terminal – the private entity that I believe Schiphol Airport has a stake in that built the “new” T4 20 years ago now (!) after the original International Arrivals Building and West and East Wing Departures Buildings were demolished on the same site – is the devleoper and lessor. I am unaware of what terms they have with the Port Authority, or if Delta has any special “veto power” as the largest tenant of that facility. But I think maybe the Port Authority is not the entity to “force” who uses T4?

            Also, I don’t know if any underlying leaseholds were changed when Delta extended the B Concourse to the Rockaways ;), thus perhaps giving Delta full control of at least Concourse B.

            So – if United wants in to T4, then maybe they can only go to Concourse A? I dunno.

            Remember – as I understand it, T2 gets demolished for the new/extended/enlarged T1, and I believe Delta is counting on getting Concourse A at T4 at some point and extending it, so as to accommodate its dispalced needs from T2 in one facility at T4. (Concourse A would likely host widebodies mostly, shifting over from Concourse B so as to allow Concourse B to host whatever domestic services T2 was hosting.)

            And I still beleive that if the perimeter rule were eliminated at LGA, the desire to sevve JFK by United may be somewhat obviated. But that ship may have just sailed.

            Anyway – just thinking out loud and food for thought.

          2. FC,
            The average fare difference I have quoted between AA and DL is for the local market, not everything on segment.
            DOT data for all of 2019 shows that Delta carried 87% local passengers at LGA compared to AA’s 91%. However, Delta carried more than 1.5X more local passengers from LGA than AA so the difference in the percentage of connecting passengers at LGA doesn’t really matter.
            As for JFK, Delta carried 71% local passengers on all of its flights compared to 87% for B6 and 76% for AA. However, American carried just 40% of the local passengers at JFK that Delta did and half of the revenue. DL carried 1.25X the number of total passengers at JFK that B6 carried but just 2% more local passengers.
            So, DL does indeed carry (or did pre-covid) a higher percentage of connecting passengers than other carriers at JFK and LGA but the difference in both local and connecting passengers and revenue between AA and DL is far larger and AA still underperforms DL in revenue. B6 and DL carry very similar amounts of local passengers at JFK but DL gets a much higher average fare – partly driven by international passengers but DL still gets more revenue per passenger in domestic markets where the two compete.
            I believe you are right that AA will eventually leave JFK-SFO and AS will pull back further, perhaps leaving altogether. However, with B6’ expansion at EWR, AS has no “safe place” in the NYC area, esp. if DL adds more flights at EWR in response to a potential UA return to JFK. AS will either decide it isn’t worth underperforming in the transcons – which almost certainly are not profitable for them – or figure out how to do a codeshare with someone, or perhaps, a merger. But the rest of AS’ network works so the decision will be for them to decide what to do in the transcon markets.
            Delta does not control all of T4 so they can’t kick anyone out. I expect that the T4A buildout will continue. The question is how quickly the Port Authority moves forward with tearing down T2 and starts building out T1. If T2 is destroyed, it would seem that the T4A buildout needs to happen.

            good conversation, as always.

            1. I don’t know exactly where you got those LGA figures from, but I can tell that looking at the raw data of the 10% fare itineraries that involved LGA, DL is connecting far more than that. So is AA. If I had to guess, about 1/3 or more of DL passengers that passes through LGA flights are on connection itineraries. I remembered to have been quite surprised when I ran through the numbers.

              I think AS will be out of NYC-LAX/SFO soon enough. Keep in mind, JetBlue is running as many flights in Nov on JFK-LAX as it is on EWR-LAX. If DL jumps in also, there is no room for AS.

              On T4, my understanding is that the build out is on hold for a while. Given the current crisis, it’s hard to know how delayed the other terminal redevelopment will be. If I had to guess, JetBlue will still try to tear down T-7 as early as it can in order to deter new carriers from starting service. ULCC presence is the last thing they want at JFK.

            2. FC
              I am looking at the total number of boardings and the O&D passengers. Trying to look at specific routes will lead to the wrong answer if the question is about an airport as a whole.
              LGA does not carry more than about 10% connections for any carrier and certainly not anywhere near 30% for DL.
              As for how each terminal is built out, it doesn’t really impact whether UA can get into JFK or not.
              Federally supported airports have to be able to accommodate new entrant carriers to a market and each carrier has to be willing to provide a certain amount of their space if the airport does not have any gates designated for common use by any airline given that the terminals are owned by specific airlines or groups.
              I honestly do not know how JFK handles gate accommodation but I doubt if the plan totally relies on T4.
              I seriously doubt that DL has NK in its terminal at LGA because it wanted an extra tenant but because DL had to be willing to give up a certain amount of space to non-incumbent carriers just as would happen elsewhere.
              I don’t think terminal location is going to stop UA from showing up at JFK if they want.
              Slots are the first issue and the FAA will have to decide how long they are willing to keep slot exemptions in place when other carriers are willing to start new service and that is true for LGA, JFK and DCA.
              I believe they will move pretty quickly to relax slot restrictions if airlines are not scheduling and flying a very high percentage of their slots by next March – which is unlikely.
              As for the perimeter rule at LGA, that is the Port Authority’s doing but the FAA could push the issue and so could Congress. The earlier reasons were because JFK needed to be protected and because LGA was much busier; neither of those are true now and might not be true for years. Also, LGA did not have the terminal space to handle many more full size narrowbody aircraft; that is changing wiht the new terminal.
              UA could not do much more at LGA w/ its current slots if the perimeter is relaxed or it would have to significantly change its current schedules.
              DL is pushing relaxing the perimeter rule and would benefit the most by it. B6 would be hurt if the perimeter restriction is relaxed and they are not at LGA in a large enough form.
              Purely from a “luck” standpoint, I will bet that UA will succeed at getting into JFK only for the LGA perimeter restriction to be relaxed in a couple years. Also luck would be for AA to swap slots to B6 at LGA only to have the perimeter restriction relaxed and then AA to be reduced to a much smaller size at JFK, a trend that has been happening for years.

              Bottom line is that this is the best chance for UA to get into JFK and I think they will succeed. If they do, it will set off a wave of competitive changes and will also set off – and their move may actually be possible -only by changes to slot restrictions and potentially the perimeter restrictions at LGA, JFK and DCA. They are all artificial restraints to trade and AA and UA are both most dependent on the government right now. The public deserves to get something out of the deal and that might be more choice which might mean allowing new competition and for flights to be able to operate from airports that can handle them and not based on artificial restrictions that protect airports that should not be protected.
              The LGA perimeter restriction won’t be dropped in isolation. UA won’t solely get into JFK but will be part of a host of changes in the competitive environment – if it happens.

    2. What a surprise, Tim Dunn thinks AA will be most negatively impacted by a piece of random aviation news. Based on a premise of forced divestiture to a company that sold JFK slots to Delta and has a mega hub across the Hudson. Thanks for the morning laugh.

    3. I’m not sure 3rd quarter will really tell us all that much in terms of cash burn. As you know, even during the midst of the CARES Act, Delta cut salaries 25% so they’ll start from a place with 25% less labor cost, the biggest cost of the quarter for most airlines. In the 4th quarter, they’re still cutting 25% of salaries, PSP2 or not. United and American did not do that to their frontline workforce… only the non-union folks at Delta.

      Delta may do well in cash burn in the third quarter, but it’s only because they chose to cut their salaries 25% even though the government was funding 100% of them.

  3. Meh. The more things change, the more they stay the same. To wit, airlines making reactive, long term decisions based on short term decisions and this perpetual carousel of build up/tear down/rebuild.

    American tried to build a west coast hub by buying AirCal. Abandoned it within three years. Tried again with Reno Air in ’99. Abandoned it again within two.

    Delta spent how many hundreds of millions to buy Western, got themselves a hell of a nice hub at LAX. Ran it for about a decade or so. Then dismantled it all. Then has been trying to claw it all back again.

    United was king at LAX for decades. Wound it down. Now trying to get it back.

    Was once also a big player at JFK….

    You get the idea…..

    1. Matt,
      UA was never terribly big at JFK; AA was the largest carrier for years. AA is now #3 at JFK behind 3 large US carriers there.
      DL has been #2 at LAX for at least the past five years behind AA but is #1 based on current schedules.

      Twenty years ago doesn’t matter. Neither does five years ago. What is happening now does matter.

      UA consolidated its NYC presence at EWR with a fairly small presence at LGA relative to DL and AA. UA wants to fix its mistake; crises provides the opportunity to do so just as B6 wants to become a major player at all 3 NYC airports.

      The real question is not whether UA can get back into JFK; I think they will. The real question is what else will move in the NYC market; I think WN will look to grow at LGA, the only NYC airport it serves.

      And then it comes down to who can succeed in the market.
      As much as some want to argue otherwise, AA has been in the weakest position among the big 4 carriers in NYC for years and is the only carrier that was smaller at the end of 2019 than it was 5 years before.

      NYC has artificial barriers to entry that will and should fall.

      The market can work the rest out.

  4. The C concourse renovations at LAS are loooong overdue. Sounds like the improvements they plan for the Southwest gates are just what is needed. It will be interesting to see how they shoehorn operations into the all-cats-and-dogs B gates in the interim. Walking into those things is like taking a trip back in time.

  5. I’m not really comfortable flying with someone in the same row as me, never mind someone sitting directly next to me. There is no way I would consider AA or United until they start blocking middle seats.

  6. Delta is doing the exact same thing as JetBlue in terms of seat caps at least in terms of regionals where they are only blocking B seats

  7. I’m sure it’s operator error but I can’t find the L-1011 on AirwaysMag.com and I’d love to read an ode to my favorite passenger plane. Could anybody post a link? Thanks in advance!

    1. Bill – It’s in the print magazine. That means it may eventually get to the website, but it may not. Subscription required.

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