With the DOJ lawsuit to stop the American/JetBlue Northeast Alliance (NEA) coming down last week, I started playing with all sorts of numbers. You’ve seen my basic thoughts, but there are plenty of areas I want to explore further. And today, I’m talking about competitiveness in New York and Boston.
The NEA focuses on New York and Boston, though of course there is an impact on flights that go to cities beyond those two places. But in terms of there being a concern about competition, it is mostly in one of those two places. Let’s start with New York.
New York, a Competitive Market
Even though the Department of Justice (DOJ) seems to think that Newark shouldn’t count as an alternative to JFK and LaGuardia for domestic travel, I think that’s absurd. So everything I look at here will take those three airports into account. (Islip, Stewart, and Westchester are rounding errors and not worth thinking about.)
Further, while DOJ uses revenue share since that would obviously give the legacy airlines a higher market share, it’s seat share that should really matter. How many seats get offered to the flying public is the right metric. And so…
2019 New York Departing Domestic Seat Share (JFK/LaGuardia/Newark)
What you see here is what we’ve talked about many times before. United and Delta are huge, only matched by putting American and JetBlue together. But Southwest and the ULCCs have really crept up, passing 8 percent. That may not seem like a lot, but when you start from basically nothing, that’s a real achievement.
Of course, this just gives us an overview and doesn’t tell us just how competitive the airlines are with each other. There are a lot of ways to dig deeper, and I’ll start with one of my favorite metrics, point-of-origin.
Domestic % Point of Origin New York By Airline By Year
Above, you can see by year the percent of onboard traffic that originated in New York by airline, including all predecessors. United and JetBlue remain highest, though they may have dropped a tiny bit over the years. Delta has, ahem, kept climbing. But nobody has fallen like American has. As American (and US Airways before the merger) reduced service and as others increased it, American became less relevant, so it started selling more tickets to loyalists outside of New York who had to visit the city as opposed to those in New York who wanted to fly out.
We can also see a version of this based on route maps.
United and Delta both have good coverage all over the country. But you can see that while JetBlue covers the west and Florida well, it has very little in the middle. American, meanwhile has a lot in the middle but lags everywhere else. Putting those two route maps together makes for something that looks a lot closer to what Delta and United have built. That doesn’t solve all problems and doesn’t consider schedules, connectivity, etc, but it does show the blueprint for how this would actually increase competition, not hurt it.
Boston is a different story entirely.
Boston, a Less Competitive Market
Up in Boston, there are fewer massive players, but the little guys have more share, as you can see just from looking at 2019 seat share.
2019 Boston Departing Domestic Seat Share
Here, JetBlue is the very clear top dog in the market with a third of all seats. Add American on and you control half the seats departing Boston. There is deeper penetration from Southwest and the ultra low cost carriers here, and that’s probably because there aren’t actually slots in Boston. It’s just a matter of finding enough gate space, which isn’t always the easiest task.
But when you look at point of origin, a funny thing happens here that is quite different than what we saw in New York.
Domestic % Point of Origin Boston By Airline By Year
You see that JetBlue continues to have a large point of sale in the home market, and that’s not a surprise at all since there are a whole lot more people flying from Boston to Florida and the Caribbean than the reverse. But I was more surprised to see both American and Delta both sinking quickly. And look at what happens in 2010 when Delta really lost out faster than American. This only starts changing in 2017 which is when Delta began building back its hub. I imagine that rebound will continue as Delta makes more inroads., and that’s really what JetBlue and American are targeting… the ability to compete with Delta better on the corporate side.
What caused the drop for all of them? I assume it’s a matter of low-cost carrier entry. Boston went from having scattered service from AirTran, America West, ATA, Independence, and the beginnings of JetBlue to having a ton of options on all the current low cost operators. The end result is that people were bound to walk away from the legacies because of the number of options they had at a lower price.
The difference here is that it wasn’t just American falling; it was Delta too. But now Delta is ramping back up. American has done a little of that, but not much.
I won’t even bother with the route maps, because it is clear JetBlue has more coverage. Put it this way, American serves 14 cities from Boston, Delta 43, and JetBlue 54. So a combined American and JetBlue certainly have much more dominance than they do in a place like New York.
Ultimately if there is a concern about competitiveness, it really shouldn’t be in New York at all. It should be in Boston. But how would you even rectify that issue, however, when there aren’t slots at the airport?
The DOJ could try to get American and JetBlue to surrender some gate space, but it’s unclear to me who would want it. I’m don’t think the low-cost carriers have been hampered in their ability to grow Boston. You don’t see Spirit clamoring for more Boston access. It’s all about LaGuardia for that airline. It might be a nice gesture to offer gates up as part of a settlement, but it may not have an impact.