JetBlue has twisted itself in knots over the last couple months explaining why the Spirit acquisition makes sense for the airline, saying it will greatly increase competition and bring fares down. I find it hard to believe all these claims since JetBlue is by nature a higher fare airline than Spirit with a higher cost base. That isn’t going to change.
While fare comparisons are nearly impossible since JetBlue has few ancillaries and high fares while Spirit has high ancillaries and low fares — completely different structures — that doesn’t mean there isn’t other data that can help think about this further.
Today, I’m looking at route overlap versus the competition, though I have to start with a caveat. There is nothing suggesting that the combined route map today will look anything like what JetBlue will actually fly after the meger is complete. In fact, I’d be very surprised if it didn’t change dramatically. But, let’s look at what we have now anyway.
In the JetBlue press release announcing the merger, CEO Robin Hayes was quoted as saying this.
We believe we can uniquely be a solution to the lack of competition in the U.S. airline industry and the continued dominance of the Big Four. By enabling JetBlue to grow faster, we can go head-to-head with the legacies in more places to lower fares and improve service for everyone. Even combined with Spirit, JetBlue will still be significantly smaller than the Big Four, but we’ll be much better positioned to bring the proven JetBlue Effect to many more routes and locations.
Yes, by definition, stapling Spirit on to JetBlue would create more overlap with the legacies. But how much overlap? I pulled July 2022 schedule data from Cirium and put it into Great Circle Mapper to show how JetBlue and Spirit overlap with the Big Four — American, Delta, Southwest, and United. Let’s take a stroll, but one minor note… I left London off these maps to keep the scale better, but American and Delta both fly the same route to Heathrow that JetBlue flies.
Some of the greatest overlap comes with American, and that stands to reason. There is relatively large overlap in the northeast, and of course, there’s Florida. The combined airline does have a substantial presence where American flies, but it’s mostly east of the Mississippi.
The other big overlap is with Delta.
With Delta, the overlap with JetBlue is understandably in the northeast where they both have overlapping hubs. But with Spirit, there is some Atlanta added, and a little more in Florida and the West, but it’s pretty sparse outside the northeast.
It only gets thinner from here. Let’s look at United.
The overlap with United today is almost entirely at Newark where JetBlue has been struggling to build up a sustainable presence. Spirit adds some Houston and Chicago to the mix, but the combined route map overlap is very small. Lastly, we’ll look at Southwest.
Keep in mind that this is specifically looking at airport overlap, so if JetBlue serves O’Hare and Southwest serves Midway, it won’t show up. But this does tell you a great deal nonetheless. JetBlue today has nearly no overlap with Southwest. Spirit, however, has plenty. It’s almost all focused on Florida or Las Vegas. And the combined map, well, it reflects pretty much the same thing as Spirit alone.
So what does all this mean? Unfortunately, it doesn’t mean much for the reason I mentioned at the top of this post. The problem we have here is that JetBlue wants to bring Spirit into JetBlue. With a different model, it stands to reason that the Spirit route map can’t simply be stapled on to the JetBlue map as is.
The way I see it, JetBlue will keep high levels of service in Spirit’s biggest airports. It’s just that the lines on the map from those cities may go to different places. I’ll cover those airports in more detail in a future post.
What we can glean from this is that the new Spue (I’ll just keep trying new name combos until I find one I like) will have decent overlap in the Northeast and Florida. That’s not much different than was already the case. It is stretching into other parts of the country, but the overlap is still very limited overall.
Either way, it’s hard to see how JetBlue is hardly going to be a real competitor to the Big Four. It and Spirit are both point-to-point airlines. JetBlue in theory has the ability to connect passengers over its hubs, but it does very little of that. It doesn’t want to do that. So the idea that there will be a fifth big competitor seems like quite the stretch.
30 comments on “Putting Numbers to JetBlue’s Claims of Increased Competition With Spirit Acquisition”
Hopefully jetblue keeps some of the advantages of spirits network, and that’s the point to point model. Not everything should have to route through a hub
You did hit on one thing I wish thee would be more attention paid to. People talk about low fares on Spirit (and other ULCCs) but that only includes the base fare.
When you add in ancillaries that a lot of folks pay for the fare difference drops. Even things like drinks on the plane.
To me, the proliferation of these airlines, while great for small people who don’t mind traveling without bags and being squashed into 29” pitch middle seats, they make it worse for others because the legacies try to match in a race to the bottom.
I’ve been in favor of this because JetBlue caters to people in between the people who will only fly cheapo airlines and the high end business travelers. We don’t have enough attention to the middle of the market.
JetBlue has been doing a stealthy shift towards the spirit pricing model in the last few years. For example, their base fares no longer even include a carry-on bag, let alone checked bag. Jetblue’s base fares put you absolutely last to board, don’t give you ability to select seat, aren’t eligible for free changes, can’t be canceled for jetblue credit let alone cash refund, and earn miles at 1/3 the rate of normal fares. At their bigger hubs, you are forced to self check-in and bag tag unless the kiosk gives you an error or you need documents checked. Really the only thing that spirit unbundles that jetblue hasn’t is the can of soda and paltry .75OZ bag of diet cheez-itz (which i can do without). The jetblue legroom and
IFE is inarguably much better (ie exists) on jetblue. but the commonly held perception that jetblue fares include all the bells and whistles is longer accurate. its funny, when they announced years bag that checked bag would cost $$$, that got global headlines and outrage. But, all their subsequent cuts and fare restructurings seems to have flown under the radar.
For years now, I’ve been reading blogs and comments from frequent travelers based in New York or Boston who rave about JetBlue and talk about it as if it’s this viable option. Which it is: if you’re based in New York or Boston (or Fort. Lauderdale). Elsewhere, not so much. Their domestic route map is so heavily skewed toward their trifecta of BOS-JFK-FLL, that it makes it difficult for them to be competitive anywhere else. As an example, I’m based near Chicago and fly out of ORD mostly (MKE once in a blue moon); I’ve never even had an occasion to try JetBlue. Yes, they fly from ORD (and I think MKE now too). But relatively few flights to fewer destinations. Why fly them when I can just go with UA and get credit toward status? Especially because there are very few cities that I can fly to on JetBlue from here. Meanwhile, UA offers a couple hundred nonstop destinations, AA offers about 2./3 of that and WN offers up close to what AA does.
I had hoped that this merger would remedy that somehow, but Cranky’s excellent analysis here seems to point toward a future that involves more of the same from JetBlue.
As a northeasterner transplanted to Houston, I still have hopes that this merger will make JetBlue a more viable option for more trips for me. I would much rather choose Jetblue than United or Southwest, but Jetblue is pretty useless for me today unless I’m flying to JFK or BOS. It wouldn’t take that much more connectivity to make a big difference for me: even if Jetblue only keeps a few of Spirit’s destinations from IAH, it would make it much easier for me to choose Jetblue a lot more often.
You’re not their target customer. They only exist to serve BOS/NYC POS, and folks in spokes are just gravy.
Cranky,
You forgot Detroit, as Spirit has a base there as does Delta. All be it Delta’s is much larger.
Not sure about Spue. How about JetBluit?
jetSpue™
jetSpuit
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.
.
Yes, Spirit has been squatting on Southwest for some time now, just as AirTran did. The common denominator there is Bob Fornaro. Perhaps JetBlue will rethink that strategy, given their higher costs. Of course, that doesn’t preclude Frontier from moving into that space. For certain, the demise of Spirit will reawaken Southwest at LAS and BWI. It’s in the hands of the regulators and Senator Shumer now. Let’s see what happens.
I wouldn’t look for much to change outside of B6’s business model. They don’t make money outside of NE – FL/Caribbean, and transcon. They need the NEA to remain intact with access to AA’s slots for this merger to work. Without it, they’ll be forced to fly lots of capacity to historically unprofitable markets. Not to mention, many of NK’s routes only work with their low cost structure.
I noticed the B6/DL overlap does not show SLC (SLC-JFK, BOS, MCO, FLL, LAX)
Looking at my local market, JetBlue briefly tries more destinations from here but basically nothing stuck. Spirit started rather big when they entered AUS but has since dropped to a handful of destinations as AA has hopped on top of them with point-to-point service at fares that aren’t that much higher, so they’re down to LAS/LAX/FLL/MCO/EWR/CUN. Enough of those overlap with B6 (plus LAS, but they’re definitely gonna keep that station around) that the merged entity would probably keep the routes, but almost certainly with fewer seats, and fewer departures than stapling one network to the other. Maybe they’ll add back ATL and DTW, both of which Spirit briefly flew from here, at which point they’d probably be even on seats vs. where they are now and up on flights, but I’m not sure how much traffic they can capture with 1x/day on a JetBlue model. Maybe they’d put a 220 on DTW for 2x/day, but a 220 to ATL would be unlikely, so they’d end up as an also-ran.
Of course, in an environment where EVERYONE ELSE is making money, JBLU is losing money on their current business model…
https://finance.yahoo.com/news/jetblue-airways-jblu-reports-q2-122512707.html
Sounds like a perfect time to do a merger where you dismember the more profitable airline for parts and staple it on to your own money losing business model, amirite?
SpirJet or SpirBlue – like spearmint, but for unholy mergers (I happen to hate spearmint)
jetBlue will retain the jetBlue name – but I propose jetIT (jet it)
How about Bluestar.
The JetBlue/Spirit overlap with American map highlights graphically precisely why the NEA is certainly not going to remain in its present form. Even before a merger proposal, AA and B6 “cooperated” in some of the largest markets in the country and had a dominant position because of the partnership in NYC combined. If AA and B6 want the NEA to survive, they need to remove cooperation in their overlap markets; there is no harm in having B6 codeshare on AA flights that B6 doesn’t operate and vice versa.
The issue is about the largest US airline by current passenger revenue cooperating in anything more than an arm length commercial relationship – simple codesharing and loyalty program benefits with ANY other airline. Add in features like swapping slots and coordinating schedules and capacity and there are very good reasons for the DOJ to object.
Add in that ORD, DFW and MIA are significant overlaps in their own right, and concern about allowing any deeper cooperation goes well beyond LGA and BOS.
Of course B6 is trying to hold onto the biggest NYC opportunity – combining with AA under the NEA – while tossing aside NK but the B6/NK overlap routes such as LGA to Florida won’t make or break this deal.
No question, if JetBlue can be a continual thorn in Delta’s side in NYC and BOS, they are pleased. But I think this over-paid mass-buy of ships and pilots speaks to something much greater than JetBlue’s campaign against Delta. As I’ve said before, I think a growth of this magnitude, without a stated business plan, indicates JetBlue has something cooking with American to move into existing AA hubs (CLT, DFW, ORD, PHX). I don’t have any clue as to what business plans either AA or JetBlue may be contemplating beyond the Northeast Alliance, but if I’m a weakened American Airlines and I’m looking at a domestic retrenchment, I would MUCH prefer a friendly tenant in my mega-hubs than ANY of the so-called Big 4 (really, the Big 3 & Southwest).
Now I know our American Airlines supporters on here are thinking: “Hey, we are doing just fine! We made $300+ million last quarter! We are managing our debt just fine. And, beside, we are too big to fail. The government will bail us out if it comes to that.” While all of that is true, it’s no secret that American has the most tenuous financial position of the 4 largest airlines. I have also heard that many in DC are grumbling at the mega-billions AA received in Covid-Cash. They picked up the lion’s share of those funds. I wonder if a government-supported reorganization would be as widely received now as if Covid had never happened?
Contrary to the implication above, the DOJ cannot block the JetBlue/Spirit merger or the NEA unilaterally. The NEA will stand if a judge decides the DOJ hasn’t made its case. And there’s been virtually no evidence to suggest that the arrangement has been anti-competitive. The only place one might dispute that statement is between New York and Boston, but that argument leaves out an important competitor – Amtrak. The only places JetBlue and American cooperate are in New York and Boston, and the combined airlines have nothing approaching a dominant presence (which I define as 50% plus) in either market. Coordinating some schedules and swapping a few slots in New York and Boston isn’t the same as total revenue sharing between the two airlines.
No one knows what a judge will decide. The level of cooperation between American and JetBlue could ultimately end up being more limited than it is now. But that resolution could take years to litigate – if the case goes to trial. The DOJ can not order JetBlue and American to quit cooperating, Only a judge can do that, and that decision can be appealed for years. The trial is set for September 26th, less than two months from now. I’m wondering if the DOJ won’t try to push it back. If I was American and JetBlue, I’d fight that effort. The NEA and the merger are two separate issues, IMHO (partial rationale below).
The overlap maps show me that the combined carrier will offer more competition to American (and Delta) east of the Mississippi, not less. The combined JetBlue/Spirit (Blue-it? – based on today’s earnings for JetBlue) will be a stronger competitor than either carrier could be on its own. But I’m a bit of a contrarian, so that probably colors my view a bit. If one looks only at domestic market share, everything I’ve seen indicates that the legacies have steadily declined over the past few years. That could factor in the final judgment as well.
Stay tuned. Plenty to write about.
Ghost,
please carefully re-examine the route maps above. You and others repeatedly keep arguing that NYC and BOS are the only places that AA and B6 cooperate but you ignore the routes that go from those cities to a half dozen other states, which is precisely why those states have joined the DOJ.
Once again, AAL touts itself as being the world’s largest airline – and they are. They have the slots and aircraft to compete if they want to. Using a lower cost competitor – which is the only mainland airline that has reported so far and lost money – is not an acceptable alternative to maximizing consumer benefits.
Please tell me what airlines have successfully steamrolled their mergers and asset acquisitions past the DOJ without amending what they have proposed to divest. The answer – which is why no one has answered – is none. No US airline has the money or political power – JetBlue included – to counter the DOJ and DOT, both of which have indeed highlighted anti-competitive aspects of either the NEA or the B6/NK merger compared to alternatives – which do include options of a standalone B6 and a simple codeshare/alliance relationship like AA has with AS.
B6 is not a failing airline. They are in far better financial shape than any of the legacy airlines were at the time of any of their mergers or acquisitions over at least the past 20 years. The legacy airlines lost far more money – even as a percent of revenue – and had far worse balance sheets than B6. And, Masters, AA is in better financial shape than B6; there is no basis for transferring routes in AA core hubs to B6 – and that will only aggravate antitrust complaints.
The fact that B6 has failed to come up w/ a strategic plan that allows it to be profitable and grow does not obligate the U.S. government, consumers or other states to accept proposals that harm their interests which no shortage of states and the DOJ have indeed noted.
Getting rid of the smallest part of the problem in the NE (NK’s slots and gates at BOS and LGA) is not going to solve the DOJ’s objections which were filed long before B6 won the NK merger battle. There will be greater and greater pressure for AA and B6 to settle esp. in order for consideration of the B6/NK merger to move forward.
I assume this was written prior to Jet Blue’s financial results which seem to be awful. Costs are through the roof. Operational reliability has been awful. So you take 2 airlines that both managed to lose money while the other 4 made money and this is going to work?
Jet Blue needs new management. This is going to end ugly.
There is some of that feel about when United and US Airways were talking about merging many years back, one Wall Street analyst described that proposal as “tying two rocks together to see if they’d float.”
You create lovely route maps
As a mental exercise, let’s pretend JetBlue has an integration plan that makes sense even though nobody can see it – what would it be? It would simply be this:
“What if we could create a hybrid of JetBlue’s brand and upmarket positioning with Spirit’s business model and costs?”
(basically replacing Spirit’s tainted brand)
Now, for that to work, you can’t publicly tell the world you’re going to convert the planes to Spirit’s high seat density configuration. You do it under the radar, keeping it quiet as long as you can. Maybe you plan ahead for a “strategic pivot” after seeing Spirit’s books and starting the DOJ approval process? Yes, airline nerds like us will see it through it all eventually, but the general flying public doesn’t hear any of that (including JetBlue’s current operational problems). As one commenter (h) mentioned, JetBlue has already unbundled almost everything Spirit has. Is it really that big of a leap that they might decide to crunch the seats a bit closer together? Maybe they rebrand certain important routes “Mint” that keep special seating (like United used to do with their p.s. transcon service), while every other plane essentially becomes Spirit seating with JetBlue branding. They would be the new Southwest, with more amenity-rich branding (wifi, assigned seats, maybe screens) and lower costs and fares. It would be genius if they pull it off…
Tory,
first, JBLU and SAVE stock has been sold to the public and is traded publicly so both companies have the legal requirement to accurately report the state of their companies and any material change to their businesses which could affect finances -which merger and acquisition most certainly does. Second, because both airlines are publicly traded – as are all large jet scheduled US airlines – there are analysts that cover those stocks and are quite adept at understanding the industry and the public documents each airline generates. There really isn’t any way to “pull the wool” over their eyes between the company statements about the merger and its benefits and what the analysts can see from public documents.
The real issue is that the low cost carrier business model is highly strained as a result of high costs; while crude oil is starting to come down, JBLU, SAVE and ULCC (Frontier) all paid well above average for fuel in the 2nd quarter so there are real structural issues regarding their fuel acquisition that probably won’t get solved anytime soon. Add in that airline labor costs are going to continue to increase at a rate faster than labor inflation in general and low cost carriers will have a hard time growing as they once did – which pushes up until costs (CASM) and makes low cost and ultra low cost airlines much less competitive with legacy (high cost) airlines.
And, finally, JBLU might have been able to refine the NEA to beat back the DOJ if they weren’t trying to acquire another airline at the same time but, for now, JBLU is trying to do both and throwing away the smallest part of the problem (NK access to LGA and BOS) in hopes of solving the complaints against the NEA. Given that NK wasn’t even on the table when the DOJ filed its complaint against the NEA, it is doubtful they will accept the settlement that B6 proposes esp. since it doesn’t solve the major issues the DOJ raises which includes slot swapping and schedule coordination between AA and B6.
CF’s maps really do highlight how much B6 alone plus B6+NK overlap with other airlines. AA is the only one of the big 4 that has a relationship with B6 so that relationship is what matters.
I suspect that when SAVE reports its finances next week, it will give an indication of when their stockholders will vote on the B6 merger proposal and, if all goes as planned which is expected, B6 will get serious about settling the DOJ lawsuit re: the NEA so they can move on to the merger.
CF continues to provide the relevant facts and data behind key industry topics.
I have long argued that a JetBlue/Spirit merger is more likely to result in a service/cost model closer to Spirit’s than JetBlue’s. That’s because JetBlue *does not have a feasible business model.* JetBlue is much like Alaska, sustained by a geographical/regional advantage but fully constrained by it, as well.
And that’s because Alaska and JetBlue want to build a product and service model that simply isn’t feasible in this industry. You have two sides to this: low cost/low service (G4,F9,NK,WN), and you have high cost/high service (DL,UA,AA). Pretty much every airline ever would love the fantasyland “high service/low cost” business model, right? I think you can pull it off in limited markets based on geography, as AS and B6 have done, but the fantasyland national powerhouse airline that’s got incredible service as well as sustainable low costs doesn’t exist because it’s not possible to do it. So, yeah: Pick a side.
I think JetBlue is much more likely to pick the side where the money and growth are at: low cost/low service. Alaska is too stubborn and too high on their own farts to realize they need to make a business model decision, too. Welcome to 6th place, AS!
Positioning themselves as an acquisition target is likely Alaska’s most financially prudent path forward, and something tells me the current CEO wouldn’t lose a wink of sleep handing over the keys on his way to the bank, just like the VX executives did a few years ago and NK’s are doing now.
problem w/ your theory is that, in the most recent quarter, the highest margin (percentage of profits to revenue) was by Southwest, then Delta, then United, then Alaska. 3 of the four most profitable airlines are legacy carriers and few would call Southwest fares low.
AS also is in a far better place because it has a much higher share of its markets than B6.
Frontier eeked out a tiny profit while JetBlue lost money – as much on a margin basis as Alaska made.
There is nothing wrong w/ AS’ business model. AS also learned with Virgin America that airlines that have simple fleet plans see costs soar when they acquire airlines that have very different fleets. None of the remaining large airlines have significant fleet commonality other than JetBlue, Spirit and Frontier.
B6 might choose to go more “low cost and lower service” but it will be because it has a highly competitive route system and can’t get its costs down and not because the ultra low cost model is working right now. High fare and high cost airlines that have strong market control are doing the best right now
Been looking at B6 plane names for inspiration on the new name. I was a bit disappointed there isn’t one called Blue Spirit or something. Nevertheless, may I suggest these three for consideration. JetGreen (N746JB, Blue plus Yellow makes Green). Indigo Blue (N279JB, just to stick to the face of Indigo Partners/Frontier). Crème Blûlée (N2017J, which is typically in yellow).
I will show myself out…