A Look at the Focus Cities JetBlue Wants to Grow From the Spirit Deal

JetBlue, Mergers/Finance, Spirit

I recently wrote about potential overlap between the new JetBlue/Spirit combo and the Big Four airlines, but that is a messy comparison since routes are likely to change significantly if the deal goes through. In its merger announcement, JetBlue got more specific about what it really wants to get in this deal, and growing its focus cities is a big part of that.

In the acquisition announcement, JetBlue said this:

The acquisition will increase relevance for JetBlue in certain key focus cities (Fort Lauderdale, Orlando, San Juan, and Los Angeles) as well as Big Four airline hubs (Las Vegas, Dallas, Houston, Chicago, Detroit, Atlanta, and Miami).

If we take that at face value, it means JetBlue isn’t really able to become relevant on its own — or not relevant enough for its liking — but somehow Spirit will push it over the top. Today, I’ll start by looking at the four focus cities where it wants more than it has today. Tomorrow, I’ll look at the “Big Four airline hubs.”

To do this, I pulled Cirium scheduled seats departing each airport for July 2022. Looking back, this may not have been the best metric since seat share will shrink as JetBlue removes seats from Spirit aircraft. But I was so far down the path before having that revelation that I decided it would directionally still be useful to look at it this way.

We’ll start in the most concerning airport for regulators outside the Northeast, and that’s Fort Lauderdale… home base to Spirit and site of a new terminal project for JetBlue.

Normally I’d look at this by metro area, to get a broader sense, but Miami is another airport where JetBlue wants to grow, and this is a particularly important market for the combined airlines, so we’ll look at it independently. You can see why the feds are concerned here. Spirit is a clear number one and JetBlue is a clear number two. Together, they are a VERY clear number one together with about 55 percent of seats in the market.

You might look at this and say, “Well, 55 percent… that ain’t bad, and these are both lower cost airlines.” Sure, but the issue is that it’s hard to get into Fort Lauderdale due to gate constraints. The airport is already committed to building a new Terminal 5 that will be exclusively for JetBlue use. To start it’s only 5 gates, but it can and will grow.

In this market, JetBlue does not need to grow to be relevant, but it will certainly have a commanding presence which it couldn’t get on its own. That sounds good… except I imagine that there will be divestiture required. And I’d imagine that Frontier would love to scoop all those up. Maybe Allegiant too. After all, with the main ULCC in the market wiped off the map, it creates so much opportunity for the others.

In Orlando, I looked at the metro area, including Sanford so that Allegiant’s presence wasn’t overlooked. And in this market, you have number six JetBlue taking on number two Spirit to leap over Southwest into the number one spot.

This is a market where you can imagine JetBlue will be glad to increase relevance further. It’s also an important base for the airline since it’s where it has its training facilities and other support services.

This July, JetBlue serves 21 destinations compared to Spirit’s 47. Of those, 12 are overlapping, primarily in the Northeast and Caribbean. Take a look at the map.

You can imagine JetBlue wants to come in here, bolster its Northeast flying, add a Midwest pattern, and then see where else it can deploy its airplanes. Of course, JetBlue is already poised to grow significantly. It is taking up 15 gates in the new South Terminal when it opens this fall.

Does Spirit add a lot? To me, this is as close as you can get to finding value in any market. This is a market where I see opportunity.

For San Juan, it’s hard to see how this is good news. JetBlue is already a clear number one, but Spirit is number two and an important source of low fares for people on the island. Presumably this gives soon-to-be number three Frontier blue skies ahead to grow, and that’s the only potential saving grace for the long-suffering residents on the island. Gate space really shouldn’t be an issue there, so Frontier will feast.

Saying that, I’m not sure what JetBlue really wants to do with a greater presence here that it couldn’t already do on its own. It’s just eliminating a competitor that can easily be backfilled.

We end today’s post with the last of the focus cities that JetBlue wants to grow, and it is a tough one. In LA — and I am just looking at LAX here — the two airlines are already similarly-sized and this combination will surge them into… fifth place, just ahead of Alaska.

Fifth place is not an enviable spot in this market, but Spirit and JetBlue both operate from Terminal 5 today so there probably are synergy opportunities that will allow further growth from better gate utilization.

My issue is… where does JetBlue grow? It has already abandoned most of the flying it had moved over from Long Beach. In July, the only markets that remain are 2x daily each to Las Vegas, Salt Lake City and San Francisco along with 4x weekly to Reno.

In its place, you find long, thin routes where JetBlue has tried to get a foothold like Charleston (SC), Hartford, and Jacksonville. Spirit adds service to a ton of places, but without that huge fare discount, it’s hard to see how JetBlue can really make a go of anything in LA… profitably.

That wraps up the four focus cities. Orlando I can see being appealing in some ways, but the others I don’t quite see the value. (Fort Lauderdale, I do, but I expect divestment.) Tomorrow, I’ll look at the Big Four airline hubs to see if that creates more opportunity.

19 comments on “A Look at the Focus Cities JetBlue Wants to Grow From the Spirit Deal

  1. The only place I see an issue is SJU. LAX right now is a nonfactor being in 5th, MCO market as well as the airport continues to grow & FLL at 55% is way lower than AA at MIA at around 80%. That difference between MIA & FLL is rather stark especially when you consider AA’s international coverage from there vs anywhere else in the southeast outside ATL.

  2. FLL’s JetBlue needs all the facilities help it can get. It’s got long, low, concourses and corridors painted in joyless colors, overcrowded gate areas (even during normal operations) and the surliest employees I’ve encountered in years. It has all the hallmarks of a barely-functional municipal facility built on-the cheap, and I think it really needs to step up its game if B6 is going to dumping even more traffic through it. It doesn’t cost *that* much extra to construct a terminal that is not a miserable space to spend time.

    1. I haven’t flown out of FLL recently, but the facilities there that you are describing sound very familiar to Southwest’s very aged and claustrophobic facilities at MCI, though it sounds like FLL’s facilities have been painted at least once in the past 30 years.

      Take away a few of the half-walls (yes, one could throw a baseball or even a spitball from the non-secure, curbside area there to the secure area by the gate, as the wall isn’t that tall) and mute a few of the brighter colors (at least, those colors that aren’t already faded) into 70s-era pastels, and WN’s MCI terminal could be a set for an aviation disaster movie from 50 years ago.

    2. it is especially tough when WN re-did T1 and has an FIS, Spirit has the newish terminal and connector, and Delta just finished a nice renovation and an incredible sky club.

  3. Realized I forgot to add one more point., B6 can grow at LAX with AS’s help if they chose to go that route with some kind of code sharing agreement.

    1. Considering how much EXTRA money B6 cost AS during the VX acquisition the incentive for AS to offer B6 any help is between zero and negative infinity.

  4. Should this merger go through my question is what is JetBlues plan to reduce their cost, which remain much higher than Spirit? JetBlue is not a ULCC, and the pandemic has work wonders for ULCC’s like Spirit to markets like Florida and Caribbean where Spirit has increased their marketshare thanks in no small part to their ultra low cost fares. Take MIA for example Spirit only served FLL prior to the pandemic, however during the pandemic Spirit saw an opportunity to jump into the MIA market and instantly became the airports second largest carrier leapfrogging over every other carrier except American Airlines. There are only 2 airlines in the US that could make something like that happen and they are Spirit and Frontier. Spirit has been able to really capitalize on the pandemic and use it to expand the reach of their airline and most of the routes Spirit launched during the pandemic they are still operating today. Compare that to JetBlue which also attempted to expand twice during the pandemic first in the second half of 2020 then during the summer of 2021. In both attempts jetBlue has been forced to pull back and cancel many of those routes.

    When I look at the Florida market the two airlines that really used the pandemic to their advantage to grab a larger piece and still retain their increased marketshare were Spirit and Frontier, the two major ULCC’s in this country. I think this merger creates problems for jetBlue because they can’t match ULCC fares which opens the door for Frontier and even Allegiant to come in and grab a huge chunk of Spirit’s customers, many of whom will not migrate over to jetBlue because of jetBlues higher fares compared to the ULCC’s.

  5. Should anything be read into the omission of Baltimore since Spirit has a larger market share at BWI than at any of the “big four hubs” besides Vegas?

    1. It will be interesting to see how it plays out. BWI is my home airport so I fly through it often. At one time, in addition to Boston, JetBlue flew BWI – MCO and FLL. They abandoned both routes after a few years. Now almost everyone else flies the MCO route (Avelo will be starting it soon). At one time, in the not too distant past, Spirit was placing a heavy emphasis on growing BWI, but post-pandemic that seems to have stagnated. They haven’t abandoned many routes, but in the past few years they’ve only added MIA. Maybe JetBlue keeps things as is here post merger. But if they shrink, the market exists for Frontier to continue its growth.

    2. Dan – I think yes. My assumption is that JetBlue just doesn’t have interest in that market in general. That doesn’t mean it would go away, but it’s just not a primary interest.

  6. CF,

    As you deep dive into Jet Blue + Spirit, I suggest you use Cirium data together with the Department of Justice Horizontal Merger Guidelines and its Herfindahl-Hirschman Index (“HHI”) of market concentration FOR each city pair for both before and after.

    https://www.justice.gov/atr/horizontal-merger-guidelines-0

    You should be able to easily come up with a Green=Safe, Yellow=Study, Red=Danger chart for each pair.

    I realize Department of Transportation has some role in Airline M&A, but this is really the expertise of DOJ-&-FTC and they methodically apply Horizontal Merger Guidelines.

    In general the relevant market is each airport (eg FLL, MIA). You could also run these calcs for existing airports with a dominant carrier (eg Delta@ATL, Americal@MIA) and publish the same Green, Yellow, Red charts.

    You have all the data at your fingertips and data analysis skills to do exactly what the Agencies (DOT, DOJ) will do. This will not only satisfy your natural curiosity, but earn praise from all the followers of this blog including another Tim Dunn Excellent Work Medal.

    Keep up the GREAT work!

  7. Disagree with the MCO analysis. MCO ranks dead last in the country when it comes to margins for any airline not name Frontier or Spirit. This is a largest leisure destination in the country and almost all the traffic is price sensitive. Any airline NOT a ULCC operates here because of brand loyalty – not economics. I believe JetBlue said they could run 100 frequencies a day between JFK and MCO, fill them all up and still not turn a profit. That is just a testament to the price sensitivity that exists in that market.

    1. Can you share your source? I can assure you that multiple other airlines are profitable in MCO, including the 2 airlines I have worked for. “Dead last” in margins is a bold statement without any proof. Do you really think every airline would fly as much as they do to the biggest loss-making airport in the country?

  8. Looks to me like the plan is to focus on increasing their service at most of the lowest margin, fare sensitive airports in the country. Great plan!

    After a few years, which of these mergers is going to win the Kerry Skeen award for the most egregious evaporation of airline shareholder value, AS buying VX or JetBluIt?

    Ironically everybody’s needs would have been better served (px, employees, shareholders, the airlines themselves) if JetBlue bought Virgin. Then SpirTier would have happened. And things would make more sense in Airline Land!

  9. Cranky, for LAX Term-5 will become AA exclusive once the T4-5 project is complete in a few years. Where will combined B6/NK find the gates?

    1. The new Terminal negative 1 or perhaps a terminal 99, built somewhere east of the 405 ?

    2. James – I don’t believe there is anything that officially gives T5 to American. JetBlue and Spirit have their T5 gates and without some sort of agreement to move, I don’t think they’ll have any trouble keeping them.
      Here’s what I’d actually expect to see happen, however.

      American will continue to have all of T4 and it will keep its gates in T5 plus expand into Bradley a little more along with its partners. Then, Alaska can move over to T5 to be closer to American, sharing the same new headhouse. Spirit and JetBlue could move to T6 along with some other cats and dogs and Air Canada, which can either stay or eventually move into T9.
      But that would put American and partners all together.

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