JetBlue, AirTran Take on Delta

Competition expected to produce lower fares, incentives

By: Jerry Chandler

Hard on the heels of word that JetBlue would begin a nonstop Long Beach-Atlanta service, AirTran a virtual unknown among Western agents announced that it would start flying LAX-ATL.

This route, which has been a high-priced monopoly for Delta, is about to become intensely competitive. The ultimate winners will be travel agents and their clients.

Delta’s nonrefundable full-coach one-way fare between LAX and Atlanta is $1,168, although a reservation clerk was quick to point out that “it does give you an upgrade to first class.”

AirTran sells a full-fare unrestricted one-way coach seat on the same route for $349; $50 more buys an upgrade to business class. In contrast, JetBlue’s full fare price for LGB-ATL is $299, one-way.

JetBlue’s service begins May 8, AirTran’s June 4.

In an apparent reaction to the forays into its home base, Hartsfield Atlanta International, Delta said that it is adding five daily nonstops on the LAX-ATL route, between May 1 and Aug. 2.

“There’s a strong demand for our Atlanta-Los Angeles service,” contends Vicki Escarra, Delta’s chief marketing officer.

The question remains: With 1,200 people per day flying between Los Angeles and Atlanta, is there enough traffic on the route to support three carriers, especially at a time when demand for air travel is soft?

“No, I don’t think so,” said Jack Keady, a transportation consultant, based in Marina del Rey, Calif. “Historically, the common logic has been that low-fare fare competitors generate a great deal of traffic and expand the market.

However, there is a darker side that says they don’t so much generate traffic as they divert traffic from existing or incumbent carriers.”

Keady said that the entry of AirTran and JetBlue into the market will probably generate 5 to 10 percent more traffic, but a significant number will shift from Delta.

Will the new nonstops that Delta is throwing into the market counter the sudden competition?

“If they’re going to fill them, they’ll have to match the fares,” said Keady. “They’re going to have to offer the exact same, penny-for-penny price.” But, he cautioned, Delta probably can’t afford to do that across the board at least not when it comes to last minute walk-up fares.

“That would cause a real problem for them,” he said. “If somebody were going to Savannah, Ga., now they’d probably have to lower their Savannah prices in addition to their Atlanta prices. It causes quite a bit of pricing disequilibrium, if you don’t lower the whole system throughout a connecting hub.”

It is likely Delta will match, as it has in the past, the low-fare carriers’ advance-purchase fares.

“Even then,” said Keady, “they’d better not be chintzy with the allocation of seats. It’s not just enough to match prices on a few seats. You have to do it on a considerable number of seats. Because once passengers find out the cheap seats on Delta are sold out, they will divert to the other carriers.”

Should your client want a JetBlue flight to Atlanta, they’ll find the service is purely point-to-point.

Should your client go AirTran, lots of connection opportunities open up. By this summer, the carrier will serve 43 cities, most of them east of the Mississippi.

Despite that route network on the East Coast, Keady said he believes it will be harder for AirTran to establish itself among West Coast travelers, than it has been for JetBlue.

“JetBlue, much more so than AirTran, has quite a cachet,” he said. Seat-back televisions and friendly customer service make a real difference to West Coast fliers. JetBlue is perceived as California cool even though it’s based out of New York City.

In contrast, AirTran is an unknown, but not to everybody.

Savvy agents will remember that AirTran once went by another name ValuJet. After the May 1996 crash of ValuJet Flight 592 into the Florida Everglades, the name came to symbolize all that was wrong with full-tilt, deregulated commercial aviation.

“Their DNA now is totally different,” said Mike Boyd, president of the Boyd Group, an aviation consultancy in Colorado. “They’re a different airline.” New management, new airplanes and new personnel now operate AirTran. The last of the carrier’s venerable DC-9-30s will be phased out later this summer, leaving it with a field of Boeing 717s.

While the 717s are new, their range is limited. That’s why AirTran has contracted with Ryan International Airlines to operate, at least initially, the LAX-ATL service, using A320s fitted with 12 business class and 150 coach seats. AirTran is looking to acquire longer-range craft of its own, perhaps Boeing 737-700s or A319s.

Wall Street certainly thinks AirTran, circa 2003, bears scant resemblance to the ValuJet of the mid-90s. Today, the carrier is valued at approximately $461 million. Delta, a far larger airline, weighs in at only $1.1 billion.

Money talks. And so, apparently, do some Delta employees. In a recent edition of his online newsletter, Joe Brancatelli, editor of, recounted a conversation with a Delta station manager, concerning all the new West Coast competition: “We just keep drinking the Kool-Aid. Don’t we?”

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