Can a Big Carrier Book Profit Battling a Nimble Rival?
Sep 9, 2002, 5:26 am
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Can a Big Carrier Book Profit Battling a Nimble Rival?
JetBlue Flight 112 and United Airlines Flight 235 cover the same 2,415-mile route -- linking Dulles Airport and Oakland, Calif. -- in identical planes with the same size crews. But there is a crucial difference: JetBlue 112 makes a very good profit; United 235 doesn't.
The factors behind that difference offer some insight into why UAL Corp.'s United is on the edge of bankruptcy while upstart JetBlue thrives. Essentially, United, like other big, full-service international airlines, is troubled by high labor costs and the expense of maintaining multiple hubs just as revenue is plunging because of the poor economy and post-terrorism jitters. A closer look at the competing flights helps explain why most major airlines are rethinking the assumptions that size confers advantage and that hubs are strategically vital.
It was on May 1 that JetBlue Airways, a low-cost carrier that took wing in February 2000, began flying the Dulles-Oakland route twice a day in both directions. This was good news for passengers -- previously no such service existed -- but bad news for 76-year-old United, which has a hub at San Francisco International Airport. United's Oakland-bound passengers, who previously would disembark in San Francisco and travel the 30 extra miles to the destination by road, now had the option of flying directly to Oakland.
As big carriers usually do, United fought back. Its aim: to keep JetBlue from siphoning off its Oakland-area passengers. On May 8, United began its own twice-a-day direct service from its East Coast hub at Dulles outside Washington, D.C., to Oakland. Now that low-fare carriers control 28% of domestic capacity, United's response is a story being repeated across the aviation landscape, usually to the detriment of the big, high-cost airlines.
http://online.wsj.com/article/0,,SB1...0.html?mod=DAI
Also available at: http://www.msnbc.com/news/805520.asp
[This message has been edited by wigstheone (edited 09-09-2002).]
The factors behind that difference offer some insight into why UAL Corp.'s United is on the edge of bankruptcy while upstart JetBlue thrives. Essentially, United, like other big, full-service international airlines, is troubled by high labor costs and the expense of maintaining multiple hubs just as revenue is plunging because of the poor economy and post-terrorism jitters. A closer look at the competing flights helps explain why most major airlines are rethinking the assumptions that size confers advantage and that hubs are strategically vital.
It was on May 1 that JetBlue Airways, a low-cost carrier that took wing in February 2000, began flying the Dulles-Oakland route twice a day in both directions. This was good news for passengers -- previously no such service existed -- but bad news for 76-year-old United, which has a hub at San Francisco International Airport. United's Oakland-bound passengers, who previously would disembark in San Francisco and travel the 30 extra miles to the destination by road, now had the option of flying directly to Oakland.
As big carriers usually do, United fought back. Its aim: to keep JetBlue from siphoning off its Oakland-area passengers. On May 8, United began its own twice-a-day direct service from its East Coast hub at Dulles outside Washington, D.C., to Oakland. Now that low-fare carriers control 28% of domestic capacity, United's response is a story being repeated across the aviation landscape, usually to the detriment of the big, high-cost airlines.
http://online.wsj.com/article/0,,SB1...0.html?mod=DAI
Also available at: http://www.msnbc.com/news/805520.asp
[This message has been edited by wigstheone (edited 09-09-2002).]
