For anyone interested in competitive dynamics and the evolution of markets over time, the airline industry is an absolute candy store. Take, for example, JetBlue’s upcoming entry into the Chicago market. According to this Chicago Tribune article, JetBlue will start its O’Hare operations on January 4 with five flights in total, to JFK in New York and Long Beach in southern California. United and American repond by dropping fares on those routes immediately:
The winner in this fight? The consumer, of course.
American Airlines rolled out a special $59 fare each way on flights from Chicago to New York only hours after JetBlue announced last month that it would charge that price. United matched the two carriers on Friday.
That’s a savings of nearly 65 percent from the full fares the two major carriers charge, and a sign of the chilly reception in store for the newcomer, travel experts say.
“They’re going to hit [JetBlue] with everything they’ve got, including the kitchen sink,” said Tom Parsons, CEO and founder of BestFares.com.
He predicts that United and American will welcome JetBlue to O’Hare with extended fare sales or by offering double or triple miles to frequent fliers who travel with them to cities where JetBlue flies.
While it’s only five flights, it’s five flights to two major destinations from a massive hub for both UA and AA. Delta managed to use its extended network from its hub, its international connections, and its frequent flyer benefits to drive JetBlue out of Atlanta. JetBlue hopes O’Hare will turn out differently. But some of these other dimensions may matter a lot to consumers.
Unlike United and American, JetBlue isn’t affiliated with any global marketing alliances. That’s a big negative for road warriors who like to convert the miles they rack up into overseas trips to exotic locales.
Its amenities “don’t make up for miles, chances to upgrade, easier-access lines through security,” said Steve Berg, executive vice president for sales for Effen Vodka, who treks to New York at least once a month. “All those things are more important to myself and most frequent travelers that I’ve talked to.”
But JetBlue has one thing its rivals can’t match, Neeleman said: “Our people are the greatest. It’s an easy way to travel.”
This example has it all: price competition, product differentiation, entry and exit. Should be interesting to watch. Personally, I loathe flying through JFK and will avoid it like the plague; if I’m flying to New York I use Newark.