New Routes...New Competition

While AirTran finally announced new seasonal service to Seattle/Tacoma, (and it's about darn time) JetBlue launched some of its new routes this week between Austin and NYC/Boston as well as Fort Lauderdale to Oakland. However, they have more to announce, as it's been strongly hinted that the airline will use the three slots it gained at Long Beach Airport to start non-stop to Newark. JetBlue just gained another gate at Newark from United, and plans to get another soon which will allow the airline to launch the new service. Newark is suffering from a lack in gate space and that won't be helped by new competition from Virgin America. Virgin America in filings with the DOT plans (and these plans can change at any time) says that while it will commence operations initially at San Francisco, it will also focus on Newark and Dulles. The planned routes will all be transcontinental, no surprise since Branson has repeatedly hinted at that fact. Transcon service to Seattle/Tacoma, Boston, Miami, and Los Angeles is planned, and while some of those markets make perfect sense, others don't. As said previously, San Francisco makes sense, since the airport is a virtual United monopoly and is more convenient for most business travelers than Oakland and San Jose which have the low-fare carriers. However, New York City is too crowded, and gate space is a very serious issue which could hamper Virgin America operations. While Virgin America may not be serving Long Beach, they will be competition with JetBlue and other low-fare carriers from NYC, the SFO Bay Area, and Washington D.C. The real question is whether Virgin America will be able to attract business travelers from legacies like United and Continental and low-fare carriers such as JetBlue which offer a great product.

Clearly with the kind of capital the airline has attracted and a business plan that makes some sense, this will not be Independence Air II. However, with transcon fares at such lows this plan could be cause for concern. The Virgin America product will have to be darn good as well, since they will be competing against arguably the two best airlines for business travelers in the U.S. If the product is JetBlue or above quality, then it’s very possible that Virgin America could snag higher-fare business travelers from United and Continental. If that happens, then Virgin America could easily make money. But, if Virgin America decides to engage in stupid fare wars with JetBlue, Southwest, and others, then they could easily lose money. The airline could find success if it has the right fares, less than United and Continental (who will likely match Virgin America’s fares) but more than JetBlue and Southwest. Another potential problem the airline could face is the delay-prone nature of the San Francisco Airport. It’s a primary reason why JetBlue stayed away from SFO, and if Virgin America suffers too many delays, they could develop a bad reputation quickly. Another pitfall could be flight attendants. Many Virgin Atlantic flight attendants are young and sometimes apathetic. However, many Continental and United flight attendants who fly the transcon routes are senior and sometimes surly. Virgin America must find flight attendants which are young, enthusiastic, and professional. Virgin America has potential, but needs to exercise every opportunity it has to survive in the cutthroat world of aviation.