Two Airlines Take Increased Risks With New Flights

Frontier Airlines announced that it would start new red-eye service between Denver and Hartford, Connecticut starting March 2. This move makes sense in many regards, but also raises some questions about the level of risk Frontier is willing to take in a new market. Hartford isn't a very large airport, and doesn't have much service to the West. But Hartford does have Southwest with service to several destinations that allow passengers to connect to Western Cities, including Nashville, Chicago, and Las Vegas. Southwest has already lowered fares substantially in the market and may make it difficult for Frontier to compete. One of the few things that Frontier has going for it is that it offers nonstop service to Denver, a city currently unserved nonstop from Hartford. In Frontier's press release, the service to Denver specifically seems to be promoted, more so than other press releases, especially in comments by Governor Rell, and Frontier's own self-promotional paragraph stating:

"Frontier is proud to be the first carrier to fly non-stop between Hartford and Denver, and we're confident passengers who are unfamiliar with our airline will enjoy our new comfortable aircraft, superior service, consistent on-time departures and arrivals, and in-flight entertainment," said John Happ, senior vice president of marketing and planning for Frontier. "We get more requests from passengers to serve New England than any other area in the U.S., so we're looking forward to bringing the Frontier experience to Connecticut and southern New England travelers. Not to mention that with our early morning departure from Hartford, passengers can be in Denver and up to the mountains by noon to enjoy a half day of skiing, biking, hiking or any of the great activities the beautiful Rocky Mountains have to offer."

While the service is timed to offer connections to other cities in the West, it appears that Frontier is launching this service primarily because it will be the only non-stop service between Hartford and Denver. But is there a reason why this market has been previously unserved? It's interesting that United, doesn't serve the Hartford-Denver market, even though both cities are thriving business centers and business travelers are United's core customer base. If United doesn't feel a need to serve the Hartford-Denver market nonstop, then there may not be a need for that flight. Even with Southwest's presence, Hartford is by no means a low-yield destination, and United could easily charge a premium on nonstop service if it wanted to since Southwest doesn't serve the Hartford-Denver route nonstop. Frontier's entering the market with fares that are likely below where United would set fares, which might spur demand, but it also might prevent the flight from becoming profitable.

One challenge for Frontier in Hartford is to make itself well-known. Hopefully the airline and the airport can work together to publicize the new service and make it a success. Southwest is currently the only low-fare carrier at Hartford with a substantial operation and Frontier's new service of one daily flight might get overlooked by consumers when they need to book a trip out West. Many customers in Hartford have never heard of Frontier because Frontier hasn't served New England for several years since they left Boston in 2002. Frontier needs to get it's brand recognized by consumers in the Hartford area if it wants to convince customers that there is a low-fare alternative from Hartford. That could pose a challenge, but Frontier is aware of the problem and will do what it can to stir publicity. Nevertheless, it will be difficult, after all, how does an airline with one daily flight publicize a new destination effectively? JetBlue did this successfully when it launched a daily nonstop red-eye flight from New York to cities such as Seattle/Tacoma, Salt Lake City, or even Denver. All of those routes have been very profitable, so marketing a single daily flight can be done well. Frontier is taking a big risk with Hartford, but if it works hard to publicize the new route and offer fares that are reasonable, the new route should succeed. One suggestion, though, Frontier should make its in-flight television free to all passengers on the route until the end of the summer, so customers can experience all of Frontier's superior amenities over Southwest.

But Frontier isn't the only airline taking risks with new flights. Delta also announced new flights between New York and Chicago, making the market share battle on the route all the more interesting after JetBlue announced new service from O'Hare to JFK several weeks ago. Delta plans to start new service between LaGuardia and Midway, the two most convenient airports for business travelers in New York and Chicago, respectively. Delta's regional partner Shuttle America will operate Delta Shuttle-like service between the two airports with E170 jets that seat 70 passengers. The aim is to attract business travelers, who will like the convenient airports (including the convenience of flying from the Marine Air Terminal at LaGuardia) and the regularly-scheduled flights Delta plans to offer. Delta also plans to add additional flights between JFK and O'Hare on 50- and 70-seat regional jets through Delta's regional subsidiary Comair. The new service will ratchet up the market share battle between New York and Chicago, and will ultimately create some losers. Airlines like ATA or AirTran that have smaller operations between Midway and New York City (ATA to LaGuardia and AirTran to Newark) could be marginalized if larger airlines like American, United, or Delta use their large market share to offer deep-discount fares, driving these smaller carriers out of the market. Both ATA and AirTran might have to withdraw from the crowded New York City to Chicago market if they can't distinguish themselves from their competitors and offer lower fares than carriers with larger market share.

But this move is dangerous for Delta as well. Even though Delta will be operating the new flights with smaller jets, there is still a whole lot of risk involved. Delta has a lot of market share in New York City at both LaGuardia and JFK, but they have less in Chicago. Marketing these flights to business travelers in Chicago as a plausible alternative to American and United may be difficult. Given that business travelers often stick with an airline that they've racked up the most miles with, Delta might have a hard time breaking into Chicago, where there are thousands of business travelers that have racked up significant amounts of miles on American and/or United. Delta also may have trouble operating the standard of service business travelers expect. American and United set high standards of service and comfort for their New York to Chicago flights. But Delta's flights involve smaller jets that business travelers typically dislike because smaller jets are less comfortable to fly on. If Delta truly wants to make the new flights business traveler-friendly, then they should operate them with mainline aircraft. But, if Delta wants to make the flights profitable, Delta should probably use smaller planes. With this latest grab for business traveler market share, there is little doubt that there will be realignment in the New York to Chicago market next year, and every airline that flies the route is vulnerable to competitive pressures. ATA and AirTran are most vulnerable to exiting the New York to Chicago market but all airlines on the route may to cut flights, even the strongest such as American or United. Fares on the route will likely decline slightly in the next six months, but may rise if some airlines retreat and remove seats from the route. It will be a very interesting year in 2007 on the New York to Chicago route, and Delta's announcement will certainly not be the last we hear about the route anytime soon.

By the way, this is a milestone for Airline Bulletin. It is the 300th post since the creation of the site over two years ago. I certainly hope to write at least 300 more in the coming years.