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JetBlue marks IPO anniversary as rivals struggle
NEW YORK (Reuters) — What a difference a year can make.
Low-fare airline JetBlue Airways has shaken the very foundations of the U.S. airline industry and foiled struggling rivals with a string of quarterly profits — all within its first year as a publicly traded company.
JetBlue hit the ground running last April, with the biggest chunk of venture capital ever secured by a start-up U.S. airline and a scalding hot initial public offering.
JetBlue's success since then has cemented its legitimacy in the industry. The upcoming year could prove bumpier than JetBlue's last, as its far-bigger competitors fix their sights on its loyal passenger base, but industry watchers still expect another strong showing from the airline.
"JetBlue will probably be 45% bigger, and just as profitable" by mid-April 2004, Blaylock & Partners airline analyst Raymond Neidl said. "They've carved out a niche, a loyal customer following, and people want that service."
The U.S. airline sector looks vastly different now than it did a year ago. No. 2 carrier United Airlines is now operating under bankruptcy protection, and its No. 7 alliance partner, US Airways Group, just emerged from a bankruptcy restructuring.
But three-year-old JetBlue and its more seasoned competitor Southwest Airlines, the model for much of JetBlue's business, have rubbed salt in their rivals' wounds by reporting profits during the sector's worst-ever downturn.
Throughout aviation history, smaller airlines have tried to emulate the sheer enormity and the domestic and international reach of the biggest players in the U.S. airline industry.
But after more than $18 billion in losses by the largest U.S. carriers over the past two years, everyone — even the industry stalwarts — now wants to be like JetBlue.
WAITING IN THE WINGS
JetBlue will face stiffer and more desperate competition on its prized routes this year.
Continental Airlines, the No. 5 U.S. airline, is now matching JetBlue's prices out of New York and simplifying fares between the Northeast and Florida, along one of JetBlue's main route corridors.
"When the largest airline in New York alters its pricing, we believe the hippest airline in New York is bound to see an impact," JPMorgan airline analyst Jamie Baker said.
Delta Air Lines is launching Song, a lower-cost carrier that will operate as a unit of its parent, to try to win back customers who switched to JetBlue on key routes between New York and Florida and Las Vegas.
Song hopes to lure passengers with leather seats, live television, and a playful mantra — all similar to JetBlue's. But if history is a measure, Song's ties to Delta's heavier cost structure and big-airline mentality will hurt its cause.
JetBlue can make money on cheaper fares because its aircraft are nearly new, its turnaround times are quick, and its labor force is not unionized. Song will be using pilots covered by Delta's more expensive labor contracts.
A string of major airlines have searched for success in the low-fare market and found failure, including Continental with its Continental Lite and United's Shuttle by United. But the market has grown even more tempting.
Low-cost air travel, generally booked by leisure passengers, accounts for about 17% of the total U.S. market, Blaylock's Neidl estimated. It could swell at least another 10% within five years, airlines have said.
Analysts say there is probably enough room in the East Coast market for both JetBlue and Song. The bigger question is not whether Song can beat JetBlue at its own game, but whether it can survive as a unit of Delta without confusing consumers and succumbing to unbearable costs.
JetBlue holds the third-largest share of the market between New York and Florida, and generates 40% to 45% of its revenue from those routes, according to JPMorgan research.
NEW YORK (Reuters) — What a difference a year can make.
Low-fare airline JetBlue Airways has shaken the very foundations of the U.S. airline industry and foiled struggling rivals with a string of quarterly profits — all within its first year as a publicly traded company.
JetBlue hit the ground running last April, with the biggest chunk of venture capital ever secured by a start-up U.S. airline and a scalding hot initial public offering.
JetBlue's success since then has cemented its legitimacy in the industry. The upcoming year could prove bumpier than JetBlue's last, as its far-bigger competitors fix their sights on its loyal passenger base, but industry watchers still expect another strong showing from the airline.
"JetBlue will probably be 45% bigger, and just as profitable" by mid-April 2004, Blaylock & Partners airline analyst Raymond Neidl said. "They've carved out a niche, a loyal customer following, and people want that service."
The U.S. airline sector looks vastly different now than it did a year ago. No. 2 carrier United Airlines is now operating under bankruptcy protection, and its No. 7 alliance partner, US Airways Group, just emerged from a bankruptcy restructuring.
But three-year-old JetBlue and its more seasoned competitor Southwest Airlines, the model for much of JetBlue's business, have rubbed salt in their rivals' wounds by reporting profits during the sector's worst-ever downturn.
Throughout aviation history, smaller airlines have tried to emulate the sheer enormity and the domestic and international reach of the biggest players in the U.S. airline industry.
But after more than $18 billion in losses by the largest U.S. carriers over the past two years, everyone — even the industry stalwarts — now wants to be like JetBlue.
WAITING IN THE WINGS
JetBlue will face stiffer and more desperate competition on its prized routes this year.
Continental Airlines, the No. 5 U.S. airline, is now matching JetBlue's prices out of New York and simplifying fares between the Northeast and Florida, along one of JetBlue's main route corridors.
"When the largest airline in New York alters its pricing, we believe the hippest airline in New York is bound to see an impact," JPMorgan airline analyst Jamie Baker said.
Delta Air Lines is launching Song, a lower-cost carrier that will operate as a unit of its parent, to try to win back customers who switched to JetBlue on key routes between New York and Florida and Las Vegas.
Song hopes to lure passengers with leather seats, live television, and a playful mantra — all similar to JetBlue's. But if history is a measure, Song's ties to Delta's heavier cost structure and big-airline mentality will hurt its cause.
JetBlue can make money on cheaper fares because its aircraft are nearly new, its turnaround times are quick, and its labor force is not unionized. Song will be using pilots covered by Delta's more expensive labor contracts.
A string of major airlines have searched for success in the low-fare market and found failure, including Continental with its Continental Lite and United's Shuttle by United. But the market has grown even more tempting.
Low-cost air travel, generally booked by leisure passengers, accounts for about 17% of the total U.S. market, Blaylock's Neidl estimated. It could swell at least another 10% within five years, airlines have said.
Analysts say there is probably enough room in the East Coast market for both JetBlue and Song. The bigger question is not whether Song can beat JetBlue at its own game, but whether it can survive as a unit of Delta without confusing consumers and succumbing to unbearable costs.
JetBlue holds the third-largest share of the market between New York and Florida, and generates 40% to 45% of its revenue from those routes, according to JPMorgan research.
