Charlotte Douglas Airport

JetBlue enjoys a cost "sweet spot" in the consolidating US market

JetBlue Airways is building on a unique position it holds between bare-bones discounters and US network carriers to sustain its profitability. Its hybrid product remains attractive to customers with a distaste for the ultra low-cost business model adopted by Spirit Airlines and the higher fares charged by US legacy airlines. The US market is moving into seemingly its final stages of maturity with three network airlines – American (once it merges with US Airways), Delta and United – and one large low-cost carrier – Southwest – dominating the landscape.

JetBlue meanwhile believes its growth plan built on expansion from Boston and the build-up of its Caribbean network will allow the carrier to forge an independent and profitable operation somewhat buffered from the waves of consolidation sweeping the country.

The airline may still have to convince some sceptics that it can turn a profit on its planned 2013 capacity growth of 5.5% to 7.5%, but JetBlue grew its 2012 net profit nearly 49% year-over-year to USD128 million on a 7.6% rise in available seat miles. Between 2009 and 2012 the carrier’s profits jumped 120%, which is a solid performance from a comparatively young carrier versus its US industry peers.

American and US Airways likely to see little competitive change in their overlap markets

American and US Airways are pressing full steam ahead to close their merger by 3Q2012, including stressing to US legislators that the combination will improve the overall health of the country’s airline industry and make the merged airline a more viable competitor with legacy and low-cost carriers alike. With just a dozen routes that overlap, the carriers should not encounter any resistance from anti-trust authorities, and given that most the markets are hub to hub pairings, few changes are likely to be made to service patterns once the 18 month integration process is complete.

Some of the arguments made by American and US Airways over increasing competition from low-cost carriers and their potential service expansion into overlap markets might be overblown as those airlines in previous mergers have been selective in grabbing the low hanging fruit created by the tie-ups between Delta-Northwest, United-Continental and Southwest-AirTran.

American’s revenue momentum continues as US Airways intensifies merger push

Top management at US Airways continues to push its argument that a combination with American Airlines would address the severe network challenges American has created for itself during the last few years as it sat out a major wave of industry consolidation in the US. There is credibility in the theory that an American-US Airways tie-up would create a carrier of significant scale to rival the giants that United and Delta have become.

But at the same time US Airways is emphasising American’s network weakness, the Dallas-based carrier is recording revenue gains that are industry-leading, which indicates US Airways maybe the the larger benefactor if the merger becomes a reality. On the same day that US Airways CEO Doug Parker lambasted American’s “cornerstone” strategy that centres American’s network around five hubs in Dallas, Chicago, Miami, New York and Los Angeles, American recorded a 2Q2012 rise in consolidated unit revenues of 9.1% and year-over-year growth in domestic unit revenues of 8.6%. The company’s 5.5% rise in revenue for 2Q2012 to USD6.5 billion was the highest in its history, according to the carrier.

United begins small market cuts from Houston in fallout from battle over Hobby

United Airlines is beginning a threatened 10% capacity reduction from its Houston Intercontinental hub (IAH) in Sep-2012 through the elimination of mostly small markets served by 50-seat regional jets and long-haul service to Paris. The carrier is following through on a pledge to reduce its footprint at its largest US hub following a politicised decision by Houston City Council to allow international flights from Hobby Airport, which currently only serves domestic destinations.

United and Southwest spent nearly all of 1H2012 attempting to convince the city of Houston that their respective stances on international expansion at Hobby would produce the most favourable economic outcomes. In the end Houston sided with Southwest, giving the carrier authorisation to push forward with the development of a new terminal at Hobby to support international service to Latin America and the Caribbean for a targeted 2015 launch. The city dismissed United’s arguments that international passenger spill to Hobby would be detrimental, and pressure the carrier’s performance on international routes from IAH.

United Airlines walks away the sore loser after Southwest wins international expansion from Hobby

A decision by Houston City Council to allow Southwest Airlines to press forward with the 2015 launch of international flights from Hobby Airport is a vote that the new service will blunt United’s threatened cuts from Houston George Bush Intercontinental Airport, which could result in a capacity reduction of up to 10% at the largest hub in United’s network. United will also axe plans to introduce long-haul flights, including to Auckland, but United is using Southwest's win as an excuse to make these overdue network changes.

The battle between Southwest, United and the City of Houston flared earlier this year as Southwest approached the Houston Airport System (HAS) to conduct a feasibility study examining the development of a new terminal at Hobby to accommodate short-haul international flights from the airport to Mexico, Central and South America.

Charlotte sneaks into the top 30 airports

Charlotte Douglas’ presence in the top 30 airports may come as a surprise to many foreigners, even some Americans. Nevertheless, its passenger ranking puts it ahead of other cities, such as Seattle or Boston that are far better known to many travellers.