Boston Logan airport: JetBlue digs in as Delta ups competition

Summary

• JetBlue has steadily built Boston up, and consistently touts, the market as one the top performers in its system.
• Delta has also singled out Boston for its revenue performance and has recently elevated Boston to hub status.
• JetBlue is publicly showing no signs of concern over Delta's growth in Boston.
• The developments are no doubt a boon for Boston, which posted a 60% increase in passengers from 2009 to 2018.

JetBlue seizes on an opportunity to become Boston's largest airline

JetBlue began serving Boston in 2004, building the market up into a focus city. The airline is now Boston Logan's largest airline by weekly departing frequencies.

Boston Logan International weekly departing frequencies by airline: as of late Jul-2019

Source: CAPA - Centre for Aviation and OAG.

Boston was a prime opportunity for JetBlue.

As American, which was previously Logan's largest airline, opted to pull back in some of its secondary markets to focus on its large hubs, Boston was one the larger US markets without an anchor airline.

JetBlue has often cited Boston as one of the top performers in its system, and over the past couple of years the airline has deployed its Mint premium product on selected routes from the airport to increase its relevance among corporate travellers in the market. JetBlue's Mint routes from Boston include Seattle, Los Angeles, San Diego, San Francisco, Las Vegas and the Caribbean destinations of Aruba, Grenada, Barbados and St Maarten.

JetBlue's management has previously determined that Mint has been a big contributor in its ability to secure corporate contracts in Boston. The airline has stated that it has contracts with every company of reasonable size in the Boston market, except for one.

Delta and JetBlue have similar goals for their service levels in Boston

During the past couple of years Delta has been increasingly building Boston up, first identifying the market as a focus city, and then declaring the airport as a hub earlier in 2019.

Delta executives recently explained: "To the extent that we're beginning to connect…more and more traffic over Boston, we would consider it a hub", said CEO Ed Bastian. He remarked that during 2019 Delta is connecting approximately 1,000 passengers per day from the US to Europe over Boston.

Delta executives also stated that Boston led the company's system revenue performance in 2Q2019, with growth of 25% year-on-year and a 10% improvement in unit revenues.

Both JetBlue and Delta have stated their ultimate goals of reaching 200 daily departure in Boston.

Delta aims to reach that threshold during the next 18 to 24 months, and its management has declared that level of service would create a very profitable and sustainable franchise for the airline in Boston.

JetBlue is not afraid of increasing competition from Delta in Boston

All during Delta's expansion in Boston, JetBlue has been fielding questions about the increasing competition, and has publicly downplayed the changing dynamics. Instead, JetBlue has continually touted its strength in Boston, and is sticking to that message - now that Delta has identified Logan as a hub.

"We are very profitable in Boston, solid. We are committed to winning in Boston. We've built the network in Boston based on carrying customers where they want to go. We are focused on local customers where we see a very clear first choice preference for JetBlue", JetBlue president Joanna Geraghty recently told analysts and investors.

Ms Geraghty highlighted JetBlue's strong leisure franchise in Boston and the airline's growth among business customers. She highlighted JetBlue's 15 daily departures between Boston and Washington National, and its hourly departures to the New York City area.

Data from CAPA and OAG show that JetBlue's seat shares on those routes are the strongest to Washington National, where it has a 51% share compared with American's 49%.

Airline seat share from Boston to Washington National and New York Area airports: as of late Jul-2019

Route from Boston Logan	Airline seat share
Washington National	American Airlines 49% JetBlue 51%
New York JFK	Delta Air Lines 58% JetBlue 42%
New York LaGuardia	American Airlines 38.5% Delta Air Lines 44.7% JetBlue 16.9%
Newark Liberty	United Airlines 74.1% JetBlue 25.9%

Source: CAPA - Centre for Aviation and OAG.

"Bottom line, it's [Boston is] solidly profitable with great growth potential", Ms Geraghty declared.

Ms Geraghty did acknowledge some puts and takes with respect to competitive capacity in Boston, with some competitors adding capacity and other airlines cutting their supply in the market. She highlighted that net capacity will accelerate in Boston during 4Q2019, but "it is still within the range of what we have historically seen in Boston so we are quite comfortable with it".

Data from CAPA and OAG show that Boston's system ASKs are elevated somewhat during mid 2019 and that capacity growth has been steady at Logan since 2016.

Boston Logan International weekly system ASKs from Jan-2016 to through Dec-2019

Source: CAPA - Centre for Aviation and OAG.

* These values are at least partly predictive up to 6 months from 22-Jul-2019 and may be subject to change.

As competitive dynamics change, Boston's passenger levels continue to grow

It remains to be seen how the new competitive dynamics in Boston will play out. But obviously Boston is welcoming new routes and additional frequencies to current markets and the airport's passenger growth continues to climb.

During 2018 Boston Logan posted 6.6% passenger growth, with 40.9 million customers travelling through the airport. For the first four months of 2019, the airport posted 5.4% passenger growth. Between 2009 and 2018, Logan's passenger growth was 60%.

Boston Logan International annual passenger numbers from 2009 through Apr-2019

Source: CAPA - Centre for Aviation and airport reports.

Boston Logan enters a new phase of competitive dynamics with Delta and JetBlue

Just as JetBlue saw an opportunity to build Boston up, Delta now sees an opportunity to leverage its growing connections from Logan, and believes that its connecting passengers at the airport have reached a level that allows for the declaration of Boston as a hub.

JetBlue has made, and continues to make, sizeable investments in Boston and is showing no signs of ceding its leading position in the market. Those elements are setting the stage for the interesting dynamics that are developing in the market to continue.