The Battle for Logan Airport: Jetblue Airways Versus American Airlines

Abstract

JetBlue Airways is only five days away from entering the Boston market by establishing a presence at Logan International Airport. The VP of strategy for JetBlue considers the range of potential competitive responses that he might expect from such established airlines as American Airlines, so he can anticipate and prepare. As the largest major carrier operating out of Logan, American had more at risk than the other major carriers and had not yet decided how best to compete with the LCCs. How would American respond?This case is a counterpart to S-0116, which takes the perspective of the incumbent, American Airlines. Instructors who wish to teach S-0229 will also need accompanying materials S-0250 and S-0118. Excerpt UVA-S-0229 Rev. May 20, 2015 The Battle for Logan Airport: JetBlue Airways versus American Airlines Low-fare doesn't have to be no-frills anymore. In the New Year, JetBlue will liberate Bostonians from high fares and offer a unique travel experience with new planes with 34-inch seat pitch for most seats, free in-flight satellite TV, and award-winning friendly service. We don't charge for snacks either—and you can have as many as you like. Bostonians will also find our operational performance liberating, as we have been an industry leader in completion factor, on-time arrivals, and customer complaints, as measured by the Department of Transportation. —David Neeleman, CEO of JetBlue Airways It was Friday, January 2, 2004, and Seth Norris, VP of strategy for JetBlue Airways, knew that his planned New Year's resolution for a better work/life balance would have to wait. His company was only five days away from entering the Boston market by establishing a presence at Logan Airport. Norris specifically considered the range of potential competitive responses that he might expect from such established carriers as American Airlines so he could anticipate and prepare. Norris most certainly did not want to see a repeat of what had happened at the Atlanta hub of Delta Air Lines. After eight months of fierce competitive pressure following JetBlue's entry, JetBlue had been forced to pull out of that airport. Norris evaluated the events of the past several months and prepared to make a presentation to CEO David Neeleman on his analysis of how American and others might retaliate and his recommendations for advance planning. From late May 2003 to January 2004, competition in the Boston market had intensified as first Song, a new low-cost carrier (LCC) owned by Delta, and then JetBlue announced plans to begin offering service in and out of Logan Airport. JetBlue was one of the most recent entrants into the LCC market and had been growing at a pace well beyond its peers for several years. Both Song and JetBlue aimed to target many of the most profitable routes served by American, the largest carrier out of Boston. Given the success of JetBlue and other LCCs in other markets, Norris believed there was a good chance that the low-fare prices JetBlue offered would reduce American's pricing power and load factor (a standard measure of capacity utilization) for those flights and place the mammoth carrier in a position of having to respond in order to preserve market share. . . .