US-based low-cost carriers expanding into territory of bigger airlines

In a significant development pertaining to the US aviation industry, low-cost carriers such as JetBlue Airlines Corp. and Southwest Airlines Co. are extending their push into the territory of their bigger competitors.

JetBlue is to expand to Ohio, and Southwest is gearing up to make its debut in Washington. As per the information available, over the past month, JetBlue started new service in three cities - Jacksonville, Fla., Pittsburgh and Charlotte - and announced that new service will come to Columbus and three more cities this year. In October, Dulles will become Southwest’s second new place this year, after starting in Denver in January.

The carriers are leading the way toward a low-cost model in an industry in which several major airlines filed for bankruptcy in recent years, Frank Werner, a finance professor at Fordham University in New York, said, according to AP.

“In the last five years, since 9/11 and Iraq and the price of oil going through the ceiling, the major carriers have found out they have to become low-cost carriers,” Werner reportedly said. “This is the natural evolution of the industry.”

The AP report referred to Terry Trippler, an airline-industry analyst, saying that low-cost airlines are filling the gap left when major airlines reduced flights to cut costs. However, he said, too many planes can mean excess capacity and a potentially damaging drop in fares. “In the long term, we must have a stable air-transportation system. If these airlines continue to bleed red ink, we're not going to have that,” said Trippler, of the myvacationpassport.com travel club. “We ... have to be very careful.”

JetBlue said it will begin providing daily nonstop flights in October between Port Columbus International Airport and New York and Boston, offering introductory one-way fares as low as $69. Dallas-based Southwest announced one-way fares as low as $79 for new daily non-stop flights between Washington Dulles International Airport and four cities.

A spokeswoman for JetBlue, Jenny Dervin, said that the company’s growth strategy is appropriate and managed. JetBlue sought early in the year to expand to between eight and 10 new cities but later planned to scale back a growth plan because of higher fuel costs, she reportedly said.

JetBlue posted its second consecutive quarterly loss in April, outlining a plan that included defering delivery of some aircraft and selling others, focusing on medium- and short-haul flights and revamping fare structures. The airline said high fuel costs drove it to a first-quarter loss of $32 million, versus a year-ago profit of $6 million.

By focusing on shorter flights and keeping planes in the air about 13 hours per day, the airline now expects to expand to 12 to 15 new locations in 2006, Dervin reportedly said.

On the other hand, Southwest spokeswoman Edna Ruano said Southwest starts out small in each new location and adds flights as demand increases. “We want to grow. We also keep in mind that we want to grow where we can be profitable and efficient,” she has been quoted as saying.