Wednesday, March 28, 2018

The Rare Case Where Airlines and Passengers Both Win: What the surge of nonstop coast-to-coast flights says about the state of flying in the United States

The Wall Street Journal
By Scott McCartney
March 28, 2018 10:17 a.m. ET

Baltimore’s airport used to beg airlines for more nonstop flights to the West Coast, but carriers said no. Now BWI may have too many on some routes.

Southwest Airlines now flies nonstop to seven West Coast cities from Baltimore-Washington International Thurgood Marshall Airport. Alaska flies to five West Coast airports from BWI, Spirit to four. You can pick from five daily flights to San Diego on three different airlines.

“We have more service to San Diego than we ever imagined,” says Ricky Smith, the airport’s chief executive.

Coast-to-coast flights linking secondary cities are letting travelers in places like Baltimore, San Diego, Seattle, Orlando, Fla., and Oakland, Calif., bypass midcontinent hubs.

There were 158 daily transcontinental nonstops 20 years ago, mostly between the New York area and Los Angeles and San Francisco. Now there are 321 daily nonstops across the country, linking airports as small as Charleston, S.C. And more are coming.

Fuel costs, more efficient new planes and population shifts have let smaller airlines play in the airline big leagues. Transcon flights carry high percentages of business travelers and garner loyalty from customers because they shrink the country in travel time. For airlines, they are high-profile, high-risk and high-reward. “These are really important markets,” says Marty St. George, JetBlue executive vice president of commercial and planning.

Coastal travelers have benefited not only from the greater convenience of more nonstop flights, but also more fare competition, even as the industry has consolidated.

Industry consultant Craig Jenks, president of Airline/Aircraft Projects Inc., thinks mergers among big airlines have created more fragmentation of coast-to-coast flying. While Delta , United and American all swallowed smaller competitors and closed hubs in the middle of the country like Cleveland, Cincinnati and Memphis, Tenn., smaller airlines saw opportunities to pick up passengers by offering nonstops.

United has the most coast-to-coast flights, Mr. Jenks says. But in 1997 it flew 41% of all transcon trips, compared with 25% this year. Alaska, with its Virgin America acquisition, now offers 20% of transcon flights; JetBlue 15% and Southwest 4%, Mr. Jenks says. Spirit and Frontier are adding routes, too.

“We’re not through with this expansion,” Mr. Jenks says. He thinks discounters will launch more coast-to-coast flights, which will trigger more flights from competitors. “These markets are too important for the big guys to ignore.”

There are three big facilitators of the transcon boom.

First, smaller jets like the Boeing 737 and Airbus A320 and A321 have coast-to-coast nonstop range. The newest versions, the 737 MAX and the A320neo, are even more fuel efficient, making it cheaper for airlines to fly transcon.

Second, fuel is relatively inexpensive, lowering trip costs. That makes many long flights profitable even with low fares.

It costs about $12,000 at today’s prices to fly a Boeing 757 2,600 miles, according to International Civil Aviation Organization data. With more seats to fill than a 737, it is poorly suited for thinner routes. A 737-800 would burn about $9,100 worth of fuel on the same trip; for a 737-800 MAX, fuel costs about $7,800.

Third, population shifts have moved more people to the East Coast and West Coast, boosting traffic at lots of coastal airports.

“We’re going through a new phase in the industry,” says John Kirby, Alaska’s vice president of capacity planning. Airlines are now financially healthy. Deeper pockets mean they can invest in new markets.

Los Angeles-Orlando is perhaps the most hotly contested route in the country, with six airlines going head-to-head. The number of travelers flying that route nonstop has increased more than 15% each of the past three years.

Virgin America had the smallest market-share—its new owner Alaska decided it will drop that route in July. Alaska added 44 new routes in 2017 and Virgin America added 38, so dropping Los Angeles-Orlando was a minor change, Alaska’s Mr. Kirby says.

JetBlue says financial results on transcon routes often trailed the rest of the airline’s network, especially when fuel prices were high. That changed in 2014 when JetBlue added its Mint cabin—lie-flat seats with 15-inch seat-back touch screens and meal service. The added revenue from premium passengers who typically pay $549 to $1,639 each way turned transcon routes into profit machines, Mr. St. George says.

The airline has engineered a transcon surge since 2014. The New York-based carrier grew to 27% of passengers flying between New York-Kennedy and Los Angeles International last year, up from 15% in 2014, according to PlaneStats.

Alaska doesn’t offer lie-flat business-class like Delta, United, American and JetBlue. Other carriers say it’s critical to profitability for long-haul flights. But Mr. Kirby says Alaska doesn’t want to get into that fight. Instead, Alaska is updating its domestic first class with new seats and is content to use its first-class cabin largely as an upgrade inducement for frequent fliers. “We’re old-school in how we treat our elites,” Mr. Kirby says.

All-coach Southwest says it has added coast-to-coast flights where it’s the largest airline at one end or both. The airline, traditionally a short-hop carrier, isn’t wild about transcontinental flying because it takes up so much aircraft time.

But local business and leisure travelers want to get to the other coast nonstop, and Southwest has found it needs to stretch to keep customers loyal. “We’ve added it methodically where it makes sense, not as a surge,” says Andrew Watterson, chief revenue officer.

One advantage of transcon flights: Adding nonstops opens up seats on shorter Southwest flights, because passengers who would have stopped at one or two airports are now flying straight on.

Original article can be found here ➤

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