Nearly a year ago, JetBlue Airways (NASDAQ: JBLU) revealed plans to fill the biggest gap remaining in its route network, by reentering the Atlanta market. It took the first step by launching nonstop flights to Boston in late March, with five daily roundtrips.
Last week, JetBlue announced it would continue its Atlanta buildup by adding flights to New York, Fort Lauderdale, Florida, and Orlando, Florida in March 2018. This will step up the carrier's growing rivalry with market leader Delta Air Lines (NYSE: DAL).
Atlanta is a key business market
Hartsfield-Jackson International Airport is the world's busiest airport, serving more than 104 million passengers last year. It is the sole airport providing commercial service for Atlanta: a major business center and the ninth-largest metro area in the U.S.
Delta Air Lines has its largest hub in Atlanta, accounting for the vast majority of the airport's traffic. This gives it a big advantage in terms of maintaining the loyalty of Atlanta-based business travelers.
Meanwhile, JetBlue is the largest airline in Boston. As a result, it has had considerable success catering to business travelers there. Yet to continue gaining share in the business market, it needs to offer service to the places where business travelers want to go. Atlanta is thus a key destination. For example, General Electric -- which is relocating its headquarters to Boston -- has major operations in Atlanta.
JetBlue outlines the next step of its growth in Atlanta
Since Boston is JetBlue's most important business market, it was particularly important for the carrier to fly nonstop from there to Atlanta. However, JetBlue has also wanted to add service from Atlanta to its other three East Coast focus cities: New York, Fort Lauderdale, and Orlando.
Unfortunately, JetBlue has had trouble getting the gate space it wants, because Delta controls the vast majority of the airport's gates. Even for its five flights to Boston, JetBlue has had to split its operations between two different concourses. This caused the company to slow down its plan to expand in Atlanta.
Rather than adding flights to its other three focus cities in late 2017, JetBlue now plans to launch those routes on March 8, 2018. JetBlue will fly twice a day to New York's JFK International Airport, twice a day to Fort Lauderdale, and once a day to Orlando. JetBlue is still working to get desirable gate assignments, but an airport spokesperson stated last week that there would be gate space available for all of JetBlue's new flights.
Sticking it to Delta
With just one or two daily roundtrips on its three new routes in Atlanta, JetBlue isn't going to be competing with Delta for business traffic. Delta offers more than a dozen daily nonstop flights each to Fort Lauderdale and Orlando, and nearly three dozen daily roundtrips to New York (spread across the city's three major airports).
Nevertheless, JetBlue will probably be able to skim off some leisure traffic. Leisure travelers tend to care less about flight schedules, and many people are attracted to JetBlue's perks, such as extra legroom, free high-speed Wi-Fi, unlimited snacks, and free satellite TV at every seat.
JetBlue also highlighted in its press release that customers will be able to connect to partner airlines' transatlantic flights in New York. This will give Atlanta-based travelers a new option for getting to Europe (albeit with a stopover).
JetBlue specifically mentioned the availability of connections to fast-growing Middle Eastern airlines Emirates, Etihad, and Qatar Airways. This seems to be a direct dig at Delta, which has been feuding with all three airlines, alleging that they are state subsidized.
A JetBlue-Delta rivalry is clearly heating up, with the former entering the Atlanta market and the latter growing aggressively in Boston. The two carriers also continue to compete intensely in the transcontinental market. Nevertheless, competition between JetBlue and Delta remains rational -- neither one is blindly chasing market share at all costs. This means that there shouldn't be much damage to either company's profitability.
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Adam Levine-Weinberg owns shares of Delta Air Lines and JetBlue Airways and is long January 2019 $10 calls on JetBlue Airways. The Motley Fool owns shares of General Electric. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy.