In the aftermath of the Great Recession, JetBlue Airways (NASDAQ: JBLU) took advantage of cutbacks by other airlines in Boston to build up a substantial focus city operation there. In the process, it became the leading airline in Boston, carrying over 31% of the airport's passenger traffic during the 12-month period that ended in August.
However, Delta Air Lines (NYSE: DAL) has mounted a challenge to JetBlue's dominance in Boston over the past couple of years. The rivalry between JetBlue and Delta is set to intensify in 2019, as both carriers gain control of new gates that will allow them to continue growing.
The airport is overcrowded
Boston's Logan International Airport was originally built in the 1920s, and while it has been expanded since then, it still suffers from significant space constraints. The airport is hemmed in on all sides by Boston Harbor and built-up areas, leaving no room for physical expansion. As a result, gate space is at a premium.
Gate constraints have started to become an impediment to growth for both JetBlue and Delta in Boston. JetBlue hopes to operate 200 daily departures there within a few years, which would be challenging to do in its existing 24-gate footprint -- particularly given its focus on serving business travelers in Boston. Delta operated 112 peak-day departures in Boston this past summer, which was already close to the maximum feasible within its existing 16 gates.
Delta is getting room to grow
To better accommodate its two fastest-growing airlines, Logan Airport has been renovating its terminals and moving other airlines around. In early 2019, American Airlines will give up four of its 18 gates, as it has been shrinking in Boston (and other non-hub cities) recently. That will allow the airport authority to build two extra gates in the area that American is vacating.
By midyear, the newly expanded area will reopen. Alaska Airlines will move its two gates there from Terminal C, and Southwest Airlines will move its five gates there from Terminal A. The latter move will allow Delta to take over all of Terminal A, expanding from 16 gates to 21 gates.
On Monday, Delta Air Lines revealed what it plans to do with all of this extra airport real estate. Next spring, it will add new three-times-daily service to Cleveland, while increasing service on its existing routes to Pittsburgh, Jacksonville, Nashville, Indianapolis, and Philadelphia. It will also follow through on expanded service to Europe that was announced previously.
In early September -- when Delta will have access to all 21 gates -- the carrier will add three key business destinations to its Boston route map. It will fly five times a day to Chicago, four times a day to Newark, and six times a day to Washington's Reagan National Airport. All in all, these moves will add nearly 30 daily departures to Delta's flight schedules in Boston.
JetBlue will be able to follow soon
JetBlue won't be standing still, either. It has already announced a new route to Rochester, New York that will start in January. It is also adding extra flights on nine popular routes to Florida and the Caribbean. But these capacity additions are being partially offset by the cancellation of its existing route between Boston and Washington's Dulles International Airport.
To grow in earnest, JetBlue Airways needs more gates. It is set to get at least two extra gates next year: one in Terminal E (the international terminal) and one in Terminal C (its main base at Logan) as part of a project that will also build a new bathroom there.
JetBlue will eventually get the two gates in Terminal C that Alaska Airlines currently uses, along with a third gate currently designated for common use -- but only after the airport builds a passageway to Terminal B in that area. The Terminal C to Terminal B Connector project includes construction of an additional gate that will also go to JetBlue.
When all is said and done, JetBlue will control 30 gates at Logan Airport. That will give it room to grow beyond its current target of 200 daily departures in Boston.
The competition will be intense
Delta recently began flying from Boston to Philadelphia. By adding service to Newark, Chicago, and Washington, D.C. -- and to a lesser extent, Cleveland -- it will fill in many of the biggest remaining gaps in its Boston route network. This will make it an even more formidable rival to JetBlue in competing for the loyalty of Boston-based business travelers.
Meanwhile, JetBlue is likely to steadily add frequencies on its most popular routes from Boston in 2019 and beyond, while filling in the few remaining major gaps in its route network there. That could eventually include starting transatlantic flights to key destinations like London, Paris, and Dublin.
Despite the growth of JetBlue Airways and Delta Air Lines in recent years, Boston remains an underserved air travel market. There may be ups and downs, but the market should have no trouble absorbing the additional capacity that is coming over the next few years.
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Adam Levine-Weinberg owns shares of Alaska Air Group, Delta Air Lines, JetBlue Airways, and Southwest Airlines and is long January 2019 $10 calls on JetBlue Airways. The Motley Fool owns shares of and recommends Southwest Airlines. The Motley Fool owns shares of Delta Air Lines. The Motley Fool recommends Alaska Air Group and JetBlue Airways. The Motley Fool has a disclosure policy.