What did I tell you?
JetBlue may soon bring discount battle to O'Hare
Delta unveils plan for low-cost airline
By John Schmeltzer
Tribune staff reporter
Published November 21, 2002
Seeking to blunt the impact of low-cost carriers on the East Coast, the
nation's third-largest airline unveiled plans Wednesday to fight fire with
fire. A similar battle may be on tap for Chicago.
Beginning in early 2003, Delta Air Lines will launch its own discount
carrier in an effort to halt a gradual loss of passengers that has
accelerated since JetBlue Airways' entry into the East Coast market two
It's the same fight that United Airlines and American Airlines could be
facing as soon as next year if New York-based JetBlue is successful in
negotiating access to gates at Chicago's O'Hare International Airport.
Unlike Delta, which is trying to protect its lucrative service from Boston
and New York to Florida, United and American would be faced with an attack
on markets in three directions: east to New York, west to California and
south to Florida.
American and United already are battling stiff competition from Midway
Airport-based discount airlines such as Southwest Airlines, a fight that
experts have said is reducing fares at O'Hare by about 10 percent. A
low-cost carrier at O'Hare could further erode fare prices.
Ray Neidl, airline analyst with Blaylock & Partners in New York, said
JetBlue's entry into the O'Hare market "can do something to pricing" by
American and United that would be limited only by the number of gates it is
allocated. The impact would be exponentially higher for each gate allocated
for JetBlue flights, he said.
Gareth Edmondson-Jones, a spokesman for JetBlue, said Chicago officials
thus far have suggested that the airline share space with other carriers at
"We haven't been offered an allocated gate," which Edmondson-Jones says the
airline needs for its operations. "We can make it work in the near term
with one gate."
Eventually, he said, the airline would need several more.
Chicago officials reportedly are so eager to lure JetBlue to O'Hare that
they are attempting to pry as many as four gates loose from competitors to
assign to the new carrier, sources said. Airlines at O'Hare have leases
extending through 2018 on virtually all of the airport's 179 gates. A
number of those gates, however, have only limited use.
Efforts to force return of the gates include linking the construction of
new runways at O'Hare, which the airlines have long sought, to the release
of the underutilized gates, several airline officials said.
Neidl said United and American would have to consider a move similar to
Delta's if JetBlue gains a foothold at O'Hare.
"I've got a feeling if [the Delta experiment] works, the whole domestic
market will go this way," he said.
Delta's new low-cost airline will fly only 199-seat Boeing 757 aircraft
non-stop between Boston, New York and other Northeastern cities and
Orlando, Ft. Lauderdale and several other Florida cities.
Like JetBlue, Delta said its new airline will fly 13 hours per day rather
than the 10 hours per day that is the norm among the nation's largest
"The new subsidiary represents an aggressive and proactive initiative to
meet the burgeoning competition from low-fare carriers," said Leo F.
Mullin, Delta's chairman and chief executive.
"We have previously noted that low-fare carriers represent a real threat to
Delta, substantially more than that from other hub-and-spoke competition.
Low-fare carriers have been making significant inroads, particularly during
this period of extreme financial duress for the industry."
Jamie Baker, airline analyst for J.P. Morgan Inc., who disclosed plans for
the new airline last week, dismissed Delta's plans.
"We are largely unimpressed," he said in a research report issued shortly
after Delta concluded its announcement.
"Why not everywhere? In Delta's own words, its new unit features elements
required for discount operations--simple low fares, low costs, high
utilization and low distribution costs. Actually, that should be the plan
for Big Delta everywhere, not just its Northeast unit," he said.
Edmondson-Jones said JetBlue isn't concerned by Delta's decision.
"Imitation is the sincerest form of flattery. As Delta tries to reinvent
itself, there are elements that we do that can be copied. But they can't
match the experience," he said. Edmondson-Jones added that JetBlue recently
was named the best carrier in North America by Conde Nast Traveler, a
"We know we have a superior product," he said. For instance, he said, along
with low-cost fares, JetBlue provides a TV set at every seat.