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Low-Cost Airlines: Increasingly Flying to a Major Airport Near You

For years, any time a new low cost carrier started up, the model looked nearly the same as the last. Low fares, no frills, direct booking, and yes, low costs all around. That meant flying to cheaper, secondary airports to serve major markets.

But life as a low cost carrier has changed, and more and more, those airlines are shifting their operations to primary airports. Costs may be higher, but so are revenues.

JetBlue's (JBLU) recent shift of its Ft. Lauderdale flight from Long Beach to LAX is just another example of the continued transformation, but with a twist. Secondary airports like Long Beach are finding new life as regional focus cities with low cost carriers.

Southwest led, others followed
Southwest's (LUV) original model, the one that many other low cost carriers followed, used to focus growth on secondary airports. Providence and Manchester served Boston. Baltimore served Washington, D.C. Chicago/Midway served Chicago (which, despite being closer to downtown, was still considered a secondary airport). Even new-breed low cost carriers like JetBlue weren't immune. It staked its claim on the West Coast at Oakland (for San Francisco) and Long Beach (for Los Angeles).

Ten years ago, that strategy worked wonders. JetBlue flew from these secondary airports to New York and other long haul destinations, and people would drive from hours away just to fly the airline with the cool live television, great service, and low fares. But then something happened. Low cost carriers realized that while low costs were good, they liked high revenues even more.

Southwest moved into places like Philadelphia, San Francisco, and now even New York/La Guardia and Newark. Those airports may be more expensive, but the travelers there are willing to pay more for the convenience.

Virgin America breaks the mold
When Virgin America came along, it decided to base itself at San Francisco International. Before Virgin America had the chance to start, JetBlue decided it would go to San Francisco as well. And as mentioned, Southwest came back to the airport too. Customers, finally having low cost options at their preferred airports, no longer would schlep to secondary airports. When the fare difference between the primary and secondary airports shrunk, the catchment areas for those airports shrunk to the closer surrounding areas. Demand dropped.

Instead of being a low cost carrier's main point of service in a region, the secondary airport had to either lose service or find a new niche. Some, like Oakland, have seen service drop dramatically. Others, like slot-constrained Long Beach, have continued to thrive, albeit with a different type of flying. Long Beach has become more of a regional hub of sorts.

Instead of being JetBlue's primary point of service in the Los Angeles Basin, Long Beach is now JetBlue's outpost to serve shorter-haul markets. The idea is that with a great deal of low cost service at Los Angeles International, fewer people will be willing to drive down to Long Beach from LA to support those flights.

How that plays out in Long Beach
Instead of shutting down the Long Beach operation, however, JetBlue recognized that there is a difference in dynamic between long haul and short haul flying, and it is successfully exploiting that.

For shorter haul flights, convenience is the key. People want frequent flights out of the closest airport so that they can be most efficient with their time. For longer flights, it's not as big of a deal to drive because the drive to the airport is a much smaller percent of the total trip time.

So JetBlue has shifted its focus in Long Beach to serve the local population with more frequent flights to nearby cities. There's now a lot more Vegas, San Francisco, Oakland, and Salt Lake than New York and Boston. With the airport being slot-constrained, JetBlue has made the decision to stick with the regional flying because it's more profitable.

A model for secondary airports
This could be a model for other secondary airports that have surrounding population to support the operation on a regional level. But the days of a low cost carrier setting up its main operation at a secondary airport are over. That, however, has left an opportunity out there for a new breed of airline: the ultra low cost carrier. I'll have more on that in a later post.


Photo via Brett Snyder
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