Over the past decade, JetBlue Airways (NASDAQ: JBLU) has built up a strong position in Boston. While New York remains the carrier's largest base of operations, Boston generates the highest profit margin among its six focus cities.
This success stems from the fact that Boston is the only major metro area where JetBlue is the No. 1 airline. As a result, JetBlue has been able to break into the lucrative business travel market there, whereas it mainly carries leisure traffic in its other focus cities.
That said, JetBlue still doesn't have as broad a route network in Boston as other airlines have in their main hubs. Delta Air Lines (NYSE: DAL) has been working to take advantage of this weakness to gain market share at JetBlue's expense. However, JetBlue is steadily adding new routes in Boston, thereby improving its standing with Boston-based business travelers.
Building a strong franchise in Boston
At the company's 2016 investor day meeting, JetBlue executives noted that after adding Atlanta to its route network in early 2017, the carrier would fly nonstop to 39 of the top 50 markets from Boston. Most of the missing markets were in the Midwest (where JetBlue has historically offered limited service) and Europe (which JetBlue doesn't serve today).
JetBlue already flies nonstop to most of the top markets from Boston. Image source: JetBlue Airways.
In total, JetBlue operates more than 160 daily departures in Boston. It plans to reach 200 daily departures within a few years and has the option to control up to 30 gates at Logan Airport, which would enable it to continue growing beyond 200 daily flights.
By contrast, Delta and its joint venture partners fly nonstop to most of these top 50 markets that are missing from JetBlue's route network. Delta will surpass 100 daily departures in Boston this summer. Furthermore, the carrier and its partners will have 50 nonstop destinations from Boston by the fall.
To be fair, Delta's Boston route network has even more glaring holes than that of JetBlue. Delta Air Lines doesn't fly from Boston to most of its rivals' top hubs -- including Chicago, Dallas, Denver, Houston, Philadelphia, and Washington, D.C., among others -- presumably to avoid triggering a competitive response. However, Delta can still serve all of those markets (and many more) with one-stop service via its hubs, giving it a leg up with business travelers.
One new route starts up -- and more are coming
JetBlue realizes that its best weapon to counter Delta's growth is to continue adding routes in Boston. Earlier this month, it filled in one of the biggest remaining holes in its Boston route network with the launch of nonstop flights to Minneapolis-St. Paul (a Delta hub city).
Delta has challenged JetBlue by adding lots of new routes from Boston. Image source: Delta Air Lines.
Minneapolis is JetBlue's 65th nonstop destination from Boston and its 102nd destination overall. JetBlue will fly three times a day between the two cities, immediately giving it the No. 2 market share position on that route.
Several more flights from JetBlue's Boston focus city will start up later this year. In late April, the carrier announced plans to add a second daily Boston-Long Beach flight and begin a daily route from Boston to Burbank, California as the carrier restructures its Long Beach focus city after Labor Day.
More recently, JetBlue announced that it will launch a nonstop route from Boston to Mexico City in October, after it was blocked from operating international flights from Long Beach. While Mexico City isn't a top-50 destination from Boston, it is still an important business market. Today, Delta's joint venture partner Aeromexico offers the only nonstop service on that route.
Finally, in recent weeks, JetBlue has announced two more routes from Boston that will start in late 2018: Saturday-only service to Havana and twice-weekly seasonal service to Steamboat Springs, Colorado. However, these flights will mainly carry leisure traffic.
Europe is still the key
While JetBlue is steadily improving its competitive positioning in Boston, it probably needs to start flying to Europe to defeat Delta once and for all in that market. Some business travelers may never switch their loyalty to an airline that doesn't directly serve key markets like London and Paris. (British Airways is a JetBlue partner, but that isn't a complete solution.)
Additionally, flights from Boston to Europe would open up new connecting itinerary options. This might be the difference-maker enabling nonstop JetBlue flights to Midwest markets like Indianapolis, St. Louis, and Kansas City.
JetBlue is in the final stages of a long-running fleet review. There's a good chance that this process will culminate in an order for Airbus A321LR aircraft that will facilitate a growth push from Boston (and New York) into Europe.
More From The Motley Fool
- 3 Growth Stocks at Deep-Value Prices
- 5 Expected Social Security Changes in 2018
- 6 Years Later, 6 Charts That Show How Far Apple, Inc. Has Come Since Steve Jobs' Passing
- 10 Best Stocks to Buy Today
- The $16,122 Social Security Bonus You Cannot Afford to Miss
- Bitcoin's Biggest Competitor Isn't Ethereum -- It's This
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 recommends JetBlue Airways. The Motley Fool has a disclosure policy.