Low Fare Carriers Struggling

Remember all of those stories last year and two years ago suggesting JetBlue can do no wrong? Well, those stories are gone for now. JetBlue’s earnings tumbled last quarter as it faced the same fuel pricing struggles as every other airline. Though still profitable, this was the second straight quarter where it missed analyst estimates.

JetBlue will recover, Independence Air likely will not. Fly-i had a miserable quarter, filling only about 44% of its seats (airlines usually fill 70-75% of their seats). The carrier is revamping their distribution system, allowing travel agents to book their flights, and revamping their schedule, reducing the number of daily departures to a number of cities. AirTran’s CEO said the airlines ridiculously (though ultimately unsuccesful) low fares cost AirTran $6 million last quarter. As he put it, “To be flying an RJ (regional jet) at $59 fares I think is one of the silliest things I think I’ve ever seen. An RJ is a very high-cost airplane.” High costs, insufficient distribution, and overcapacity—doesn’t bode well. I suspect we won’t see them around in 2006.

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