Earlier this month, JetBlue Airways announced that it would abandon its focus city in Long Beach, California this fall after nearly two decades. Instead, the carrier plans to shift nearly all of its remaining Long Beach flights to Los Angeles International Airport (LAX): the region's primary airport. It then plans to embark on an ambitious effort to more than double its schedule at LAX by 2025.
However, JetBlue won't be the only airline looking to grow at LAX in the midst of the COVID-19 pandemic later this year. Last week, Alaska Air (NYSE: ALK) announced a meaningful growth push of its own in this strategically important market.
Doubling down on its strengths
Several years ago, Alaska Air bought smaller rival Virgin America to expand its footprint in California. Soon after completing the acquisition, the company embarked on an aggressive expansion in California, including lots of new transcontinental routes. On many of these new routes, Alaska struggled to gain market share profitably from entrenched competitors.
As a result, over the past year or so, Alaska Airlines has adopted a more targeted growth strategy in California that leverages its strength in West Coast markets, especially the Pacific Northwest. As part of this shift, it began four new routes at LAX earlier this year: twice daily service to Spokane, Washington and Boise, Idaho and daily service to Redmond/Bend, Oregon and Missoula, Montana.
Last month, despite the ongoing pandemic, Alaska announced that it would launch a new route from LAX to Fresno in September, with flights twice a day. Historically, the 209-mile route has primarily served passengers connecting on to other destinations from LAX, but Alaska may be hoping to stimulate local travel demand, including getaways to Yosemite National Park, which is about 65 miles north of Fresno.
Image source: Alaska Airlines.
Alaska finds more growth opportunities at LAX
Last Thursday, Alaska Airlines announced seven new LAX routes to complement the four it has already started this year and the Fresno route that is on the way.
In October, the carrier will start daily service from Los Angeles to Eugene and Medford in Oregon. Daily flights to Bozeman, Montana will begin in November. All three of these new routes continue Alaska's strategy of connecting major California cities to destinations in the Pacific Northwest, where it is the dominant airline.
Alaska Airlines will also launch routes from LAX to two new Florida destinations in November. It will fly four times a week to Fort Myers and once a day to Tampa. It will have a monopoly on the former route, while competition to Tampa is limited as well. Between local leisure demand in both directions and connections to other Alaska Airlines and alliance partner flights from LAX, Alaska has a decent shot at carving out a profitable niche on these new Florida routes.
Finally, Alaska plans to launch service to two additional Hawaii destinations from LAX in December. It will fly three times a week to Kona and four times a week to Lihue. With these routes, the carrier hopes to tap into pent-up demand for Hawaii leisure travel.
A play for the future
Many of the north-south routes Alaska Airlines is adding from LAX this year play to the airline's strengths: namely, its dominance in the Pacific Northwest. With the pandemic raging, it's an odd time to be launching new routes, but most of these routes are likely to be quite successful in the long run.
The prospects for the leisure-oriented routes are far less certain. Alaska has been quite successful serving some leisure markets from Los Angeles, but it canceled service from LAX to Cancun, Havana, and Orlando in 2018. This year, it has eliminated its flight from LAX to Salt Lake City while downgrading its route to Fort Lauderdale to seasonal service. The new Hawaii routes seem especially suspect, as Alaska will be offering less-than-daily service in markets where, pre-pandemic, there were four airlines flying at least daily.
Like JetBlue, Alaska Airlines seems to be experimenting at LAX. That will allow it to test out various markets during a time when even proven routes aren't guaranteed to cover their costs. Staking out positions on new routes now could also deter some airlines that previously served those routes from returning. Finally, growth at LAX in 2020 could help Alaska eventually secure additional gates at the perennially space-constrained airport, paving the way for more growth once travel demand has recovered.
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Adam Levine-Weinberg owns shares of Alaska Air Group and JetBlue Airways and has the following options: long January 2022 $10 calls on JetBlue Airways. The Motley Fool recommends Alaska Air Group and JetBlue Airways. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
