The Battle for Logan Airport: American Airlines Vs Jetblue (B)

Abstract

The entrance of JetBlue into the Boston area low-cost carrier market in 2004 is viewed as a direct attack on Major airlines and prompts American Airlines to decide whether or not to respond and if so, how to respond. American, already weakened financially, cannot match JetBlue's prices and remain profitable. It must weigh the importance of the Boston market in its overall economic picture and the potential responses of other airlines to whatever action it takes. This case reviews the recent economic conditions affecting the airline industry; the business models of the 3 main types of airlines--Major, Low-Cost Carriers, and Regionals--and their strenghts and vulnerabilities in terms of recent competitive market conditions; and the economic role airports play. This case is divided into 3 parts: A, B, C. The B case involves American's counter-attack--a free ticket promotional offer from American on the day JetBlue opens. The C case discusses the responses of other airlines and JetBlue and a preliminary analysis of the fallout: resulting financial and Market costs and benefits. See related cases(A case: UVA-S-0116; and C case:UVA-S-0118).

Keywords: competitive analysis, market analysis, pricing, pricing strategy