Battle for Logan (A) * The battle for Logan Airport: American Airlines vs Jetblue * January, 2004 - Joe Smith, American Airlines VP of Strategy – realized that JetBlue Airways, one of the most recent entrants into the low-cost carrier (LCC) market, was five days away from commencing service at Boston’s Logan International Airport * Given the success of LCCs in other markets, Smith believed there was a good chance that the low fare prices those competitors offered would reduce American’s pricing power and load factor (a standard measure of capacity utilization) for those flights * Smith sat back in his chair and thought about the industry’s evolution and American’s position in it, while contemplating his course of action. * Airline industry overview - Prior to 1978, an airline’s ability to freely choose its routes and ticket prices was limited by strong regulatory controls. With the passing of the Airline Deregulation Act of 1978, however, government control of routes and fare pricing was eliminated, resulting in increased consolidation and competition and the emergence of unequal cost structures, as airlines jockeyed for a better market position and price advantage in the post-regulation era. By the start of the 1990s, industry consolidation had resulted in a handful of airlines’ controlling more than 90% of the U.S. air passenger transportation market. * Competition after deregulation increased dramatically at both the national and the regional levels. Established regional airlines and well-funded upstarts saw that period as an opportunity to expand into attractive niches not served by the industry’s larger participants. Many of the new entrants brought with them fresh ideas and business models that improved on the typical cost structure and hub-and-spoke system strategy used by the major carriers. * The U.S. Department of