Low-cost airlines face new competition - each other

In contrast to the aforementioned airlines, AirTran has embarked on a completely different strategy, adding mostly smaller cities, like Allentown and Harrisburg (Pa.), Asheville (N.C.), Branson (Mo.) and Charleston (W.V.) to its network.

•Pursuing business travelers. Once the mainstay of budget-conscious leisure travelers, LCCs had limited appeal to business travelers, but this is quickly changing as LCCs increasingly add more business destinations and modify their products to target a more discerning customer.

Southwest Airlines recently changed its unreserved seating policy to facilitate priority boarding for full-fare and very frequent travelers. In addition, all Southwest passengers now receive their boarding priority at check-in, eliminating the need to queue up an hour before flight time. Southwest is also courting business travelers with new seats at its gates with electrical power outlets and USB connectors.

Though Southwest maintains its longstanding single-class service, AirTran offers business class and Virgin America has a luxurious first class product. Even in economy class, jetBlue and Frontier have a greater seat pitch than most other U.S. airlines.

•High-tech in flight. With limited capital, most LCCs originally flew older second-hand aircraft, but this is changing fast. Years of sustained profitability have allowed most LCCs to acquire new aircraft while financially struggling network/legacy airlines have been unable to replace aging airplanes. As a result, AirTran, Frontier, jetBlue and Virgin America boast fleets less than five years old, while the average age for network airline fleets is ten to 15 years. Newer airplanes allow LCCs to offer the latest onboard technology, like the satellite radio and television offered by Frontier and jetBlue.

Targeting the growing number of younger business travelers, Virgin America airplanes are outfitted with mood lighting and a computerized entertainment system with iPod hook-ups, touch-screen food and beverage ordering, texting capabilities between passengers on board, and hundreds of hours of music and videos. Virgin America also targets their audience by flying such routes as the high-tech corridor between San Francisco and Seattle.

•Serving international markets. Once confined to domestic travel, LCCs are now expanding beyond U.S. borders. Frontier has stepped up service to Mexico, while jetBlue has opened up an extensive route network in the Caribbean and Latin America. Even the most unlikely candidate for international travel, Southwest, now has codeshare agreements with partners in Canada and Mexico and is gearing up for its own foray into the international arena within the next few years.

LCCs will continue to face new challenges as they evolve. Rising labor costs and volatile fuel prices impact all airlines, but perhaps the biggest challenge for LCCs is competition from similar airlines. It is no coincidence Frontier's bankruptcy coincided with Southwest's expansion into Denver. Similarly, Midwest Airlines has been hurt by AirTran's expanding operations in Milwaukee. In this highly competitive environment, product differentiation becomes increasingly important, so here's hoping that amenities such as high-tech entertainment, comfortable coach cabins and more convenient airports are only the beginning.

Read previous columns

Send David your feedback: David Grossman is a veteran business traveler and former airline industry executive. He writes a column every other week on topics of interest and concern to business travelers. E-mail him at travel@usatoday.com.

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