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US low-cost carriers face off

AP, New York
The cool kids of the airline industry are giving big-city travelers more opportunities to show who they like more.
For years, JetBlue and Southwest catered to customers in the same way — with cheap fares and good customer service — but avoided much head-to-head competition in major markets. These days, they are trying to distinguish themselves as they ramp-up competition in places like New York, Washington, Baltimore — and starting this weekend, Boston.
Fliers stand to benefit as these airlines expand in the Northeast. This rivalry not only pits one popular low-cost carrier against another; it puts further pressure on other airlines to stay competitive with them.
It also means JetBlue and Southwest must find ways to differentiate themselves. Southwest is touting its fewer baggage fees and more extensive nationwide presence, while JetBlue is highlighting its live TV service and its own comprehensive route system.
Just over a month after Southwest began flying out of New York's LaGuardia — eight miles from JetBlue's base at John F. Kennedy International -- Southwest began service on Sunday from Boston's Logan International Airport. In September, Southwest starts service between Boston and Baltimore.
A few years back, their flights mostly crossed paths in places like Burbank, Calif., and Orlando, Fla.
The move to New York was a gamechanger for Southwest. Formerly it concentrated on smaller, less-congested airports, where it could count on quick turnarounds, a key to its low-cost model.
And with Southwest breathing down its neck, JetBlue has had to make a more aggressive defense of its traditional turf, cutting fares and mulling new routes.
Expect to see low fares discounted further on routes where Southwest and JetBlue will compete out of Boston especially to Northeastern markets, Chicago and Los Angeles.
When Southwest announced it would fly from Boston to Baltimore for as low as $49, JetBlue said a week later it would launch the same route - offering tickets for $ 10 less.
"It makes me think of gunfighters in the Old West -- who is going to be the last man standing?" said Harlan Platt, a finance professor at Northeastern University who follows the airline industry.
Dallas-based Southwest is the biggest U.S. airline by the number passengers flown. JetBlue is tenth, but it's No. 2 at Logan.
Much of JetBlue's model of low fares and quick turnarounds came right out of Southwest's playbook. It's no wonder. JetBlue founder David Neeleman started JetBlue in 1999 after he was fired from Southwest.
In 1993, Southwest bought a little-known discount charter airline called Morris Air, based in Salt Lake City. Its co-founder — Neeleman - came to Southwest.
But that didn't last long. Southwest founder Herb Kelleher -- a cigarettesmoking, Wild Turkey-drinking Texas lawyer that revolutionized the airline industry in the 1970's -- fired Neeleman after just five months. Neeleman. a Brazilian-born Mormon father of nine who's never touched booze, had new ideas for expanding Southwest that were scoffed at by long-time executives there.
JetBlue (originally NewAir) was started with $130 million from investors -- the most ever for a start-up carrier. Neeleman attracted several Southwest executives to the new airline as well. Three Southwest veteran'?are with JetBlue today. One worked with Neeleman since his days at Morris Air.
JetBlue started with a single flight to Fort Lauderdale, Fla. It now has 650 daily flights to 56 cities. Its rapid growth has now started to plateau, but JetBlue is still steadily adding new service in markets larger carriers have turned away from -- like the Caribbean.
JetBlue has been in Boston for five years, although it's only recently targeted the city as a focus of its expanding operations.
Southwest will start Boston service with five weekday non-stops to Chicago-Midway and Baltimore-Washington International, with connecting and direct service to 48 other spots including Houston, San Francisco, Las Vegas and Los Angeles.
Boston is familiar with Southwest because of its service in nearby Manchester,
N.H., Providence, R.I., and Hartford, Conn -- three markets it has been serving for about a decade.
Both carriers' low fares and brand loyalty should give them a leg up against major carriers in Boston. It's already worked for JetBlue. The airline has worked its way up to second place at Logan in passenger traffic, behind American and ahead of US Airways, which operates a Boston-New York and Boston-Washington shuttle service.
"When you enter a town the size of Boston as really the sole low-cost carrier (like JetBlue did), you really can pick off a lot of the legacy carriers," finance professor Platt said. "But when the last two gunfighters are JetBlue and Southwest, you've got anothergame."
Platt thinks Southwest eventually will win the discount competition with JetBlue in Boston because of its large network and image as an anti-fee airline with ads that say "Your Bags Fly Free." Southwest lets two bags fly free, but charges for a third checked bag. JetBlue charges for the second checked bag.
JetBlue wants more business travelers, as does Southwest, which has tried to lure them with its "Business Select" option launched two years ago. Passengers that pay a premium can go to the front of the boarding line. Neither airline offers business or first class seats.
JetBlue said in July that although it has not focused on courting business travelers in the past, it's landing more of them in New
York and Boston as companies cut travel budgets.
Because of their cheap fares and high customer service rankings, both airlines have legions of loyal travelers. Part of that loyalty can also be traced to fresh marketing that tries to put some fun in flying. JetBlue’s tongue-in-cheek ads have urged executives to get off their private jets and fly JetBlue. In Southwest TV ads, CEO Gary Kelly told customers "It's On" in New York.
Both airlines are on YouTube. Blogs and "Rvitter are also important parts of they, brands.
Kelleher and Neeleman no longer run the airlines they started. Kelleher, 78, stepped down as chairman last year, but he is still under contract until 2013. Neeleman. 49, runs Azul Airlines in Brazil - a venture he started after he was pushed out of JetBlue in 2007 following the company's bungled response to a Northeast snowstorm, leaving 130,000 passengers stranded or delayed.
But the airlines they started still have the low-cost, passenger-savvy traits of their founders. Both have flown farther and lasted longer than some of their larger competitors. Platt thinks the big airlines may have something to worry about now in Boston and JetBlue will have to ramp up its game, too.
"Boston has really been a two-horse town with (two major carriers dominating service there)," he said. "Just the mere presence (of another low-cost carrier) is going to change the landscape."