Southwest steps in after JetBlue vacates Long Beach airport

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Southwest Airlines' willingness to take the slots JetBlue is vacating at California's Long Beach Airport by JetBlue is good for the A3-rated airport, according to Moody’s Investors Service.

“The award is credit positive for the airport because it removes the uncertainty of the airport’s ability to reallocate the 17 available slots, which equal one-third of the airport’s total slots, during a period of uncertain demand by airlines,” Moody’s analysts wrote in Tuesday’s report.

Southwest Airlines will take all the slots at the Long Beach Airport, California, airport that are being vacated by JetBlue in October.

JetBlue, which had comprised more than a majority of the airport’s enplanements, had announced July 9 it would consolidate its local operations at Los Angeles International Airport effective Oct. 7, ceasing operations at Long Beach.

JetBlue reported during its second quarter 2020 earnings report in late July that revenue declined 90% on a year-over-year basis as a result of the impact of COVID-19, but traffic and yields improved in May and June from an April trough.

“Southwest picking up all available flight slots at the Long Beach Airport so quickly is a testament to the strength of our airport and their commitment to succeeding here in Long Beach,” Long Beach Mayor Robert Garcia said in a statement.

The airport has a conflicted relationship with the city that owns it, with passenger flight slots limited amid a local noise ordinance driven by anti-airport neighbors.

LGB has been able to add 12 slots since January 2016, Moody’s wrote, because of a reduction in night flights and technology advancements that have resulted in quieter airplanes.

On July 28, airport management reached out to air carriers, inviting them to add their names to the waiting list by the close of business on August 28; some carriers expressed interest, but indicated the timing was not ideal. Among those were Delta Air Lines and Hawaiian Airlines, both already on the permanent waiting list. Long Beach Airport awarded the slots to Southwest Airlines on Sept. 2.

JetBlue’s move “is in line with our expectation that small airports in highly competitive markets are likely to experience some service consolidation by the airlines into larger airports,” Moody’s analysts wrote. Moody's lowered its outlook to negative on the airport's $99 million of debt in July.

JetBlue has held a dominant position at the airport since 2002, although it has decreased its enplanement market share to 46% as of April 2020 from 56% in 2019, and 83% in 2015.

Southwest, which has gradually increased its presence at the airport since it started operations there in 2016, will hold 64% of the available slots at Long Beach after it takes on JetBlue’s slots, Moody’s wrote.

With the new slots, Southwest will increase from 17 to 34 flight slots. No announcements have yet been made regarding new destinations, but airline officials said it is expected that the airline will increase its current offering of nonstop destinations. In late May, Southwest added new non-stop service to Austin and Phoenix, initially set to begin in November, but service to Phoenix will now begin in September.

“This is a vote of confidence in the boutique travel experience we offer at our airport,” said Cynthia Guidry, LGB's director. “We are thrilled to see Southwest increase their presence at LGB and grateful for their ongoing partnership.”

Southwest began service at LGB in 2016 and has steadily increased service as flight slots have become available. LGB offers a total of 53 flight slots, 41 of which are permanent and 12 of which are supplemental and subject to review of the annual noise budget.

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Bond ratings California City of Long Beach, CA