Increased Competition Means Slower Growth

Competition is good for consumers, but sometimes bad for competitors. AirTran says competition with other low-cost carriers means it's growing slower than planned, and that means it'll need eight fewer 737's over the next two years.

In fact, it probably won't need them 'til 2011. According to Bloomberg, the carrier slipped five jets due for delivery in the latter half of next year, and another three scheduled for the year after. Instead, they'll get those eight planes between 2009 and 2011.

The company will still take twenty planes scheduled for delivery this year, fourteen in 2007, and fifteen in 2008.

AirTran is the second east-coast, low-cost carrier to change its growth plans. Jet Blue announced similar changes earlier this year. Executives from both carriers say they're getting tough competition from Delta, US Airways and United.

AirTran says it planned on twenty-percent growth on the eastern seaboard, but experts say that was too agressive. Calyon Securities analyst Ray Neidl told Bloomberg the Florida-based carrier wants to keep its margins up, hence the slow growth.

This is the first change in delivery schedules since AirTran ordered one hundred 737's in 2003, and aside from that, the company hasn't shared any changes in its plans to slow the airline's growth. It's already taken thiry-four of the one hundred ordered.

AirTran's C-F-O said the company's growth reduction estimates aren't a reaction to changes in travel demands, he says they always had plans to adjust at some point and came close last year, right before Delta went bankrupt. After that, they decided to wait and see how their market might be affected.

Now that another year has gone by, and with Delta and United still adding flights in AirTran's markets, the company is beginning to feel the squeeze of competition.

FMI: www.airtran.com