JetBlue Orders New Airplanes, Focuses East

We already talked about the massive number of orders rolling in at the Paris Air Show this week, but there was one that caught my eye. That’s right, it was JetBlue’s announcement that it will be buying A320neos, larger A321s, and reducing its planned fleet of Embraers. This was a very interesting and telling order about the future of the airline.

Here’s what’s happening.

• JetBlue is ordering 40 A320neo aircraft. These are the re-engined A320s that offer fuel savings and greater range.
• JetBlue has 52 regular A320s on order now. Thirty of those will be converted to larger A321s and eight will be pushed back a couple years. All A320s will have winglets installed.
• JetBlue will grow its Embraer 190 fleet to only 75. Previously it was going to be 100 with options for more.

If there was any question where JetBlue was planning to go in the next few years, we know now the answer for sure. It starts with CEO Dave Barger’s BlueNote (internal memo) which says this:

I believe that our network strategy focused on Boston and the Caribbean/Latin America has given us the right to grow.

In other words, JFK is good but it’s not a huge growth opportunity. That’s largely an airport constraint, but it’s a reality. So growth will be in Boston (which has already been growing like crazy) and in the Caribbean/Latin America, where we’ve actually seen some pretty good growth as well. Everywhere else? It’s just going to be a matter of how they fit into these focus areas.

The upgrade to the A321 makes a lot of sense in this context. It’s a bigger airplane, and that means more seats. There are 150 seats on a JetBlue A320, and I’d bet we’d see about 30+ more on the A321. It costs less per seat to fly those airplanes, so for markets with high demand, it’s a no-brainer. To me, it seems that this airplane can do really well flying between the Northeast/South US and Latin/Caribbean markets. Those are markets that are highly leisure so they don’t need as much frequency. That’s why American used to fly its big old A300 aircraft down to the Caribbean. Load ’em up and ship ’em out.

Interestingly, JetBlue also sees an opportunity “in the potential application of the 321 on some of our heavy transcon markets such as JFK-LAX, JFK – San Francisco.” I can see some limited use there, but I expect the A321 won’t be seen on the west coast nearly as much. This does however highlight the shift in focus from Long Beach and Oakland to LAX and San Francisco for longer haul flights.

The A320neo, however, will likely fly west far more often. One of the problems JetBlue faces, especially during winter months when winds are strong, is a lack of range on the A320. This is particularly an issue for flights from Boston, which you’ll often see in cities like Vegas or Salt Lake because they ran out of gas on their way to California. The A320neo will give a range boost that will allow those airplanes to make it without any trouble.

Then again, this might not be necessary. With JetBlue also putting winglets on its current A320s, those airplanes should be able to make it as well. So the A320neo will just provide a more fuel efficient airplane that might make marginally unprofitable flights today a reality tomorrow. Or it could make wildly profitable flights even more wildly profitable. The reality is that if you want to order an A320 these days, you order the neo unless you have an urgent need in the next couple years. (You listening, Boeing? That 737 isn’t going to cut it for much longer.)

The last piece of this announcement is the Embraer 190. That really was David Neeleman’s baby as he envisioned opening up smaller markets with that plane and its 33 percent fewer seats than the A320. That dream is not the dream of JetBlue today, that’s for sure. The plan was originally to have around 100 Embraer 190s in the fleet (and there were options for more), but JetBlue is cutting that back to 75. This could be an alteration to the existing order, but it sounds like there might be a plan to instead lease out or sell 25 of the airplanes in one way or another.

The 190 is an interesting story. Many of its routes were failures – places like Columbus, Ohio and Nashville quickly disappeared when they just didn’t work. Now JetBlue thinks it’s found good placement for 75 of the airplanes but it doesn’t want any more than that. There are only 46 today, so there will still be more growth in the fleet, but it’s just not as rosy as the airline once thought. The 190 is taking a back seat.

To me, the upshot of this announcement is that JetBlue affirms its position as an east coast airline and it’s tailoring its fleet to fit the missions it wants to fly. The Boston-New York-Caribbean-Latin markets are clearly the focus. What about the west coast? Seems like we won’t be seeing much if anything out here. Maybe the A320neo will enable Hawai’i flying but that’s years away, and I wouldn’t count on it. Instead, the west cost will continue to be a spoke that feeds the east coast with the exception of the small short haul outpost in Long Beach. At least, that’s how it looks today.