JetBlue Supersizes Itself With A220 Order, A321 Upgauge

It wasn’t long ago that Airbus finalized its deal to take control of Bombardier’s CSeries aircraft program, so to celebrate, the aircraft has been renamed in the Airbus naming convention. Say hello to the A220. (No, it most certainly does not rattle off the tongue easily.) In what appears to have been a well-choreographed effort, Airbus quickly unveiled its first big order for the newest baby bus soon after the rebranding. JetBlue will take 60 of the -300 (formerly CS300) series with options for more. At the same time, JetBlue is converting 25 A320neos into the larger A321neo. Like most airlines, JetBlue has found magic in the ability to upgauge. This particular move seems like a huge win for the airline and for travelers.

Today, JetBlue operates the Embraer 190 with 100 seats. When JetBlue ordered that airplane 15 years ago, it knew it needed to get into a smaller aircraft than the A320 to grow its focus cities to their full potential. The 100-seat Embraer was the best option available at the time, and JetBlue today has 60 in operation. But it’s long been known that JetBlue wasn’t happy with the airplane. The Embraer had reliability issues, and it wasn’t as efficient as hoped. JetBlue put out a great stat saying that though the Embraer is only responsible for 11 percent of the airline’s available seat miles, it’s responsible for 20 percent of expenses. Yet JetBlue relied on that airplane to really build the backbone of its Boston focus city. Some of the destinations from Boston just couldn’t be served profitability with a bigger airplane. So we should salute the Embraer even though it’s had one foot out the door for years.

JetBlue had already deferred 24 orders out into the end of time, and it had publicly stated it was looking at its options. Now, it’s the A220 that’s the big winner. The aircraft will be delivered between 2020 and 2025 (weighted heavily into the 2023/2024 timeframe) and the Embraers will be phased out at the same time. The remaining 24 Embraers on order have been canceled.

What’s so great about the A220? Pretty much everything. In an investor presentation, it’s shown that the A220 has direct costs per seat 25 to 30 percent lower than the Embraer including ownership. So let’s do a little math. The Embraer has 100 seats, but we don’t know how many the A220 will have. SWISS has what would be 145 in an all-coach configuration, but JetBlue is more generous with legroom. Let’s say it’s 140 just for argument’s sake. If that’s true, then JetBlue can effectively fly an A220 with 35 percent more seats for about the same trip cost as it can fly an Embraer today.

That’s pretty remarkable, but won’t that be a lot of seats? Yes indeed. I’m sure some are surprised that JetBlue didn’t go for the A220-100 (formerly CS100) with fewer seats onboard. It can convert orders into the -100 if it wants, but it makes sense to go for the -300. Think about it this way. If there are smaller markets where JetBlue thinks a 100-seat airplane is good today, then the -300 can fly those just as profitably as the Embraer can even with a bunch of empty seats. But if those markets can generate a little more traffic at lower fares, then that’ll all be gravy. The economics should improve.

More importantly, this airplane now has some serious versatility. JetBlue showed the map of Boston with the A220’s range in its investor slides.

As you can see, the -300 can cover all of North America, Northern South America, and yes, it can push into the British Isles. Throw Mint on there with a less dense configuration and maybe it can do more than that. The airplane has great short-field performance. I imagine Boston and JFK will get flights to Orange County in California pretty quickly. Having those extra seats and the extra range can make a big difference in letting this airplane do a lot. (Moxy may be unhappy about this.)

It can also step in and fill in some of the thinner A320 markets with ease. Remember, JetBlue has had the A320 with 150 seats but it recently started its upgrade program which will convert them to having 162 seats. But JetBlue wants to go bigger than that. As mentioned, as part of this order, JetBlue agreed to upgauge its 25 A320neo orders into A321neos. Here’s a delivery schedule comparison from before versus today.

Those A321s in an all-coach configuration will have 200 seats, though some will likely be delivered in the 159-seat Mint configuration.

In short, JetBlue is upgauging everything. In markets like New York to Florida, that A321 will be a rock star. It’s a bottomless pit of demand in there, and the unit costs are just so low on that airplane. But on the lower end, the A220 should be a perfect fit for the airline as well. It can handle some lighter A320 markets that are too far for the Embraer to handle today. It will also provide more seats in smaller markets that could use them. Even in those markets that don’t need more seats, JetBlue can operate the larger airplane for the same cost as the Embraer. Sounds like a great strategy to me.

Other than Embraer (and those who keep typing A320 instead of A220 every…single…time, grrr), everybody wins in this deal.

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33 Responses to JetBlue Supersizes Itself With A220 Order, A321 Upgauge

  1. Itami says:

    Good writeup Cranky. From where you’re writing, do you think the improved economics of the A220 bring any implications for JetBlue’s LGB operation?

    • CF says:

      Itami – It’s possible, but I don’t imagine that would be at the top of the list. Long Beach had the Embraer 190s briefly but maintenance issues caused big problems. Also, the capacity was too low for these higher demand, really low fare markets. They switched back quickly. So they might like an A220 with 140 seats out here on some routes, but I don’t imagine it’ll help JetBlue grow or add destinations if it were to happen.

      • Anthony says:

        If not for the slot constraints at LSB, it would seem that destinations like Reno, Tucson, Colorado Springs, El Paso, etc might come into play. Another argument for Jet Blue to move the LGB operation to ONT?

        • Anthony says:

          oops, of course I meant to type “LGB,” not “LSB”

        • CF says:

          Anthony – Reno is actually already served, but the rest? I suppose it’s possible, but it hardly seems like the best use of a slot for JetBlue.
          Those aren’t going to be high fare markets, so the smaller gauge may not work well. It’s hard to say. I don’t think Ontario would be much better in markets like those. But we have a lot of years for things to change before the airplanes actually find themselves with that opportunity anyway.

    • Noah says:

      Jetblue has always had the trouble of scale. Tons of profitable opportunities, but they can only acquire aircraft so quickly and maintain a reasonable balance sheet. It is why so much of the middle of the country sits unserved, and good served markets don’t grow. (How JB couldn’t make Austin a focus back in the day is a real shame)

      LGBs problems seem to be less of slots and more of revenue premium. Jetblue can’t seem to generate high enough fares to justify deploying limited assets there vs. Boston. The e190 not being commuter, FIS failure, NIMBYs, and now Southwest all make it’s future prospects look pretty unexciting.

  2. tim dunn says:

    Perhaps the most significant part of the JetBlue announcement is that it will not begin to receive its A220s in significant amounts until 2023. They get on average less than 6 aircraft per day for 3 years and then things ramp up. So, yes, the potential for the A220s to dramatically alter B6′ network is large but it is quite a bit down the road. Part of that is because B6 said that its E190 leases will continue until the 2020s.

  3. What’s the ETOPS rating on the A220? BOS>RKV anyone? To your point, Cranky, this seems like a no-brainer. I’m still shocked that more US carriers haven’t embraced the newly christened A220 series. I have yet to meet a passenger who has flown on one and not raved about the roominess.

    • CF says:

      Chris – JetBlue would have to go through the process to obtain ETOPS, but I doubt they’d do it for Iceland. This would be more interesting into the British Isles.

  4. David SF eastbay says:

    I’m sure Airbus said hey buy our “new” airplane and will give you a great deal on our planes had nothing to do with this. Can’t have B6 keeping the “new” Boeing small plane in the fleet, can we Airbus.

  5. Is it just me or does it feel like the A220 may replace all the A320 routs that don’t need the A321?
    Yes, I am asking if the A220 will end up repacleing the A320 (after the E190’s are gone) because they have none on order now.

    • CF says:

      Patrick – I don’t think so. Though we don’t know the configuration that JetBlue will use on the A220, the A320 will be at least 20 seats (~15%) bigger than the A220. Then the A321 is 38 seats (~23%) bigger than the A320. I think there’s room for all three. Though in the long run, who knows.

    • Wes says:

      I like where you are going with this, Patrick. My first impression as well was that this order looks more like at least a partial but substantial replacement of the A320 fleet than a 1:1 replacement of the E190 fleet.

      I have trouble accepting that B6 views the prospect of flying A220’s with 100/140 seats sold the same as it views flying an E190 with 100/100 seats sold, even if the fuel cost will be the same in either case. From what I understand, the bulk of the efficiency gains of pretty much any new aircraft comes at cruise altitude. On many of the short hops that the E190 currently serves, the bulk of the flight is spend in either ascent or descent, where the fuel efficiency gains of the A220 are still present, but far from the percentage gains mentioned in marketing materials that get all the attention. That aside, larger plane still is going to have higher crew costs, landing fees, and maintenance costs (I would think those fancy new GTF engines have to be pricier to keep up than the ol’ GE’s on the E190). I also don’t think B6 would like what such a situation would do to ticket yields if the A220-300 indeed ends up offering more seats than the E190 markets can fill.

      My current theory is that B6 will convert a portion of the order to the smaller A220 variant, which is more of a direct E190 replacement in terms of pax capacity. Then the bulk of the remaining A220-300’s which they take delivery of will end up replacing the oldest A320’s in the fleet. The A320 fleet is far and away the oldest that B6 has, with well north of 30 A320’s being more than 20 years old when A220 deliveries begin in earnest for B6 in 2023.

  6. Jonathan says:

    You say “Moxy may be unhappy about this”. Do you mean Southwest?

    • CF says:

      Jonathan – No, I mean Moxy. A big part of Moxy’s business plan is being able to serve secondary airports in big cities, like Providence over Boston. But if JetBlue can now serve more cities from Boston more efficiently, then it’s going to make it harder for Moxy to pull people into secondary airports.

      • ejjacob says:

        I agree – Moxy will start getting their aircraft first, so it will be interesting where they launch from.

  7. Manu says:

    Great read. You briefly mentioned the possibility of an A220 with Mint onboard. What do you think the odds are of that actually happening? And realistically, if JetBlue goes transatlantic, do you think the 220s may get any share of that work, or will it all go to the 321s?

    • CF says:

      Manu – I think it’s possible, but it would be niche, likely Transatlantic.
      It could serve a market like London/City, potentially, and that would definitely be a Mint market that the A321 can’t serve. But it’s hard to know. I don’t imagine that’ll be one of the early uses of the airplane.

      • Bobber says:

        Brett, do you have a feel as to whether LCY-DUB-JFK could sustain much competition (I’m guessing the A220 would still need a refuelling stop in DUB going West)? Could they make it work without going ‘full Mint’ i.e. a mix of Y and C class seats? Flying from LCY is so much more pleasant than LHR.

        • Chris says:

          BA already flies that route in an all-biz configuration (with the stop in Shannon for fuel and preclearance). I don’t know how B6 could compete too well with no UK point of sale or FFs, unless they make some kind of partnership on that side of the pond. If they mix in coach, maybe that changes the calculation…

        • CF says:

          Bobber – I fit needs a refueling stop going west, then it’s a non-starter.
          But if it can go nonstop, then that’s a different story. I don’t know enough about what that runway will support.

  8. I’m pretty sure Airbus will never sell another A319 again.

    • Mark Skinner says:

      Perhaps that’s the point. If Boeing had acquired Bombardier, then Airbus would be struggling to sell another A319, so either way, it’s a goner.

  9. iahphx says:

    Thanks for the insight. It would seem like the A220 would cement Jetblue’s status as Boston’s airline. That’s great, but not much of a business in the grand scheme of things. What else could this airplane do for Jetblue? From a consumer standpoint, it would seem like JetBlue would be America’s Greatest Hope for a decent domestic airline. It’s services tend to be extremely humane, and good value. But they don’t tend to be terribly profitable. Rather, what seems to actually make money is Cattle Car Service (aka Spirit and Frontier) and Mega Airline Service (the legacies and Southwest). I don’t see how a new 140-seat aircraft with relatively high per-seat costs is going to change that dynamic. Do you?

    • CF says:

      iahphx – The A220 can do long and thing markets like no other. So perhaps JetBlue can find a niche beyond its focus cities with this airplane. But I don’t think we’ll see that anytime soon. To start, JetBlue is just going to want to fortify its focus cities even further.

      • ChuckMO says:

        At first yes, Brett. If they do add-on orders I think we’ll probably see one or two new focus cities for B6 down the road. There is a lot of space between BOS/JFK/MCO/FLL and LGB that B6 could (and should) fill in.

    • Jonathan says:

      Would SNA-Hawaii nonstops be a potential with the A220-300?

      • CF says:

        Jonathan – Good question. It seems likely that it could happen, but that may not be a good airplane for it. Hawai’i has a lot of mid-level fares (low in the off season) but it doesn’t have a lot of high dollar traffic.
        So airlines tend to like bigger airplanes with a lot of seats on them for that market. It’s different than a business-heavy market like London/City. But I’m sure it would at least be looked into.

  10. Jack R says:

    Cranky- The A220 is a brilliant aircraft and my new favorite. However I cannot understand why they didn’t choose the A319NEO, which seats the exact same amount. The cost savings for having a single aircraft type is huge. And given JetBlue’s propensity for irregular operations, the flexibility with crew scheduling & aircraft swaps would be immeasurable. JetBlue makes a lot of questionable decisions and to me this is just one more.

    • Noah says:

      The cost savings can quickly be overblown but to you point, the e190 likely cost Jetblue more than it saved.

      Yes, synergy in pilots and airport equipment is nice, but a lot of maintenance is provided as a service (i.e. power by hour engines) where carriers don’t directly pay for parts and perhaps people. While single fleet is fewer pilots to train and keep on reserve, it also means all pilots on same higher pay scale.

      As for routes, Jetblue is growing airline which means new markets that benefit from smaller capacity. The a220 offers ability to do that and go even smaller if needed.

      Next, shrink versions of planes, like he a319, tend to carry the higher weight and “overengineering” of their bigger counterparts. This means they seat 20% less people but may only cost 10-15% less per trip. The a220 is significantly cheaper per seat to operate so there is big savings there. Additionally, in this case, acquisition cost was likely much more advantageous than an a319neo which comes off a production line with years of orders vs. relatively light one. Lastly, single fleets carry risk of single point of failure – should a type every get grounded, the entire fleet is at risk. While not common, there have been instances with the 787, Southwest subtypes, and others where it is not a 0% chance.

      So ultimately, there are many different philosophies that have merit, but it takes some real analysis to determine what is best for each carrier given their challenges, market, objectives, pricing, and competition.

  11. Mike says:

    My 2 cents to a lot of these questions here:

    I think you’ll eventually see the 220 on the west coast. Particularly in the winter. Currently B6 has to use the 190s to fill the NE to FL demand in the winter because they don’t have to legs to get to the west coast. I promise that you’ll see 220s doing trans cons in the winter on the thinner routes in order to free up 320’s and 321s for the Florida flying. LGB will also get plenty of 220s since they’ll be able to fly around fewer empty seats.

    ETOPS is coming, but I don’t see much of a market for pure deep SA or trans Atlantic. However, from what I hear a 220-300 with 44 Mint seats could do BOS-LCY or even possibly JFK-LCY. I think Iceland is a possibility, but you could easily hit that with a 321 (ditto for the Azores).

    B6 makes its bread and butter utilizing high value geography. They’re profit margin (and CASM) is much high than the legacies, while their product competes much better than Spirits or Frontiers in the people with disposable income category. They’ll do just fine competing against either.

    As for the 319 neo, it’s way too much of an airplane for regional routes. You’re paying 95% of the cost of buying a 320 but getting 15% fewer seats. Plus you get the added bonus of having the same mx costs as a 320, and can’t serve some of the airports you currently serve (ACK, HYA, MVY). You can also use this argument for the 321 vs 320 and this is why nobody (US carriers) has been ordering anything but 321s lately. Having a single fleet is nice, but the cost advantages associated with it decline in proportion to the fleet size.

    The 320s might eventually be replaced, but if that was their plan, they wouldn’t be spending money upgrading the interiors on the entire 320 fleet. It wouldn’t make sense to add 12 seats to 130 aircraft and then dump them in 2-4 years time. Past 2025 however, I could see this happening. Especially if a 220-500 comes along.