JetBlue Follows the Numbers

JetBlue has taken a fair bit of flak lately for falling in line with other airlines and their less customer-friendly policies, but this really isn’t all that surprising.  After all, JetBlue is a public company, and investors want to see stronger returns than the airline has been able to generate.  While Southwest has chosen a strategy of bucking the trends set by other airlines to generate impressive returns, JetBlue thinks the opposite is going to be its road to riches.  The airline’s argument is… if consumers behaved differently, JetBlue would too.

Going Basic

There was a lot of talk recently about JetBlue’s decision to follow the big guys and implement a Basic Economy fare.  We don’t know full details of what exactly this will look like since it hasn’t been officially rolled out yet.  That makes it hard to comment on specifics, but the airline should proceed with caution.

As JetBlue said in a blog post/internal memo:

At JetBlue, we never liked the “no frills” approach. But with these competitors now offering basic economy on many routes we fly, Customer behavior suggests our success is at risk if we do not disrupt this market by lowering fares without sacrificing the experience.

“These competitors” are the ultra low cost carriers like Spirit and Frontier.  It seems like JetBlue is keeping its current three-tier fare bundle structure, but the bottom one will evolve from just excluding checked bags to being a full-blown Basic Economy fare.  The mid-tier will be a more traditional regular economy fare while the rarely-purchased top tier will come down in price and be more about flexibility and priority access.

JetBlue’s President Joanna Geraghty closes the note with this:

We’ve all heard the horror stories from Customers about ultra-low-cost travel. JetBlue can do better for them. If we add a fare that saves Customers money but still delivers the JetBlue experience, I can’t imagine why a traveler shopping on price would ever choose another airline over us.

And what are those “horror stories”?  They usually come in two flavors: cancellations/delays and poor service/experience.  JetBlue seems confident that if the fare is the same, it can win by providing a better service/experience.  That may be true, but when it comes to cancellations and delays, JetBlue is much worse. 

In the most recent month reported, July 2018, JetBlue had a relatively good month for itself with a comparatively-awful 69.1 percent on-time arrival rate.  Spirit was at 80.2 percent.  In that month, JetBlue canceled 2.4 percent of its flights.  Spirit only canceled 1 percent.  Even if we look at an apples-to-apples comparison, Spirit wins.  In Ft Lauderdale, JetBlue had 66.7 percent of flights arrive on-time while Spirit was at 73.4 percent.

Like the legacies, JetBlue sees that low-cost carriers can come in with cheap base fares and win the battle.  Also like the legacies, JetBlue is going to match those fares but only after stripping what’s included down much further.  If this helps to bring the price-conscious traveler back to the airline, then that’s good.  But it could also dilute the brand (something that is a big asset for the airline) and dilute the fares existing travelers are paying.

Route Reshuffle

This isn’t the only way JetBlue is following the money, however.  It has recently announced a massive network restructuring.  Some people have focused on the negatives of this announcement, but it’s really more of a long-overdue change to where airplanes are flying.

Growth

  • Boston: New route to Rochester, more flights to Aruba, Nassau, Orlando, Punta Cana, Santiago, Santo Domingo, Sarasota, Tampa, West Palm Beach
  • Ft Lauderdale: New route to Guayaquil (new JetBlue city), new route to Phoenix and St Maarten, more flights to Nassau and Santo Domingo
  • New York/JFK: More flights to Aruba, Cancun, Nantucket, Nassau, St Lucia, Santiago, Santo Domingo, Tampa
  • Orlando: More flights to Aguadilla, Hartford, Ponce
  • West Palm Beach: New route to Providence, more flights to Hartford and Westchester

Or if you prefer it in visual form:

What you see here is a lot of strengthening in core focus cities on the East Coast in heavy tourism or visiting friends/family markets.  That is JetBlue’s bread and butter, and it’s clear that Boston, New York, and Ft Lauderdale are the future.  There are some other northeast-Florida routes sprinkled in that are also big markets for JetBlue.  And the Aguadilla and Ponce flights are just targeting the hundreds of thousands of Puerto Ricans who have fled their homeland to settle in Orlando in the last few years. The only odd outlier is Phoenix, but then again, American isn’t in that market.  This is probably meant to replace the Long Beach flight as an evening utilization trip since that one is getting killed off (see below).

These all seem like smart moves, but it has to come at a cost.  JetBlue isn’t just magically adding airplanes, so it has to cut.  What goes away?

Cuts

  • Boston: Flights canceled to Washington/Dulles
  • Ft Lauderdale: Flights canceled to Baltimore, Detroit, Long Beach, Pittsburgh, Fewer flights to Mexico City, 
  • New York/JFK: Flights canceled to Daytona Beach and Washington/Dulles, Portland (ME) becomes summer-only, 
  • Orlando: Flights canceled to Baltimore, Fewer flights to Mexico City, 
  • San Juan: Flights canceled to Santiago and St Croix

It looks like JetBlue is just going down the list and finding weak performers.  Dulles hasn’t done well for any low cost carrier, and JetBlue apparently also sees weakness in Baltimore where it has to fight both Southwest and Spirit.  Other Florida cuts are either from small cities like Daytona Beach where demand is weak or are to places outside the Northeastern US (including to the shrinking focus city in Long Beach).  Mexico City fares are really weak for everyone, so that’s not a surprise.

This is more straightforward than the Basic Economy introduction, but the trends are the same.  JetBlue is looking at the numbers and making changes to try to kickstart margins.  We’ll see if Wall Street or customers end up being happy about this.  It’s possible neither will be.

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grichard
Guest

I was pretty excited about a couple of the deep South America routes on the map… until I realized that they were lines of longitude.

christophe.bottega
Member
christophe.bottega

Guayaquil is pretty deep !

Jaison.thompson
Member
Jaison.thompson

Speaking of LGB do you know what’s going on with their Slot reductions?
When do they officially release them back to the city for redistribution?
I can’t see the small number of inter California flights being all that profitable.
I’m surprised they haven’t closed up shop completely in LGB.
How profitable is the focus city for them anyway?

noahkimmel
Member

probably not profitable, but if they can’t grow at LAX and give up LGB, then they abandon West Coast to be just token spokes for NY/BOS customers. That may be the more profitable strategy, but hard to grow while not being relevant to west coast customers. Difficult decision….

christophe.bottega
Member
christophe.bottega

Is Jetblue move towards Basic Economy really dictated by Ulccs and not regular players who with the introduction of basic economy have been able to switch traffic away from Jetblue ?

Kilroy
Guest

It’s interesting to see JetBlue, Spirit, and some of the non-legacy carriers running flights south not just to traditional Caribbean beach destinations, but also to the northern half of South America, and flights to the Caribbean / Central America that seem more geared to the “visiting friends and family” leisure crowd than the “tourist” leisure crowd. I assume this is largely due to a function of the opportunities being right combined with the range of the airlines’ narrowbody planes, plus block times that allow for decent aircraft utilization if necessary, but still… I can’t help but wonder how much of… Read more »

ART
Guest

Could this plus the management reductions at both companies point to an eventual Alaska merger.

Zack Rules
Guest

What a pity Portland (ME) is going seasonal. Looks like Southwest and Delta are eating their connecting traffic though. I wonder if B6 is clearing the deck for LHR flights, trying to get their costs/house in order before embarking on a higher risk market.

noahkimmel
Member

They keep teasing Europe, so my guess is they will take longer to start the service than WN does Hawaii. They don’t currently have planes to make it deep into Europe, don’t have any LHR slots (or tons of cash to buy a few meaningful ones), so the threat to legacies is contained. The second b6 starts, my guess is it will be a bloodbath with AA and DL dumping capacity and fares. I would assume B6 starts with BOS-LHR or DUB first. Mint cabins have given b6 much experience in premium service, but simple things like hot economy meals… Read more »

Kilroy
Guest

There is a recent Forbes article that argued that B6 keeps beating the drum re: flights across the North Atlantic in an effort to attract merger offers from the Big 3 US legacy carriers, by threatening the profits the Big 3 get from premium seats on flights to Europe.

Not sure how valid the threat is, and sounds like it will be tough for B6 to make flights to Europe happen in the short term, but will be fun to watch.

noahkimmel
Member

I saw that but disagree with it on a few levels. 1) the a321neo can go to Europe. It certainly can’t reach everywhere, and we don’t have specific B6 info on seat count and weights, but JFK/BOS to at least Ireland and the UK seem extremely likely, and further routes are within airbus marketing material. 2) If JetBlue wanted to be acquired, threat of a few flights to slot controlled LHR should hardly change the calculus. The industry knows who is growing and where and B6 has been really transparent. You don’t buy a carrier and pay a premium for… Read more »

southbay flier
Guest

The legacies are much better at connecting traffic than B6 IMO. It’s a nice airport, but it’s a ghost town in the winter. If you are going to fly to ski, you’re most likely going west.

cpagan2
Member
cpagan2

jetBlue has basically completely abandoned the DC market from JFK.

cblock2
Member
cblock2

I can understand the lack of service JFK- or LGA-National, since there are slot issues on both ends. The complete elimination of Dulles is a little surprising, as it’s convenient for the western suburbs.

cpagan2
Member
cpagan2

Looks like there is no appetite for jetBlue at Dulles.

noahkimmel
Member

I remember when they tried to make it a focus city!

MRY-SMF
Guest
MRY-SMF

Pick up after Independence Air?

Sam
Guest
Sam

Purely personal anecdote, but I don’t see this going well for them. I hate Economy Minus and have frequently chosen JetBlue (over AA usually) to get up and down the east coast because they’re so much more customer friendly. They’re destroying their own competitive advantage with this move.

cblock2
Member
cblock2

I have to wonder about the potential demand to the brand, but we don’t know enough of the details yet to make any judgments. On the cuts, a lot of them make sense: Baltimore doesn’t surprise me, given Southwest’s strength there. In hindsight B6 probably should have gone into BWI in force early on instead of Dulles. A little surprised to see Dulles totally eliminated, but apparently the yields are garbage. Does effectively put B6 out of the NYC-DC market. FLL-LGB bodes ill for the FLL focus city’s future. I wouldn’t be surprised to see B6 start to get a… Read more »

Kilroy
Guest

B6 still has a HUGE black hole in its route map that covers most of the Midwest, especially if you eliminate cities/routes served with low frequencies.

In NYC, B6 Is a starting pitcher. In the Midwest, they aren’t even a top AAA prospect.

davidp627
Member

Agree on BWI. They had a chance before Spirit planted the low fare flag between BWI-FLL and Orlando. Between WN and Spirit, there are multiple non stops a day between those points (almost a shuttle service). JetBlue should’ve considered Florida routes like BWI-Sarasota and BWI- West Palm Beach, where there is not nearly as much competition.

Ben
Guest
Ben

While cutting under performing routes is a start, they’ve got to their their operation in order. They run an absolutely awful operation, and I think that hurts their customers more than a Economy Minus fare would. You can only run flights late for so long before the biz traveler moves to someone more reliable.

Michael
Guest
Michael

You are right. Used to work for B6 and now work for DL. The difference in how the operations are run is mind-blowing.

Anthony
Member
Anthony

Tell us more, please…

And I can’t picture the skeletal operation at LGB continuing. I’m a leisure traveler, not a biz traveler, but even so… I’m planning a trip from N Calif to S Calif next month. Jet Blue now has only two flights a day from SFO to LGB. If I’m booked on the 9am flight and it gets canceled, does Jet Blue expect me to wait seven hours for the next one??

FC
Guest

It’s a little unfair to compare NK and B6 number at FLL directly and say B6 is doing that much worse since a good chunk of B6 flights at FLL are to NYC/BOS/DC area where all the delays are. That probably represents 30% of their flights and we know this summer had non-stop rain up here. This may shock people, but B6 OTP numbers at JFK and BOS have actually been above airport average for most of the summer. Does it really matter to people flying out of these airports that their OTP overall is worse if the only flights… Read more »

Tim Dunn
Member

Actual DOT on-time statistics for this past summer show that JBLU underperforms multiple of its key competitors in JBLU’s major markets including JFK, Ft. Lauderdale, and Boston by 10% or more in on-time. The DOT also now includes on-time performance for legacy carriers and their regional carriers on a combined basis destroying the notion that JBLU’s legacy competitors get by with better on-time because they don’t count their regional carrier performance. https://www.transportation.gov/sites/dot.gov/files/docs/resources/individuals/aviation-consumer-protection/320571/september-2018-atcr.pdf https://www.transportation.gov/sites/dot.gov/files/docs/resources/individuals/aviation-consumer-protection/319546/august-2018-atcr_0.pdf It is more notable that JBLU operated so many flights that didn’t make money and which they now have to cancel. As for the whole basic economy… Read more »

FC
Guest

Yes, they were definitely under water for much of the year, but things have actually gotten better since pilots got the new contract and they did more scheduling padding. You can see their BOS numbers for July is right at the average for the airport. JFK was 5% behind for arrival, but it improved a lot since Aug and have been consistently above average. I’ve followed it pretty closely. Wait a couple of months, you will see.

Nick Barnard
Member

I’m saddened to see JetBlue picking up Wall Street’s photo copier and using it.

I’m not a fan on Southwest’s incessant self cheerleading and reality distortion field, but I give them great credit for leading and not following.

I’m kinda amazed that companies now to shareholders without them getting near initating a proxy war.