JetBlue CEO Robin Hayes recently announced that he would step down on February 12 after a nearly 9 year run. His long-time lieutenant Joanna Geraghty will take the reins, and oh boy, does she have a big job ahead of her.
Robin’s tenure can really be broken into two halfs. Between 2015 when he took over as CEO and the pandemic, JetBlue seemed more focused on controlling its own destiny and growing organically. The airline was building its Boston and Fort Lauderdale operations. Then the pandemic hit, and the airline changed. Or maybe it wasn’t the pandemic when it happened; maybe it was when CCO Marty St George left in June 2019. Whatever it was, around that time, JetBlue’s eye started wandering.
During the pandemic, the airline focused more on short-term opportunity instead of long-term strategy as other airlines like Delta and Southwest did. The experiments in Miami, Newark, Philly, and Raleigh/Durham amounted to nothing and were discarded just as quickly as they started.
The already-lagging operation got even worse. Just look.
JetBlue Operational Performance by Month
Meanwhile, the airline’s culture continued to erode from those heady early days. Under Robin’s leadership post-pandemic, JetBlue took three big swings, but it ended up striking out. The JetBlue of today is in a worse place than it was 5 years ago.
Strike 1 – Europe
While Rome burns, JetBlue has literally tried to get closer to Rome with its burgeoning European operation which started in 2021. The problem is that this is a vanity project. with limited return. It requires a separate subfleet of the A321neo — actually an A321LR — that has only 138 seats onboard. Compare that to SAS with 157, TAP Air Portugal with 171, and Aer Lingus with 184 on the same exact airplane. This is a very premium-heavy product that works if they can fill all those premium seats. But how will that happen?
You can probably make London work on an airplane like this, but then what? Maybe Paris? Oh sure, during the summer those frilly flights to Dublin and Edinburgh work, so does almost anything. But it’s a long cold winter with limited places to put those airplanes.
And these airplanes aren’t just a different subfleet in terms of configuration. They have hot ovens unlike the rest of the fleet. [Correction: the rest of the fleet has hot ovens but only for Mint, not in coach like the LRs] It’s a whole different service flow. This is a significant investment for a small potential return. It’s a distraction, but this is more like a foul ball. JetBlue took a swing and made contact, but a foul ball still counts as a first strike.
Strike 2 – The Northeast Alliance (NEA) with American
Robin’s best swing was on a fastball right down the middle. On the surface, the NEA was a fantastic plan. JetBlue and American had both been looking to improve their positions in New York. American needed to improve its position in Boston. The partnership would have vaulted them into a competitive position in both markets. But it all went wrong.
American was bleeding in New York, so the first thing it did was turn over a ton of slots at LaGuardia and some at JFK to JetBlue to fly. JetBlue couldn’t digest this quickly, but it was all hands on deck. The airline essentially gave up on restoring Boston and Fort Lauderdale post-pandemic so it could put all its chips into New York.
JetBlue Flights By Top Cities
This was a strategic, long-term investment, but it meant that JetBlue took its eye off the ball in important markets, especially in Boston where Delta was hungrily growing its presence.
JetBlue Percent of Delta in Boston Domestic Market
Delta had been building up in Boston, and slowly cut into JetBlueʻs position up through 2019. After that, JetBlue fell of a cliff in comparison. Now in 2023, Delta actually passed JetBlue in number of seats offered (when you include joint venture partners) and number of local passengers for the first time. This was JetBlue’s one true opportunity to dominate in an important city, and it lost it so that it could be a stronger number three in New York.
What’s even worse is that JetBlue didn’t just direct its resources to New York, but it had to change its fleet plans to do so. The Embraer 190s were probably one of the worst purchases made by the airline long before Robin’s tenure, but there has been much waffling on retiring those airplanes. JetBlue made various decisions to extend retirements and leave complexity and expense in the operation. There are still about 50 flying today with their demise coming sooner rather than later, finally.
As we all know, the NEA ended in failure when the judge blocked the partnership. But instead of continuing to fight with an appeal or an altered agreement for something that at least made real strategic sense, JetBlue abandoned the plan in favor of strike 3.
Strike 3 – The Spirit Acquisition
JetBlue under Robin — and probably before that, really — has had a Napoleon complex. It wanted desperately to be bigger regardless of the strategic value of that growth. When Frontier announced it would merge with Spirit, JetBlue completely freaked out. It decided to pour money into a hostile bid of its own for Spirit. It got so desperate in the process that it agreed to a monumental $470 million reverse breakup fee, much of which it prepaid to the Spirit shareholders.
The rationale was basically that JetBlue needed more pilots and airplanes, and it couldn’t get them quickly enough on its own. In the context of the NEA, you can see how it might have felt that way. But the Spirit acquisition was at the opposite end of the spectrum from the NEA, and in the end, it hurt the NEA’s chances of working.
With Spirit, JetBlue was going to inherit moderate positions in a whole lot of cities around the US. These positions weren’t big enough to give JetBlue any sort of dominance. Spirit’s whole goal of winning on low fares would have been thrown out the window in favor of a JetBlue premium-ish product that the airline felt would give it more relevance in competing with the big three.
I never liked this plan, but JetBlue signed an agreement in blood that it would defend it to the death. When the NEA was blocked, JetBlue just abandoned that and put all of its effort into getting the Spirit merger approved.
The thing is, with the NEA gone and all those NYC slots going back to American, why did JetBlue even need more airplanes and pilots?
As we all know, the judge in this case blocked the merger last week, so now JetBlue’s entire plan has crumbled. It is appealing, but it had to do that. It promised Spirit it would fight to the death, and so it will. But the chances of winning on appeal are slim.
Now that JetBlue has struck out, it has little to show for its efforts over the last few years except for a few fancy airplanes flying across the Pond.
On top of these big strikes, there have been other problems along the way showing just how bad JetBlue is at… doing things. I know that sounds odd, but here are three good examples of what I mean.
A320 Reconfiguration – Slow to Execute
The airline made the decision to increase capacity on the A320s from 150 to 165 (later reduced to 162) back in 2014. It took years for the first one to even be done, and the work wasn’t completed until 2022. Even then, there were 11 aircraft that wouldn’t be fixed due to retirement by 2025. So a much-needed move to add seats and reduce unit costs will take more than 10 years to truly finish.
The LA Basin Disaster – Unwilling to Take Action
JetBlue should have left its Long Beach focus city years ago, but when it made the move in 2020, it never should have moved the operation to LAX. The airline has not figured out how to make LAX work at all, outside of the core flying as a spoke from the airline’s northeast and Florida focus cities. There is no value in being a clear number five in a market when you have little opportunity to get ahead, but the airline continues to waffle and waste resources in a place where it will not succeed. If it really needs airplanes and pilots, this is a great place to find them.
Blue Basic – Poor Implementation
In November 2019, JetBlue rolled out its Blue Basic basic economy fare. This highly restrictive basic economy fare eventually was tweaked to not even allow a carry-on bag. For an airline that had developed a premium reputation, this did not fit. The fare difference between Blue Basic and the regular fare has often been rather large, a startling difference from what most airlines have done. I have no idea how it is able to remain competitive with Delta in the northeast with this uncompetitive fare product.
When you add it all up, you have an airline that did try to take a couple of swings, but other than the NEA, maybe it shouldn’t have. And now, Robin leaves the airline having failed on two of his three big efforts.
What lies ahead of new CEO Joanna is highly dependent upon the ultimate outcome of the merger. If there is a successful appeal and the purchase is allowed to go through, she will have no choice but to spend her early years in the job trying to digest Spirit. It’s a long, tedious task that will do nothing to actually strengthen the airline’s strategic positioning. It will just make the airline bigger. After all, the biggest strategic benefit would be the addition of scarce resources in New York and Fort Lauderdale, and it has already agreed to shed those if the merger happens.
If the acquisition fails in the end — as seems highly likely since appeals rarely win — then it gets interesting. This is probably the best possible outcome for a JetBlue CEO with a clear strategic vision. Joanna would inherit an airline that’s shockingly not all that different compared to what Robin inherited nearly a decade ago. But Joanna could build a team to finally regain focus, create a sensible strategic plan, and rebuild the culture that has been on a steady decline for years.
Robin’s tenure at the helm of JetBlue will be one remembered for high profile legal failures while ceding ground in the airline’s strongest markets. Let’s hope the next regime can do something more for JetBlue.