Blue No More: With altered tactics and some favorable macro forces, JetBlue is on the upswing
As recently as 2014, just two U.S. airlines—United and Virgin America, both then synonymous with despair—recorded lower operating margins than JetBlue. Even more uncomfortably, JetBlue’s margin was a massive 10 points lower than Spirit’s, giving rise to a dominant new narrative: Ultra-low-cost carriers were conquering the world, while JetBlue, with its higher-cost model, was falling behind. It was seemingly overindulging customers with free amenities and stubbornly refusing to charge for checked bags or densify its seating. What’s more, in Boston, JetBlue lacked many of the critical routes business travelers there demanded. Transcontinental routes continued to lose money, as they always had for JetBlue. E190s were the wrong planes for longer-stage routes like Boston-New Orleans and Boston-Austin. As 2015 approached, it looked as though JetBlue’s best days might have been in its past.
But now? As 2017 begins, JetBlue is producing margins more or less on par with its highflying LCC brethren, cutting in half its margin gap against Spirit during 2015 and further narrowing it to just two percentage points through the first three quarters of 2016. JetBlue is likewise neck and neck with Southwest while outperforming not just United anymore but Delta and American too.
For one, JetBlue recognized a need for change. In late 2014, hosting an event for investors, it said it was abandoning a longtime aversion to charging for a first checked bag, thereby opening the taps on a significant new revenue stream. It would institute the charges, furthermore, as part of a new branded fare strategy. It saw wisdom in densifying its seating configurations too, albeit with a drawn-out plan of implementation. Soon a new CEO was in charge, overseeing the rollout of an ultra-premium transcon product called Mint.
Boston, meanwhile, flipped from a money-losing market to JetBlue’s most profitable base, as ultra-aggressive capacity growth paid off—JetBlue had become the go-to airline for Boston business travelers. As oil prices fell dramatically in 2015, and as consumer spending spiked in response, JetBlue’s leisure markets prospered— Boston aside, JetBlue remained a mostly leisure-focused airline. All the while, transcon routes began to flourish for all airlines, fueled by a booming tech sector and some of the hottest economic growth nationwide in places like Los Angeles, San Francisco, Seattle, New York City and— yes—Boston.
This issue is not currently online. To inquire about purchasing a copy, please email firstname.lastname@example.org.