The International Air Transport Association (IATA) predicts airlines worldwide will lose $9 billion this year, with North American carriers shedding about $1 billion of that.
The International Air Transport Association (IATA) predicts airlines worldwide will lose $9 billion this year, with North American carriers shedding about $1 billion of that. That’s why this number is so significant: JetBlue just posted a Q2 net income of $20 million — this compared to a year-earlier loss of $9 million.
One year shy of its 10th anniversary, JetBlue is soaring — despite ferocious fiscal headwinds. Aside from astute fuel hedges, and lower fuel prices, JetBlue’s making money because people legitimately like the airline. J.D. Power’s 2009 North American Airline Satisfaction Study ranked JetBlue highest in customer satisfaction among North American LLC’s — for the fourth year in a row.
The infamous Valentine’s Day meltdown is history. JetBlue’s been able to maintain its vaunted service rep while reworking the mechanics of running a large airline. No longer a boutique player, the carrier now sports a fleet of 145 Airbus A320s and Embraer 190s. And it’s managed to hang on to that loving feeling that lured people to fly it in the first place, while growing the product. Service and size don’t automatically go together.
What’s really driving the carrier’s success in these troubled times is the price/value relationship, asserts Tim Luceno, JetBlue’s director of sales. With travel the second most controllable cost at any company, travel managers are reining in road warriors. It’s the kind of environment that “sets up quite well for JetBlue,” contends Luceno. “People are trying to figure out what value they’re getting out of an airline. And that’s where we differentiate ourselves.”
The recession has ripped business class asunder, sending flyers fleeing to the first few rows of coach. IATA’s most recent Premium Traffic Monitor found first and business class traffic off 23.6 percent for May 2009 compared to the same month a year earlier. Carriers reap a significant slice of their revenue from the pointy end of the airplane. That’s a prime reason profits have been in free fall.
The EML Equation
The flyers that remain have got to go somewhere, and they prefer it not be to a seat built for pre-pubescent gymnasts. Enter EML — JetBlue’s Even More Legroom seat set-up.
Seat pitch (legroom, essentially) on most US airlines ranges from 30 to 32 inches in coach. At JetBlue, the average is 33 to 34 inches. Not bad, but not business class either. To get premium pitch, you have to pay — either through a well-polished corporate deal, via liberal upgrades, or up front. Given the state of affairs, “There aren’t nearly as many people approved to fly in business and first,” says Luceno. But, “we’re finding that a lot of companies will reimburse” their senior people for EML excursions.
The seats are still three-abreast, but they do offer bodacious legroom — 38 inches. That’s the kind of room that’s laptop friendly. On the A320, you’ll find them arrayed in Rows 2, 3, 4, and 5 — as well as the overwing emergency exit row. On the carrier’s rapier-like Embraer 190s, EML is confined to the overwing exit row.
It’s the price point that’s driving flyers to book EMLs. $10 for a short hop from, say, JFK to Buffalo; $25 for a medium run from Kennedy down to Florida; and $40 for a long trip, perhaps from New York to LAX. You can upgrade from any JetBlue fare. “That’s the beauty of it,” says Luceno. For the price of a couple of drinks at the airport bar, you’ve got the kind of room that can make all the difference.
If you want to keep up on what’s happening en route, JetBlue serves up free DIRECTV at every seat. Neat, but it’s the channels that make it useful. CNN, Fox, MSNBC, and the like keep you keyed into the markets, while four flavors of ESPN help you kick back a bit. The Weather Channel works to help you reconnoiter what lies ahead, as does a channel dedicated solely to Google Maps. Want to rest the eyes? There’s XM Satellite Radio. It’s free too.
While the snacks aren’t ordinary, the wine selection is extraordinary. JetBlue doesn’t serve meals. Best bring something on board if you’re hungry and hopping a transcon from Boston to Long Beach, maybe LAX.
The Airport Argument
For years, if you wanted to fly JetBlue from SoHo to SoCal you’ve had to land at Long Beach. While lots of flyers prefer to do precisely that (art deco terminal, un-crowded environs, etc.) others like LAX.
Long Beach remains JetBlue’s LA Linchpin. But Luceno says despite the economy vehicular traffic in the Basin remains “brutal.” There are simply times flyers “don’t want to drive past one airport to get to another.” That’s why the carrier launched nonstop service from LAX to both New York Kennedy and Boston Logan in June. That put it in head-to-head competition with American, United, Delta and Virgin America on the JFK-LAX run, and with AA, UA and VX between Boston and Los Angeles.
Premised on the notion that it brings value to virtually every route it touches, JetBlue is upping the ante in the BOSWASH, launching nonstop service September 9 between BWI and Boston. That pits it against a couple other low-fare powerhouses — Southwest and AirTran, as well as Delta Connection. The resulting rates on the route could well be among the lowest in the country.
Thing’s are bubbling at JetBlue’s home base too. Kennedy’s Terminal 5 is kinetic. “People will always say, ‘JFK is so much farther than LaGuardia’” from Manhattan, says Luceno (actually, the difference is just four miles). But JetBlue’s sales chief asserts, the extra time is worth it. “The experience you get [inT5] is unmatched in the New York area.”
The facility handles almost a third of JFK’s passengers, so it’s got to be efficient. There is a pair of check-in areas, and 65 e-ticketing kiosks. But the key to moving flyers from “landside” to “airside” is T5’s central security checkpoint. It lays claim to being the largest in the country. It can handle 20 lanes.
Complementing the passenger throughput is an in-line baggage system. That means no more clunky minivan-sized machines taking up space out front of the ticket counters.
Business flyers crave speed and predictability. T5 is built on those basics — but the amenities don’t hurt. Wi-Fi is free, and there are laptop charging stations at the gates. Luceno contends the 635,000-foot, 26-gate complex “is one giant corporate lounge.” That “lounge” is replete with nine full-service restaurants, bars and cafes — places where you can get a decent grab ‘n go meal for the trip ahead.
Increasingly, there are lots of trips to be had — not just from JFK, but from places you wouldn’t automatically link with JetBlue, such as Austin. The high-tech, heart-of-Texas city serves as a mini-hub of sorts for E190 flights. “The market demographic is very much in line with the overall JetBlue demographic,” says Luceno, “skewing younger, well-educated and affluent.” From AUS there are nonstops to Boston and JFK on the East Coast, SFO and Long Beach on the West Coast, and FLL and Orlando in Florida.
Orlando is fast becoming a major Latin American launch pad for JetBlue. From MCO, the carrier recently began nonstop service to San Jose, Costa Rica — a major Central American finance and ecotourism hotspot. Bogotá, JetBlue’s first destination in South America, is also served nonstop from Orlando.
This expansionary clip includes … swaths of the Caribbean. In June, JetBlue launched nonstop flights from Fort Lauderdale to Cancun and Santo Domingo, as well as nonstop service from Boston (where it’s now Logan’s largest airline) to Santo Domingo.
Come October, the carrier is primed to begin a trio of new Caribbean nonstops out of Kennedy. Kingston, Barbados and Saint Lucia are in line for service. All this activity puts JetBlue on course to serve 60 domestic and international cities by Halloween. Not bad — especially in light of contraction by major carriers, and the fact that a scant nine years ago the airline flew just two nonstop routes.
What’s Left To Do
While the amenities are neat, and the network is spreading, there’s still work to do to make JetBlue friendlier to business flyers — specifically corporate travel managers. While the airline shows no sign of doing corporate deals (Luceno says the fare structure is already competitive with negotiated rates) there is a concerted move afoot to render it easier to book JetBlue. Luceno freely admits that GDS connectivity “isn’t real-time.” And because it isn’t, “it’s possible that there can be fare discrepancies.” Corporate travel managers hate surprises, especially the kind that costs them money. “The last thing they want to do is get a phone call from one of their travelers saying that they found a lower fare on a dot-com instead of their booking tool. Although we’ve minimized that risk, it’s still possible.”
Nettlesome too is that there’s no JetBlue seat map resident in the GDSs. Luceno says that makes it tough to get the specific seat you want via the GDS. Soon, these problems should be history. While declining to be publicly specific just yet, Luceno says “We are moving towards a higher level of participation with some GDSs that will alleviate all of these issues.”
With that higher plane of participation the final piece of the proximate puzzle should fall in place. “If you’re a corporate client, every issue you’ve ever had in booking JetBlue is going away,” asserts the airline’s sales chief. So too is the complaint by corporations that they wish the carrier flew to more places. The product itself has never been an issue at this airline. Access to that product has.
Wither goes JetBlue from here? Airlines don’t telegraph future markets, or future marketing initiatives for that matter. And carriers don’t expand pell-mell anymore. This recession has further driven home the lesson that it makes no sense to loft too many seats in search of too few fannies. Airlines pick their airports fare more prudently these days. But the recent past can be predictive.