Travel Rewards Credit Cards

Jul 25

JetBlue Business Plan Continues To Evolve

When it comes to the in-flight experience, I think JetBlue has one of the best. When it comes to rewards programs, I think JetBlue has one of the best. And when it comes to credit cards, they definitely have the best. But there’s one area in which they seem a little less consistent. And that isn’t a bad thing.

JetBlue Tweeks Business Plan

Earning profits as an airline is notoriously difficult, and JetBlue has done an admirable job. The airline has made money in every year since (and including) 2009, a feat that legacy carriers have struggled to match. It began as a “low cost carrier,” with less expensive fares but the same, or better, amenities (The airline had considered gourmet meals instead of televisions when it first began. Good call on the TVs.). It had traditionally viewed itself as a leisure carrier but, as the airline expanded and overlapped with increasing amounts of competition, it responded by adding a Mint premium product and offering free internet access. It did reduce seat pitch by a few inches, but the airline remains the most spacious in coach.

JetBlue’s ability to anticipate consumer demands has allowed the airline not only to survive but actually to grow.* Its Mint product (which I will do a review of shortly) has been a home run and it has invaded other traditionally business markets, such as the New York – Boston shuttle, which it serves with an all-coach product.

Old Is The New Blue

A photo of the new cabin. Looks a lot like the old cabin, only bluer.

JetBlue reported its quarterly earnings today, and two items stood out as a continuation of the “transition to a mixed business-leisure” airline. In particular:

  • The airline cut back growth just a bit. With ATC issues clogging up the skies in the northeast (2/3 of JFK flights, for instance, were affected by delay programs in the second quarter), it pulled back a bit on its expansion plans. Instead of growing 5.5-7.5% this year, the airline will grow 5.5-6.5%. While that seems like only a slight change, every bit of growth matters in the airline industry.
  • The airline is continuing to concentrate on its focus cities. A focus city is one in which the airline concentrates its capacity, similar to the concept of an airline’s hub.** Most of JetBlue’s new flights are into either Boston or Fort Lauderdale, two key focus cities. In fact, over the past five years, 97% of growth has touched either New York, Boston or Fort Lauderdale, and 92% have been into the latter two cities.

The Bottom Line

Things will get tougher for the airline going forward. Competitors no longer view it as the cute little upstart, but rather, as a real player. The airline has always shown the ability to innovate to meet demand. Let’s hope that it continues to do so.


*Beginner’s Hint: Counterintuitively, growing faster actually helps an airline reduce costs. A large percentage of costs for an airline are fixed, meaning that you have to pay them whether the plane has passengers or not. Those costs don’t grow even if the airline does. For example, if the airline grows 10%, you don’t need to add another 10% of a CEO. If you add seats to the airplane, the rent expense for that plane doesn’t change. Etc.

**Beginner’s Hint: Even if you don’t know exactly what a “hub” is, you’ve likely flown through one. Airline hubs are cities where the airline has very high market share and connects a lot of passengers. For example, Delta airlines has hubs in Minneapolis, Detroit, Salt Lake City and Atlanta so, if you are flying them, there’s a good chance that you will have a connecting flight in one of those cities. It’s not cost-effective for an airline to fly passengers from, say, Phoenix to Providence; there simply aren’t enough people flying those routes. But if you can fly them from Phoenix to Atlanta, and then put them on another plane with all the other passengers who have been collected in Atlanta to fly to Providence, it becomes much more efficient.

JetBlue is a “point to point” carrier, which means that it does not connect many passengers. Instead, it concentrates on “focus cities” and flies you non-stop from there. The major focus cities for JetBlue are Boston, New York and Fort Lauderdale. Feel free to email me if you have any questions about the difference between the two.


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