Can JetBlue Please Both Customers and Shareholders?
by Michele McDonald /JetBlue Airways outlined a number of steps it plans to take to increase shareholders’ returns on their investments.
Beginning in the first half of 2015, the carrier will adopt a “fare family” approach to pricing, offering three bundled options.
The first will not include a checked bag. The other two will include one and two checked bags, respectively. The two higher-priced bundles will include other perks as well, such as bonus frequent flyer points and more flexibility in changing tickets.
The move leaves Southwest as the only U.S. carrier that does not charge for checked bags.
That’s ‘refreshing’
JetBlue also will undertake a “refresh” of its A320 cabins, bringing them into line with the carrier’s newer A321s.
It will install lighter seats enabling the carrier to add 15 seats and still offer the most legroom in standard coach in the U.S.
Actual seat pitch will be reduced, from 34.7 to 33.1 inches, but the next best is Virgin America, with 32.6. The seats have adjustable headrests, seatback video screens and – a boon to JetBlue’s highly connected travelers – a power port.
The A320 retrofits will begin in mid-2016.
JetBlue said it will roll out additional mint services in the New York-Los Angeles market through the fourth quarter and in the New York-San Francisco market through the first quarter of next year.
The premium service, which includes flat beds, was introduced in June to critical acclaim and has become very popular.
Stressed out
The carrier has been under pressure from Wall Street to improve its profitability.
Analysts have said JetBlue CEO David Barger cares more about passenger comfort than shareholders’ returns. The difference of opinion has led to Barger’s announced departure when his contract ends on Feb. 15.
Since then, observers have speculated about whether JetBlue could make its investors (and Wall Street analysts) happy without damaging its brand, which was born in 1998 during the industry’s dark days when the idea of an airline having a brand at all was almost laughable.
But JetBlue forged ahead to become one of the few U.S. airlines that could lay claim to being hip.
Not so sure
The FlyerTalk community was skeptical that JetBlue could pull off a transformation and remain the JetBlue that its loyal customers know and love.
Tim Winship, editor of FrequentFlyer.com, bemoaned the changes, blogging that “The worst fears of JetBlue loyalists were confirmed today” and adding, “This isn’t your father’s JetBlue. Will it be yours?”
But travel industry analyst Henry Harteveldt believes JetBlue’s approach is smart.
He noted that the carrier resisted the move to charge for inflight wi-fi, opting instead to pursue sponsorship deals with Verizon, the Wall Street Journal, Time, and other companies.
A carrier with heart?
JetBlue also will continue to offer free snacks, free television on bigger screens with more channels, and frequent flyer points, even at the lowest fare tier.
“This is in keeping with the brand promise,” Harteveldt said. “They’ve created a set of fares that will let the traveler decide whether they want savings or more amenities. It respects the traveler’s brain and wallet, and it respects JetBlue’s heart.”
A key factor in customers’ acceptance of the new regime will be the pricing of the fare families. If the gaps between tiers are too wide, customers may revolt, Harteveldt said.
But JetBlue can’t reveal its pricing this far ahead – that would be considered “signaling” to competitors.