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JetBlue May Begin Charging for the First Checked Bag Next Year

@denschaal

Apr 24, 2014 12:30 pm

Skift Take

The lure of bag fees may be too much for JetBlue to resist, but it would take a big brand hit if it decides to do so. Coupled with the airline’s new business class service, many passengers will wonder if the JetBlue they loved is gone forever.

— Dennis Schaal

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David Goldman  / Associated Press

JetBlue sees dollar signs here. David Goldman / Associated Press


JetBlue is open to the possibility of charging for first checked bags next year, a move that would leave Southwest as the only U.S. airline balking at charging for first and second checked bags.

Robin Hayes, JetBlue’s president, addressed the issue during JetBlue’s first quarter earnings call today, opening the door to what would be a dramatic change in JetBlue’s bag-fee policies.

Without providing details, Hayes said charging for a first checked bag could come in the context of offering various fare bundles, and giving passengers more choice.

He said JetBlue’s investment in a partnership with Dublin-based Datalex, which will provide the technology as a foundation for a new merchandising platform for the airline, “went a little bit unnoticed.” JetBlue and Datalex announced the partnership in January.

“This strategic agreement with Datalex will further strengthen our ecommerce capabilities with a state-of-the-art merchandising platform and expanded self-service capabilities,” Eash Sundaram, JetBlue’s chief information officer, said when the deal was announced.

In an environment where airline passengers get more choice, perhaps JetBlue would shake its hesitance to charge for first checked bag fees and pursue opportunities for further monetization, Hayes said.

JetBlue currently doesn’t charge for a first checked bag, but passengers must pay $40 for second checked bags and $75 for the third checked bags per flight.

Southwest has remained adamant to date in viewing its policy of not charging for the first two checked bags as a competitive advantage. It would be alone in this stance among U.S. airlines if JetBlue begins to charge some customers for first checked bags next year.

Here’s what Hayes said in full about the possibility that JetBlue would charge fees for first checked bags next year:

“I do think that the — it kind of went a little bit unnoticed, but — I mean, we look at the investment that we made in our partnership with Datalex to be very significant in this area in what it’s going to enable us to do in the future. We’ve also made insignificant investments in Mosaic and our TrueBlue base to really create a larger group of customers who are flying more frequently.

“And those bring a lot more value to us just because of sort of the amount they spend, the amount of trips they’re taking. So again, going back to Datalex, our ability to create a retail merchandising capability that’s greatly superior to what we have today, to create bundled offerings, which aren’t necessarily going to look like the low-cost goods.

“But certainly, it will allow us to monetize not just some of the product offerings we have today, but maybe take advantage of things that we don’t today. We asked a lot about the first bag fee. Our hesitance around that in the past has been we believe that in many of our markets we get a significant fare premium because we don’t charge a bag fee and customers certainly take that into the fares.

“But in a wide way we can start to give customers bundled offerings and choices that allows us to — if you like, protect the fare where we’re seeing — and in the fare but maybe go after our opportunities like first bag, where maybe today we don’t do that. I think the investment in Datalex we’re going to start seeing into the early part of next year allows us to do that.

“So I’m very excited about what’s that going to drive. And I anticipate and believe that’s going to allow us to significantly enhance some of our ancillary offerings, particularly around things like first bag into next year.”

Any move to charge bag fees doesn’t mean that JetBlue is intent on becoming a discount airline in the mold of Spirit or Allegiant airlines, however.

For example, Hayes said it would be “hard to make the case to increase [the number of] seats on its aircraft, as many other airlines have done, because it would increase crew costs and cut into the $190 million in revenue that the airline expects in 2014 from its  Even More Space seats.

Barger agreed that JetBlue has looked at the playbooks of the ultra-low cost carriers and network airlines, and opted for “a third model.”

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