Why JetBlue’s Investors Are Hoping It’s Looking to Spirit for Inspiration

Do you remember the outcry last year when Southwest launched an advertising campaign that seemed to neglect its maverick roots in favor of an-all-grown-up corporate image?

That little brouhaha would pale in comparison to the coming storm if some JetBlue shareholders and a Cowen & Co. analyst are correct about the carrier’s future direction.

In a research note yesterday morning, Cowen’s Helane Becker upped her rating of JetBlue  from “market perform” to “outperform” on the premise that JetBlue CEO David Barger would leave the carrier when his contract ends in February 2015, and that JetBlue would toss out some of its relative passenger-friendliness [no fee for the first checked bag] in exchange for a more bottom-line-focused approach.

“We believe a management change would lead to a change in philosophy and likely morph the model similar to one of Spirit Airlines ( SAVE ), although not as extreme,” Becker wrote. “The changes would improve the financial outlook for the company in our opinion.”

The Nasdaq responded and JetBlue’s share price rose 3.24% August 20 to $12.73.

Staking Out the Middle Ground

JetBlue in recent years has tried to claim a middle ground between legacy airlines and the so-called ultra-low-cost carriers on the model of Spirit and Frontier.

But, look at all of the signals that JetBlue brand messaging is about to undergo significant changes.

In December 2013, Barger shed his duties as president and promoted then-chief commercial officer Robin Hayes to the role of president.

Anything can happen between now and February, but Barger, who has been coy about his intentions, could depart the airline, with Hayes now groomed to succeed him as CEO or another replacement might come in.

JetBlue debuted its Mint business class service on routes from New York to Los Angeles and San Francisco in June, and has been steadfast in reminding passengers in the “core” section of the plane i.e. coach that they are not being neglected.

As Unbundling Goes, So Goes JetBlue

But what is abundantly clear is that big changes — even fees for the first checked bag — are looming next year whether Barger stays or goes as JetBlue implements a partnership with Dublin-based Datalex, which specializes in airline merchandising of ancillary services.

JetBlue officials hinted earlier this year that analysts hadn’t initially understood the significance of the Datalex partnership.

“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 earlier this year.

That’s shorthand for the prospect that JetBlue intends to follow the lead of much of the airline industry by unbundling fares, and levying a bunch of new fees.

After finally debuting Wi-Fi last year, JetBlue still offers free Wi-Fi for basic surfing, but charges $9 per hour to access games and streaming media. Expect more of these kinds of charges for premium services.

The Bottom Line is Mightier Than the Brand

Getting fee-happy undoubtedly would lead to a substantial brand hit for JetBlue, but investors and the Cowen analyst believe the merchandising move would outweigh negative publicity and accrue to the bottom line.

That would make some investors happy while at least some passengers would pine away for the days when JetBlue had that awesome seatback entertainment for free, the seats with decent legroom in coach, the first checked bag at no charge, and a brand reputation that most airlines would envy.

Squeezing extra seats into some of JetBlue’s fleet is one of the options analysts are discussing.

If these trends we discussed bear up next year, then “New York’s Hometown Airline” may never be the same.