Interview: JetBlue on Its New Bag Fee and the Passenger Experience

JetBlue unveiled its much-anticipated new fare types that include a $20 to $25 fee for a first-checked bag in the lowest fare category and reduced change and cancellation fees.

For details about the new fares see the chart below. They are called Blue, Blue Plus and Blue Flex fares. The Blue Plus fare, which includes one free checked bag, generally costs about $15 more than the base Blue fare. The Blue Flex fare, which includes two free checked bags, usually costs about $85 more than a Blue Plus fare, officials said.

In abandoning its free first-checked bag policy, leaving Southwest as the only major U.S. airline with no bag fees on a first (and second) checked bag, JetBlue now charges flyers who purchased a Blue fare $20 for a first checked bag if they change their minds and check in online or at a kiosk. Deciding to check a bag at the airport counter would cost people flying on Blue fares $25.

Only the Blue Flex fares come with two free checked bags so travelers who bought Blue and Blue Plus fares would pay $35 for a second checked bag. That’s a reduction from the previous $50 for a second checked bag.

JetBlue implemented the new fare structure through a partnership with Ireland-based Datalex despite the fact that the airline’s reservations system provider, Sabre, this week announced its own branded fare solution.

The idea behind the new fare strucuture is for JetBlue to increase profits and to allow travelers to pay for the product and service bundles that they want.

There are no change or cancellation fees for flyers who opt for Blue Flex fares, and the fees are reduced a tad for Blue and Blue Plus ticket-holders. For example, the previous change or cancellation fee for a fare $150 or more was $150 plus the fare difference. The new fee is $135 for fares more than $149 plus the fare difference for Blue fares and $120 for Blue Plus fares.

In addition to the two free checked bags and no change or cancellation fees, travelers who purchase the Blue Flex fares get perks such as an expedited security process and higher TrueBlue online booking bonuses.

Source: JetBlue

A couple of weeks before today’s scheduled launch of the new fares, Skift accompanied Marty St. George, JetBlue’s executive vice president of commercial and planning, on a tour of an A321 at JFK Airport in New York to learn more about the airline’s thinking behind the new fare structure.

An edited version of the interview follows:

Skift: So what was your thinking about rolling out these new fares?

Marty St. George: The goal we had at looking at fare options was to try to bundle different product elements together but do it in a JetBlue way and, we should obviously think about transparency. The one thing we see on most other airlines is that you walk in the door, you think you’ve got a $9 fare, at the end of the day you’ve paid $120. It’s only after you click the $9 and you see all the add-ons.

The add-on could be things like, get me a ticket, get a seat assignment, carry a bag on — things like that. It’s a bit of a bait and switch. The goal that we wanted was to make sure that when I look at the display on the website and you look at Blue, Blue Plus and Blue Flex, the price you see is everything in that bucket. So it includes all of these elements. There are no add-ons after the fact. At JetBlue we want to make sure that the price that we show is the price you’re going to pay.

Now, we do still have other add-on options you can choose to do. You can choose to add on things like an Even More space seat but the core product, if all I want to have is this Blue Plus experience, that’s the price you’re going to pay. It is very important to us for the customers to understand. There are certain airlines that say, ‘Oh no, no, on your base fare, you get a seat assignment, no problem.” But you go on their website and the only seats available are middles. But to me, getting a seat assigned in the middle, that’s not a seat assignment.

That’s basically the seat I don’t want assigned. If you really want an aisle seat, well you have to pay for that. If you’re on just a plain Blue fare, you get access to all the same seats in the airplane we get access to in the Blue Plus and Blue Flex. You get the full Jet Blue experience. It’s really important to us that as we design this product, that customers did not see this as a bait and switch game. Customers will say, ‘You know what? This is still going to be the JetBlue I know and it’s the JetBlue that has been the best experience of any airline in North America,’ as we were in 2000 and we’re going to be 2015.

Skift: What did you have to do to get ready for this rollout marketing-wise, public relations-wise and technology-wise?

St. George: I think the two biggest places we had to focus on is technology and on crew member preparedness. As part of the launch of fare options, we’re going to be launching a new website, a new JetBlue.com. We have a partnership with a company called Datalex in Ireland. They really give us the flexibility to offer bundles like this.  If you look at the sort of standard …

Skift: You mean the way global distribution systems like Sabre handle fares?

St. George: Yeah. That sort of thing. You can’t really offer that same sort of service. So it’s important to us that we want to do it in a way that is very customer-friendly. Those systems are great systems. We still use Sabre as our backbone, but they’re definitely focused on, ‘OK, here’s the one price, now give me all the add-ons.’ We want to be able to bundle things up together. I think that’s why we went in the direction we did with Datalex.

The second thing we did was we also relaunched our kiosk product. So we’ve gone off of the Sabre-based kiosk product we’ve had historically, and moved to IBM software. The hardware is actually the same, it’s just was you put in the software. The IBM software has been out there since January or February, I think. That is structured so that it’s much easier to buy these things at the kiosk. If it turns out that your plans change or if you didn’t initially but now you want to check a bag, it will be much easier to buy with the IBM software than with the previous Sabre software.

The other place that was a big part of the preparedness for us was with our crew members. This is definitely something that’s going to be a difference for them, whether it is airport crew members as far as transactions or flight crew members. For the airport crew members it is all automated. So when they check you in today it will automatically pop up if you need to pay a second-bag fee. If you bought Blue Plus, it’s going to let you check in like you do normally. With Blue Flex, if you’re on a Blue Fare, and you choose at the last minute to add another bag, it’s going to be an automated process for crew members.

Honestly, we’ve had a lot of conversations with other airlines — not in North America, obviously — that have gone through this transition themselves, and what we realized, and I think this is one of the reasons why we’re actually doing what we’re doing, is that customer behavior has already changed very much to this world of pack as little as you can, and bring as much on the airplane as you can. So the carriers we talked to that expected really big changes in the cabin, didn’t have that amount of change in the cabin. That being the case, we’ve still gone through the process of training our in-flight crew members as far as how to manage a bag in the airplane.

Skift: So you’re selling this as customers now are going to have more choice, improved customer experience, but there’s going to be somewhat of a backlash anyway. How do you prepare for that?

St. George: I think backlash is a very interesting phrase. I’m not going to call it backlash. Honestly, one of the reasons that we’ve focused on launching this with all the things about JetBlue experience is, Jet Blue’s product is still going to be the best product in any airline. If you go back to communications on Investor Day, which is only focused on giving financial guidance to Wall Street, it ended up being a financial story.

With respect to a customer experience story, this investment is going to cost a lot of money. We’re investing in things that customers tell us is most important to us. They want comfort, they want legroom, they want TV. These are all places where we are making really big investments. I should mention Wi-Fi too. So from a backlash perspective, this is still going to be the best product of any airline. From that perspective, I think that once customers actually get on this airplane, or an airplane like this, and see what this product is like we’re not really too worried about it.

Skift: So you’re saying this is going to sell itself once people try it.

St. George: Absolutely. That’s the JetBlue experience today. So much of what my team focuses on is on trial because this is a business that’s been commodotized so much. I think if you look at online travel agencies you just pull up the market, look for the lowest fare and it’s treated like a commodity. We are not a commodity product. This experience is significantly different.

I was over in Hamburg back in March. When we were over there looking at the delivery of an airplane, we got on an A321. We were with the delivery people who manage the transition process and selling the airplane, and someone I never met before at Airbus says ‘This airplane? Nobody buys airplanes like this. I’ve never flown you, I don’t know what the story is, but this is amazing.’

We just saw an announcement that Frontier is going to 186 seats on an A320, and 230 seats on an A321. The world is going in a very dramatic direction toward more and more commoditization. That’s not where we’re going.

Skift: Are you going to sell these fares through the online travel agencies?

St. George: I’ve been working with the OTAs to make sure that technology-wise, we can sell them. Different OTAs have different abilities. Our goal is to have them eventually sell on the OTAs. They will not be there on day one.

We want people to come to JetBlue directly. For the lowest fare it’s always going to be on JetBlue.com. We think it’s very much to the customers’ advantage to buy on our website. If you buy on OTA your personally identifiable data that you give, things like your email address, your phone number, they don’t give that data to us. I think if you look at the customer disruptions we have there’s a disproportionate percentage of people who don’t get handled well have booked through third-party channels. [Spirit CEO] Ben Baldanza said that multiple times about Spirit. If you looked at his complaints, it is way over-indexed where people are complaining they went through OTAs because they just don’t know what they’re getting.

Skift: The global distribution systems [Sabre, Amadeus and Travelport] have a hard time handling these type of fare bundles but your goal is to get it to them?

St. George: They all recognize they need to get to something that allows this. There’s the IATA standard, NDC (New Distribution Capability), that’s going to make this a lot easier. Most airlines are working to trying to get the NDC standards up and running.

Skift: Can you talk a little more about the new fare bundles? [This interview took place June 9, a couple of weeks before the launch of the new fares.]

St. George: The one thing I would say is that each one of these bundles has a little more stuff in it. It’s not just throwing in a bag. We have lower change fees and same-day changes. It is a bundle of benefits. The price gaps between Blue and Blue Plus are still going to be very low price gaps. We really want to incentivize people to buy this before they get to the airport. The biggest reason for that is we don’t want customers to feel surprised.

We don’t want them to show up at the airport and say, ‘What? I have to pay for a carry-on bag? I have to pay for the seat assignment?’ What you buy on the website is a great experience, and you know exactly what you’re getting. That’s one of the reasons why it’s taken us this long to actually launch this because we had to have the technology up-front so we could do it in a JetBlue way.

Skift: Why did you lower the change fees?

St. George: The funny thing is the reason we have change fees is because we have another benefit at JetBlue that I think customers understand conceptually and that is that we don’t overbook. So if you have a confirmed seat on JetBlue, you are going on that flight. We don’t bump anybody because you are going to go. In a lot of ways what this is focused on is that if your flying to Fort Lauderdale tonight at 5 o’clock and you’ve got to move off, I’m not going to re-sell that seat so I need to get compensated for someone who’s not going to be on that flight.

That’s one of the reasons why the change fees go down the further off you book, as well. The way it is structured right now is if you’re going book 30-45 days out then the change fee is much lower because I have a better chance of re-selling that seat.