What’s Behind JetBlue’s Investment in a Small Jet Airline?

Can JetBlue Airways grow on the West Coast without sending more of its planes to California?

That’s a distinct possibility now that JetBlue has bought a piece of one of the nation’s more unusual airlines. It’s JetSuiteX, a small six-month old carrier that flies to only six West Coast airports, including Burbank Bob Hope, San Jose International and McClellan–Palomar Airport, near San Diego.

JetSuiteX would be unremarkable, except for one major advantage. It is classified as a public charter airline, a favorable distinction because it means passengers on each regional jet do not need to clear security, allowing them to arrive only 30 minutes before departure. And because public charters can have no more than 30 seats, JetSuite’s Embrarer E135s have seven fewer seats than the same planes had when they flew as American Eagle. Every passenger has plenty of legroom.

In announcing the investment on Tuesday, JetBlue executives were coy about how much of JetSuite the airline owns, and they declined to give concrete plans for how the partnership with evolve. But presumably, the deal will open intriguing possibilities for JetBlue customers. It might be possible for passengers to fly from New York to Burbank on JetBlue, and then transfer to JetSuiteX for the short flight to San Jose.

“We just see a a great opportunity on the West Coast in terms of offering customers a much more convenient alternative in terms of how to fly,” JetBlue CEO Robin Hayes said Tuesday on the carrier’s third quarter earnings call. “We think the JetSuiteX model has plenty of potential to grow. It’s very exciting when you can offer customers private jet type amenities at a commericial airfare from very convenient airports.”

The West Coast is now a point of emphasis for JetBlue, after the company lost on the bidding for Burlingame, California-based Virgin America earlier this year. JetBlue’s main Western base is in Long Beach, California where it operates a small focus city. But a local noise ordinance limits how much it can grow there.

“We are now working with the JetSuite team to put a commericial agreement in place that will allow JetBlue customers to continue to benefit from a very creative and disruptive travel option,” Hayes said. “It’s a small investment but can it grow? Of course. And we’re going to work hard to really help the JetSuite team execute well in making this a much bigger proposition on the West Coast.”

JetSuiteX is led by Alex Wilcox, a JetBlue employee from 1998 to 2004. After serving as JetBlue’s director for the Western United States, Wilcox founded JetSuite in 2008, and for eight years the company focused on the traditional private jet market, offering relatively cheap prices for jets that are a little less opulent than what the competition sells.

It’s still in that business, but the company is expanding into public charters, selling tickets on its website. Travelers can buy a one-way JetSuiteX ticket from Burbank to Las Vegas for $99, only slightly higher than Southwest Airlines charges on the same route.

By next year, JetSuiteX expects to have 10 Embraer E135s. These used planes have fallen out of favor for the regional airlines operating as United Express, Delta Connection and American Eagle because they’re cramped and not fuel efficient. But they’re cheap on the used market, and Wilcox saw an opportunity, spending $1 million per plane on new seats, power outlets and WiFi.

On the earnings call, JetBlue’s Hayes said the carrier seeks to additional unique investments, both directly and through JetBlue Technology Ventures, its Silicon Valley-based venture capital subsidiary.

“These are more current and more modern manifestations of what we have been doing for 16 years,” Hayes said. “It is certainly not intended to poke anyone in the eye, but it is intended to make sure that we stay at the forefront. I think there’s a lot of complacency out there that the airline industry can’t get disrupted. But we disagree with that.”