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No U.S. airline has disrupted the premium market recently more than JetBlue Airways, the first carrier to bring (somewhat) affordable lie-flat seats to domestic routes. While the product has been more successful than JetBlue executives expected, don’t look for it to expand to all routes.
JetBlue only wants to put it on longer flights where customers will reliably pay for it, executives said this week at the JP Morgan Aviation, Transportation & Industrials Conference.
“Once you get to about 2,000 miles, I think we’re in good shape from there,” said Marty St. George, the airline’s executive vice president of commercial and planning. “Under 2,000 is a little bit challenging. We’ve had a lot of customer demand to fly in places like New York to Palm Beach, New York to Fort Lauderdale. But we think it’s just too short a flight actually to justify that square footage of cabin.”
JetBlue began flying its 16-seat premium cabin, called Mint, in 2014, putting it on the two obvious routes — New York to San Francisco and New York to Los Angeles — as a strategy to try to turn the flights from revenue laggards into top performers.
Almost immediately, the economics on the key transcontinental routes changed for every airline, as industry-wide advanced purchased fares dropped considerably. Travelers could buy business class for as little as $599, a steal when most carriers charged at least $1,000. Entry-level fares are a higher now — often about $759 — but across all carriers, they’re far cheaper than pre-2014.
Now, JetBlue executives said, New York to Los Angeles is among the carrier’s top-five-performing routes. And JetBlue is adding Mint to markets that don’t often have flatbed service, including Boston to Los Angeles, San Francisco, Seattle and San Diego, and New York to Las Vegas and San Diego. Other carriers, including United Airlines and Delta Air Lines, have put their own flat-bed-equipped planes on some competitive routes.
There’s no guarantee this strategy will work — not every route has that much year-round premium demand — but JetBlue executives are optimistic travelers will pay for a quality product, even if they’re accustomed to free upgrades into recliner seats on other airlines.
“We have a business value proposition that doesn’t include upgrades,” St George said. “So if you’re in the Mint cabin, you have to be paying for it. That’s one of the reasons why the fares may appear low, but there are a lot of people who find ways to get up there without paying. That’s why that is such valuable square footage in the airline for us.”
The growth is coming faster than expected. JetBlue’s original business plan called for 11 Mint-equipped airplanes, but by the end of this quarter, the airline will have 34, executives said. Fifteen of the 16 Airbus A321s JetBlue took last year had a Mint cabin.
Reaction to Virgin America
All this might not have happened if JetBlue hadn’t lost the bidding for Virgin America in 2016.
JetBlue wanted the upstart low-cost-carrier to solidify its presence on the West Coast. But after Alaska Airlines acquired Virgin America, JetBlue changed strategies, deciding to grow its transcontinental franchise organically.
“When we looked at their customer profile, when we looked at their culture, when we looked at their fleet, all the things that you would say normally would be difficult about [mergers and acquisitions], that just seemed to fall into place,” Robin Hayes, JetBlue’s CEO, said this week at the investor event. “But that was in the past, and I think it has really driven us to accelerate Mint, and that’s been a great success story.”
The next frontier could be Europe. JetBlue executives again this week wondered aloud whether the airline should launch transatlantic routes with the Airbus A321LR, an aircraft the manufacturer will begin delivering this year. JetBlue hasn’t committed to the long-range plane, but can easily convert to it from its current orders with Airbus.
“When we look at the opportunity for potential flying to Europe, it’s really looking at how high the premium fares are and can we have the same impact on the market that Mint has had on [transcontinental routes], where it’s really been a profit driver for the company,” Hayes said.