JetBlue Sees Rapid Covid Tests as Key to Near-Term Recovery Ahead of Vaccines

The widespread adoption of cheap and accurate rapid-response, Covid-19 antigen tests will be the key to the recovery of the airline and travel industries, JetBlue Airways executives said on Tuesday. Quarantines, on the other hand, are a blunt instrument that have not proven effective and discourage people from traveling, they added pointedly.

JetBlue’s home market of New York continues to mandate quarantines for visitors from several states with high Covid-19 infection rates. Over the summer, the carrier did see demand fall off as the New York quarantine — and quarantines in other states where it has a large presence, like Massachusetts and California — stifled demand. But when New York and California dropped mutual restrictions on visitors, demand started to rise, JetBlue President Joanna Geraghty said during the company’s third-quarter 2020 earnings call. The company is working with state and national governments to press its case that quarantines are not as effective as testing in controlling passengers’ potential to spread the disease.

But the tests themselves must change, Geraghty said. The current standard is a PCR test, administered by a clinician with a swab of the nasal passages. These tests, which JetBlue says are about $150 for passengers, are too expensive to be practical. In order for demand to bounce back more fully, cheap and accurate rapid-response antigen tests need to be developed. These could be taken in the airport or at a passenger’s home before departure or after arrival. Crucially, Geraghty stressed these tests must be able to screen both symptomatic and asymptomatic people, which antigen tests currently do not.

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“We don’t believe a vaccine is necessarily a panacea,” Geraghty said. “We definitely think it’s critical to longer-term recovery, but in terms of returning to something that even looks remotely like a pre-pandemic travel level, we’re going to need to have in the short- and medium-term a rapid testing strategy.” And state and national governments will need to coordinate on the types of tests they will accept to waive quarantines for incoming travelers.

Leisure is the key

After staggering during the initial months of the pandemic, JetBlue has found its footing with leisure travel. The carrier, unlike network carriers like American, Delta, and United, has always buttered its bread with leisure, not business-travel, demand. This has stood it in good stead as the pandemic has worn on. Despite rising infections around the country, CEO Robin Hayes said demand is starting to return. “We have seen signs of pent-up demand from customers who want to visit their family and friends or want to go on vacation,” he said. “And we believe we will remain extremely well positioned to serve these customers as they return to air travel.”

But JetBlue isn’t relying on the strength of its pre-pandemic network to attract these customers. It has added about 60 new routes to leisure hot spots to take advantage of what travel demand exists. It is adding more flights to Los Angeles and is adding more connections to the Latin America and Caribbean destinations it serves. JetBlue is adding more flights to Florida, as most U.S. carriers are, and these flights are doing well, despite increasing competition and despite quarantines for incoming Florida travelers in JetBlue’s home market of New York.

Transcontinental flights between the Northeast and California also are showing strength. On these flights, JetBlue’s premium cabin is doing well, Hayes said. On Caribbean flights, on the other hand, JetBlue has seen more demand for economy tickets and is deploying aircraft without the premium cabin on those routes.

As consumer confidence returns, passengers are booking tickets further out from the day of departure, reversing a trend seen industrywide earlier in the pandemic for tickets booked close to the day of travel. Demand is relatively strong, Hayes said, for Thanksgiving and Christmas travel.

Despite the optimism, no matter how cautious, JetBlue reported that its third-quarter capacity — or the number of seats it flew — was down 58 percent compared with last year, and it expects fourth-quarter capacity to be down by about 45 percent from the same period in 2019. The company believes it won’t be until the end of 2021 that travel will start to approach 2019 levels, and it could take longer than that. Much depends on Covid-19’s trajectory through the U.S. and whether testing becomes more widespread or a vaccine is developed.

The Middle seat

JetBlue is among the few U.S. airlines that has continued to block middle seats as a social-distancing measure. This will start to end on December 1, as the carrier begins to lift those restrictions. “The middle seat block has largely been about rebuilding customer confidence in travel,” Geraghty said. “It’s not something that’s sustainable.”

Earlier in the pandemic, science did not understand how the virus spread, nor how it could spread within the confines of an aircraft cabin. With evolving science on transmission and numerous studies on aircraft-cabin ventilation and filtration, JetBlue says it is confident that the middle-seat block is no longer necessary.

Southwest recently said it will stop blocking middle seats on December 1. Alaska Airlines, on the other hand, will continue blocking middle seats through January 6.

Third-quarter results

Despite management’s “cautious optimism,” JetBlue’s third-quarter results were grim. The carrier reported a 76 percent decline in revenue from last year, to $492 million. This resulted in a $516 million operating loss, and an operating margin of -105 percent. But. this was better than the company expected. It had planned for an 80 percent decline in revenues for the quarter. Also better than expected was daily cash burn of $6.1 million. Management had expected daily cash burn to be between $7-9 million. Fourth-quarter cash burn is expected to be between $4-6 million. The carrier ended the quarter with $3.1 billion in cash, partially raised through a federal loan.

JetBlue is pinning hope on its new alliance with American Airlines, which is now undergoing regulatory review. This alliance will bring traffic to JetBlue’s Northeast bastion, Hayes said. “Getting this partnership off the ground quickly is critical to…get us on the road to a faster recovery and job growth.”

Unlike many of its rivals, JetBlue largely avoided layoffs, as more than 6,600 employees took either voluntary separation packages or extended leaves of absence. These programs will continue if JetBlue needs to trim its roster further. The company has joined other airlines in lobbying Congress to extend the CARES Act’s payroll support program through March, although with the Senate adjourned until at least November 9, more federal support is not looking likely in the near term.

“The reality is that we are still navigating this unprecedented crisis, and we expect demand to remain depressed for some time,” Hayes said.

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