JetBlue wants to be a challenger airline on a nationwide basis. If it acquires Spirit, then the Midwest would not be merely something to admire from 30,000 feet.
JetBlue President and Chief Operating Officer Joanna Geraghty teased that beyond recent launches of a trio of routes from New York to London, including JFK-Heathrow, JFK-Gatwick, and Boston-Gatwick, the airline is contemplating expansion to continental Europe.
Continuing to grow JetBlue’s network in Mexico is also on the to-do list, but Geraghty quipped “right now, our plate’s a bit full” given the airline’s engagement in an antitrust trial pertaining to its Northeast Alliance with American Airlines, and JetBlue’s pending acquisition of Spirit.
Watch the video and read the transcript below.
Edward Russell: All right. Here we go. Excellent. Welcome, everybody. I’m Edward Russell, the editor of Airline Weekly, Skift’s daily airline news site and in-depth analysis every week. I’m joined today by Joanna Geraghty, president and chief operating officer of JetBlue since 2018. Joanna, welcome.
Joanna Geraghty: Thank you.
Russell: Excellent. This panel, we’re talking about JetBlue balancing growth and other opportunities. I wanted to start out with a little bit of growth. JetBlue launches new service between Boston and London Heathrow today, which is pretty exciting. It’s been a long time coming. Tell us a little bit about that. How’s it going?
Geraghty: Yeah, it’s great. We launched service to London last year around this time from JFK. We operate one daily JFK-Heathrow, one daily JFK-Gatwick. We launched Boston-Gatwick earlier this summer. And today we launched Boston-Heathrow, which obviously with the Queen’s passing, it’s a much more muted celebration. But very excited about our entry into London, our flying across the pond.
So far, it has been fantastic. The product is amazing. 24 seats of Mint configured seats, great food. We have Dig Inn. If you’re from New York, you know Dig a little bit. It’s a pretty cool restaurant. I actually think Core, our back of the cabin is going to disrupt quite a bit as well. And we’ve won a number of awards. So really, really excited. We have a wonderful in-flight team that delivers that service.
So far, load factors have been through the roof, and I’d say it’s pretty tough to get a Mint seat flying across the pond. We look forward to continuing to add an additional Gatwick frequency later this year. And then who knows what’s next for further European expansion?
Russell: Well, that’s what I want-
Geraghty: I know it’s next, but [inaudible 00:01:52]. Yeah.
Russell: I mean, I would love that. I mean, if you’d like to give us any hints. Are we thinking continental here?
Geraghty: I think maybe Continental Europe.
Russell: OK, OK. But Joanna, JetBlue’s international expansion, transatlantic expansion has been coming for a few years. It’s been a project. Now, I know for you, you were saying in a Syracuse University commencement address a couple years ago that you’re interested in all things international. How did that play into JetBlue deciding going across the pond and going to Europe? I mean, it sounds like that’s a passion of yours.
Geraghty: Sure. Yeah. I mean, I have a master’s in international relations and I went to law school in Syracuse. When I graduated, I thought it’d be very fun to work for a global company. As you think about JetBlue, actually 30 percent of our flights are international already just to the Caribbean. And having spent a year in London myself, that was very high on the list.
I’ll say our CEO was also British, so I think it was a passion point of his to be able to fly himself over there as well. But London is the perfect opportunity for JetBlue. When you look at, before we flew there, the number of markets that JetBlue didn’t serve, London was at the top of the list, both out of Boston and out of JFK. So it makes for the perfect match to our network.
Russell: Definitely. I have to say, the advertising that you guys have done with JetBlue and Big Ben and all of that, it’s gorgeous. It’s really on point and stuff.
Geraghty: Yeah. It’s very fun.
Geraghty: Thank you.
Russell: Speaking of growth, international is only one part of JetBlue’s growth story. Another big part is JetBlue has a deal to buy Spirit Airlines for $3.8 billion, which is pretty big. It’ll make JetBlue the fifth-largest US airline if it goes through. Can you tell us a little bit about what’s the rationale behind acquiring Spirit?
Geraghty: Yeah, we’re very excited. For those who’ve watched it in the news, it’s been quite the journey. It’s probably… Well, it is, one of the very few takeovers that’s been a bit more challenging over the years. Obviously stepping into an environment, the Department of Justice, that we fully recognize may take a bit longer than in prior transactions.
We very much believe that the Spirit JetBlue combination will allow us to be a national challenger to the other legacy carriers. If you think about the current environment that we live in today, Delta, American, Southwest and United represent about 80 percent of the domestic seats in the United States. That leaves very few seats for others to try to grow with. Frankly, organic growth takes a long time.
For JetBlue, we really want to accelerate our organic growth strategy. We want to build our fleet. We want more crew members, more people. We love the fact that they have a footprint in Florida. We intend to be both in New York and in Florida.
And then we like the customers that they have and how we evolve the JetBlue brand. We’ll be configuring Spirit to the JetBlue brand and the experience that you know and love when you fly JetBlue, but we also intend to offer and continue to offer great low fares, which is really part of I think what’s made JetBlue so special.
It’s very challenging in an environment where you are dominated by four legacy carriers to affect competitive change. And JetBlue has done that since our inception. And we want to do more of that. We want to bring more low fares, a great product, a great service. You shouldn’t have to choose between both. You can have a great product and a low fare, and that’s what we’re going to do with Spirit.
Russell: Excellent. Well, it’s funny you talk about challenging because this is the first real airline bidding war that I’ve ever gotten the chance to follow. I wrote about the American, US Airways merger back in 2013, and that was almost dull comparatively how this went down. Excellent.
You mentioned the brand. I mean, that’s one thing. Skift is big about branding. And I have to ask, Spirit is an airline that a lot of people love to hate. It’s not [inaudible 00:05:26] the best brand. How do you buy an airline like Spirit without diluting the JetBlue brand, which is more better? It’s better, frankly.
Geraghty: It’s a great question. I mean, with any transaction, it’s going to take some time to take Spirit and bring it into the JetBlue experience, the JetBlue brand, the JetBlue product. So there’ll be an evolution over a few years, but at the end of the day, Spirit has some great team members and Spirit does what Spirit does very well. They know who they are, and they lean into that.
We intend to take that excitement that they have and evolve it to the JetBlue brand. We have a basic economy product that we think will play well for that more price sensitive customer. And then we also have our Even More Space product and our Mint product that we think a lot of Spirit customers, if they were given the opportunity, would look to upgrade to those parts of the cabin.
At the end of the day, it becomes JetBlue, the product offering, the brand, but we intend to continue to do what we do best, which is disrupt the industry. If you think about 1999, 2000 when JetBlue was founded, there were no TVs on planes. Leather seats were something that people had never thought to put into an economy class product.
We’ve disrupted for years. Our Mint product, before we launched Mint to the West Coast, there were very few lie-flat seats. Now, you stumble over lie-flat seats to the West Coast. And so, we’re going to continue to do that. We’re going to disrupt, but we do think you can balance low fares and great service. It’s going to take a little time to get there, but I am so excited. We’ve met a number of wonderful Spirit team members and look forward to bringing them into the JetBlue family. And we know they’re excited as well, particularly their frontline.
Russell: Excellent. Excellent. I mean, that’s good to hear. And you’re right, it will take some time. Every airline merger does for sure, I love how you talk about the excitement and the screens. I flew on JetBlue first time in 2001 I believe with the screens. I was really excited because I don’t know if you guys remember, it was big, no dropdown in the front of the cabin. I could decide when I watch. But now I’ve got a kid who similarly very much likes the screens and playing with them and stuff.
Of course, one big question with the merger is going to be antitrust approval. I have to ask, the Northeast Alliance with American and then there’s the merger. What happens if the Department of Justice just says one or the other? What do you guys do?
Geraghty: Yeah, we think you can do both. The Northeast Alliance, which is our partnership with American Airlines, we’ve introduced 50 more destinations. We’re currently flying over 257 routes out of New York. We are growing New York. We are growing Boston. We are trying to become a really viable competitor jointly with American against the Deltas and the Uniteds in the Northeast. That is completely separate from the Spirit transaction, which really involves the rest of the country.
If you live in New York, you recognize it’s quite congested. There’s lots of ATC delays. It’s a challenging operating environment. And we are really looking forward with Spirit to expand our footprint, provide a better operation for our customers, provide more choices, a deeper network across much of the country that we don’t currently serve.
One of the top questions we get asked is, what about the Midwest? Why doesn’t JetBlue fly there in a meaningful way? What about some of these states? We just fly right over them. Spirit is going to allow us to fly to many of those locations, which I think is exciting. And then American allows us to continue to really make sure that we have a solid presence in the Northeast and we continue to be a strong competitor to the other legacy carriers there.
We view them as entirely complimentary. We clearly like spending time with the DOJ because we have a DOJ trial with Spirit, sorry, with American next week. And then we’ve got our process with the DOJ that we’ll follow with our Spirit transaction. But we’re confident once the Department of Justice understands how these two work together and how the environment that we live in right now, where you have 80 percent of the market consists of four large carriers, JetBlue just wants to compete. We want to bring more low fares, more great product, more great service to the United States. And sometimes you got to do that in an organic way when the playing field is set up the way it is.
Russell: I think you might be the only one who says you’re enjoying spending time with the Department of Justice, but more power to you. It’s funny you talk about the network benefits, because I’m based in Washington, DC and JetBlue serves DCA quite well to Boston, to Florida, but you don’t go many other places. But you bring Spirit in, which has a large operation of Baltimore, Washington. You become a much more relevant player in my market. And it’s exciting.
Geraghty: Yeah, it is. We want to be a challenger brand. We want to be a national challenger brand, and we believe the way to do that is by acquiring Spirit and complimenting that with the Northeast Alliance.
Russell: Excellent. Excellent. You mentioned briefly the DOJ’s lawsuit that goes to trial next week. Any outlook for that? Give us your strategy if you can.
Geraghty: Yeah. I’m going to bring you behind the tent, tell you what we’re doing. We’re confident that we will prevail. Again, this is about the JetBlue effect. It’s about bringing more low fares, a great product and service. If you look at everything that we’ve done since our inception, whether it’s introducing ourselves into congested and legacy dominated hubs, whether it’s introducing Mint, whether it’s really bringing a great service to economy class customers, we want to continue to disrupt. We’re confident that we’re going to convince the DOJ that the JetBlue effect will continue.
And it is. If you look at the Northeast Alliance, Delta has doubled down in Boston. United has added a lot of capacity into Newark. And that’s all in response to what JetBlue and American are doing in the Northeast. If that’s not a competitive response from legacy carriers that will drive competition and drive fares in a positive way, I don’t know what is.
Russell: Speaking of Delta, I thought this was very interesting, I saw that you guys or you and American have called on Delta executives to testify at the trial next week.
Geraghty: I mean, at the end of the day, the environment, as I mentioned is you’ve got four dominant carriers. And so in order for a carrier like JetBlue to grow, we need to be given that same ability that American, that United, Southwest and others have been given.
And then I’ll also point out, you do have a lot of other carriers out there, they’re smaller, that this will allow them to accelerate their growth, whether it’s Breeze, Avelo. Frontier obviously will continue to grow. They have one of the largest order books out there.
Part of what we’ve indicated we’d be willing to do in Spirit is that we would divest some of our slots, the Spirit slots that we would get in New York, as well as some other parts of the country. That would provide an opportunity for those carriers to grow as we look to acquire Spirit.
Russell: Excellent. As a reporter, I’m very looking forward to watching all of this play out.
Geraghty: Yep, interesting.
Russell: Definitely. We’ve got a fun poll question here. What do you think is the most critical issue facing domestic airlines in the year ahead? Our audience says staffing. What do you think about that? Is staffing your top concern in the year ahead?
Geraghty: Yeah. Staffing is definitely challenging. I’m pleased that a lot of it is stabilized. As we entered this year, staffing was most certainly the number one item that we were all trying to navigate. I think a lot of the capacity changes that you saw both from April into the summer were largely a result of pilots. So training, there’s a whole training throughput process for pilots. And if any part is a little bit off, you see elongation of pilots being able to go from hiring into service.
Obviously, our ground staff, whether it’s our baggage handlers or airport operations team above the wing, that’s challenging. But we’ve stabilized much of that, so all of those core processes, whether it’s the recruiters, background checks, training, that’s all working very well. So we feel in a much, much better way.
I do think we have some acute challenges in the Northeast Boston. It’s a smaller talent market. If you look at some of the challenges on the ramp in Boston, that’s something we’re watching closely. I’d say on the staffing front, wage rates are also quite concerning. I mean, everything is getting more expensive. So we want to make sure our crew members feel engaged to work at JetBlue and are appropriately paid. Staffing is definitely a challenge but stabilizing.
Russell: All right. I mean, that’s good to hear. I’ve written a lot about the pilot shortage that some airlines are facing here in the US. I mean, talking about wage rates, we’ve got regional airlines, traditionally are lower paid, their entry level wages are now equal to or even excess of some airlines like yourselves. I know it’s trained labor and pilots should be paid, but that’s got to do some pressure.
Geraghty: Yeah. I mean, the good news or bad news, depending on how you look at it, is every airline is seeing these same pressures. JetBlue is not an outlier. We’re at a point in time where almost every collective bargaining agreement that a flight operations or pilot group has at an airline is open for negotiation right now.
You’ve seen the news, United, American, others. I think UPS may be the only one that has been ratified recently. So everybody is currently in negotiations with their pilots, and the pilots are in pretty strong position given some of the labor shortages with pilots. But all carriers are experiencing the same issues from a cost perspective there.
Russell: Yeah, absolutely. I can attest to that. It’s across the board stuff. So, earlier this summer, JetBlue had some operational issues that was partially staffing played a role in that other things as well. And you guys pulled back a bit on your schedule. How are things going? Have you achieved, met your goals?
Geraghty: Yeah, much better. In April, we first saw some pretty acute operational issues, largely coming out of Florida, tied to air traffic control delays in the Jacksonville Center. When we saw that we pulled capacity a bit more than we had planned to, we were taking it down from the Presidents’ Day Week, we started seeing some challenges there. The infrastructure is far more fragile than it was pre-Covid. Air traffic control shortage was a problem pre-Covid. It’s even worse now.
We started seeing these things play out and made a decision in April to pull a pretty good amount of capacity, about 10 points into the summer timeframe. Interestingly, other carriers all saw it a month or two later than JetBlue. We just happened to see it first because we are quite strong in Florida. We have a lot of flights down there. Things are much better. Our completion factor is back up to generally around pre-Covid levels and the operation is most certainly stabilized.
That said, as we move forward, we are planning for a more fragile infrastructure. We are not going to be flying at the level we’d like to. We’d love to fly a bit more, but we know we need to ensure operational reliability. We also are in one of the toughest air spaces in the country. 80 percent of JetBlue’s flights touch congested airspace compared to United, which is 60 percent, 70 percent. Delta is 20 percent.
We just have a very challenging environment that we operate in, so we must make sure that we’re providing a better level of resilience, whether that’s more pilots in reserve, whether that’s flying a little bit less, whether that’s staffing up in some of our airports. And there’s a lot of focus on airline reliability right now, so we need to make sure that we’re doing our part to make sure our customers get to where they want go.
Russell: Definitely, definitely. I got to enjoy JetBlue last week actually, and I have to say, in and out of Florida operations were smooth, no delays at all.
Geraghty: Great. Wonderful.
Russell: Definitely improved. As we look into the fall, that’s less capacity, demand is still high, and we know supply demand equations, that means fares are also going to be high. I mean, is that continuing? That’s the trend we saw the summer. Is that continuing into the fall?
Geraghty: Yeah, I think you’ll see fares ease up. We are seeing some really great leisure strength into the fall. The fall tends to be a bit of a trough period for JetBlue. And I’m pleased to report that we aren’t seeing that. We’re seeing that leisure strength from the summer carry into the fall.
We’re also seeing some strength over the last two weeks in the business customer, which is great. I think you probably see it around New York City. I’ve been out to breakfast and dinner a few times in the last two weeks, and there’s not a empty seat in restaurants around New York City, which is great for our 16 a day between Boston and LaGuardia, if you’d like to go.
But at the end of the day, we are pleased with the leisure strength that’s coming into the fall, and we hope that continues. I think with the summer, because most airlines had to pull capacity back, there just wasn’t enough flights out there. So some of that pent-up demand is bleeding into the fall timeframe, and we hope that continues.
Russell: Excellent. I mean, I know business travel is so important, JetBlue, all airlines. It’s funny you mentioned that. It’s September, and I’m on the road every week suddenly. And this is the first time I’ve been able to do this in a long time. That’s-
Geraghty: You love it, right? And you want an in-flight movie.
Russell: I do love that. I do. I miss my kid when I’m on the road, but I do love it. Yeah.
Russell: That’s, I mean, good for you guys, and hopefully I’m not alone.
Geraghty: Fingers crossed.
Russell: Yes. Yes. Excellent. Going back to international, we’ve got an interesting [inaudible 00:18:18], sorry, audience question here about going strong to Mexico. Now, I know that’s a destination. JetBlue served Mexico City for a little while pre-pandemic.
Geraghty: We did.
Russell: Tell us a little more about Mexico strategy.
Geraghty: Yes. We fly to Cancun right now, along with some of the leisure destinations on the West Coast. At this point, we probably won’t be going back to Mexico City. We did operate there. We pulled out of Mexico City. Mexico was, particularly on the leisure side, a great destination for JetBlue. We actually during Covid we’re flying Raleigh-Cancun, which was great. We’re still doing that. Mexico will continue to grow that.
We do extremely well in the mix of leisure and VFR markets. VFR, visiting friends and relatives, is an incredibly resilient customer demographic. It continued to be really resilient during Covid. So to the extent that we can grow there, we’ll continue to grow in Mexico. Right now, our plate’s a bit full-
Geraghty: … with the Northeast Alliance out of the New York and Boston area and then obviously with the Spirit acquisition. But with Spirit, we’ll be able to go to more than 125 destinations. That has quite a bit of Mexico in it, which is exciting.
Russell: I know when we talked about Spirit, we talked about the domestic market, but Spirit will really expand JetBlue’s presence near Latin America. It’s-
Geraghty: Yes, correct. They serve a number of destinations we don’t presently serve in Latin America. They’re destinations we’ve wanted to serve, but because we haven’t had aircraft to do that, we’ve had to prioritize. Yeah, it will absolutely accelerate our organic growth plan and bring, as I mentioned, more JetBlue flights to the traveling public.
Russell: Excellent. Excellent. We just got a few minutes left. I want to talk on [inaudible 00:19:54]-
Geraghty: I like the Africa one though. Is Africa an option?
Russell: Oh, okay. Well, tell me, is JetBlue planning Africa next? [inaudible 00:19:59].
Geraghty: It would be hard for our planes to make it there. There’s some points in Africa that the XLR when we get that could probably make it to certain parts of Western Africa, but it’s not on the radar right now.
Russell: Not high [inaudible 00:20:11].
Geraghty: I’d love to see it happen someday.
Russell: All right, there you have it, someday, definitely. In our last few minutes, let’s talk quickly about sustainability. That’s been a big push for the industry. There’s an industry wide goal of net zero carbon emissions by 2050. What’s JetBlue doing to hit that?
Geraghty: Yeah. Our goal is net zero by 2040.
Geraghty: We’re trying to beat the industry commitment. A few things, obviously carbon offsets are a piece of it, but we are moving to more science-based measures as we think about how you evolve. SAF is also an incredibly important part of our future.
Russell: Sorry, I should say that’s sustainable aviation fuel.
Geraghty: Sustainable aviation fuel, sorry. Sustainable aviation fuel, incredibly important part of our future. Right now, there’s a pretty significant cost gap between Jet A and SAF. And so we actually have a program, which I think is quite creative, with our corporate clients so that they can address some of their Scope 3 emissions, where you can buy SAF certificates from JetBlue. That helps bridge the cost of SAF from Jet A to that incremental cost, enabling us to buy even more SAF, which I think is a pretty creative approach.
But we’ve led, frankly, the industry in our sustainability efforts. We’ve invested in hydrogen technology, eVTOL. We continue to look for new ways to offset the carbon footprint. Some of those technologies are a bit farther off. The solve is really going to be a mixture of carbon offsets and SAF. We do need help though from states and the federal government to really start to help encourage further SAF supply because right now it is supply constrained.
Russell: Are you happy with the incentives and the Inflation Reduction Act that-
Geraghty: We are very happy with that, yes. We would like to see that continue and we’d like to see that expand.
Russell: Right. Right. Inflation Reduction Act that president Biden signed, it has incentives for sustainable aviation fuel through about 2027, I think.
Russell: So it’s a start.
Geraghty: It’s a start. We need more of it.
Russell: Definitely. You mentioned eVTOLs, which are essentially electric air taxis. Will we see those in JetBlue colors anytime soon?
Geraghty: Anytime soon?
Russell: By the end of the decade, by the end of the decade.
Geraghty: Possibly. We’re a partner with Joby, we’re an investor in Joby, which makes eVTOLs. They currently have a prototype working through FAA certification. I’m hopeful that we will see it, but some of these technologies, they’re a little ways away. But eVTOL is a bit closer than others.
Russell: Yeah. Excellent. We’ll be focusing on sustainable aviation fuel in the meantime.
Geraghty: Yes. That’s right.
Russell: Anyway, Joanna, thank you so much-
Geraghty: Thank you.
Russell: … for joining us. It’s a pleasure. And thank you for our audience.
Geraghty: Great. Thank you. Thanks for flying JetBlue.
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Photo credit: JetBlue President Joanna Geraghty spoke with Airline Weekly Editor Edward Russell at Skift Global Forum in Manhattan September 20, 2022. Skift