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JetBlue Airways
Corp.
JBLU -0.10%
introduces simple economic fares to compete with low-cost carriers and increases sales due to rising labor and fuel costs.
The No. 5 US carrier by the traffic touted amenities such as free WiFi and more spacious bus seats, as other carriers reduced their free services. Operations Director Joanna Geraghty said Friday that JetBlue may be falling behind, as more and more customers use websites and apps to compare prices before buying.
"Customer behavior suggests that our success is in danger," she wrote in a letter to employees.
The major carriers in recent years have introduced basic economy tickets to compete with the extremely low fares offered by very low cost carriers, including:
Spirit Airlines
Inc.
These rates are $ 30 to $ 50 cheaper than standard economy tickets, but do not include amenities such as advance seating, locker space, loyalty rewards and other benefits.
JetBlue is striving to reduce its annual spending by $ 300 million by 2020. The New York-based carrier said earlier this month that it was expecting an increase 3% of unit revenues due to increased demand. But rising jet fuel prices are a challenge as they jumped some 45% this year. JetBlue's shares are down 13% this year.
"They had a little trouble converting the higher quality product that they offer … in improved profitability," said Joseph DeNardi, an analyst at Stifel. Lower margins and higher fuel prices are pushing carriers like JetBlue to be "more aggressive on the revenue side," he said.
Last month, JetBlue drove most major US carriers to raise fees for checked baggage.
United Continental Holdings
Inc.
American Airlines Group
Inc.
and
Delta Airlines
Inc.
quickly followed. Increasing baggage costs allows JetBlue to cover rising fuel costs without sacrificing other amenities, Geraghty said Thursday at a conference in New York.
The new tariffs help major airlines attract the most cost-conscious travelers, who will give up the benefits of low prices, but airlines say the majority of travelers still choose to pay more to avoid price restrictions.
JetBlue said its new ticket class, which it plans to introduce "later next year," will still include many amenities for which it is known. The carrier will not charge good deals for internet, snacks or sodas. Passengers will also be entitled to full-size carry-on luggage.
JetBlue did not specify which equipment would be excluded. Ms. Geraghty wrote that passengers who choose the cheapest travel class might miss an earlier boarding time, greater flexibility in seating allocation or the ability to modify bookings.
"We will not make them feel like second-class citizens," she said.
Write to Alison Sider at [email protected]
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