Saturday, May 4, 2019

JetBlue, Trans-Atlantic Routes, and Airline Strategy

This weekend's Wall Street Journal had an interesting article on JetBlue's new service to London from NYC and Boston.

Most discount airlines that try long (over 10 hour) flights end up losing money because their business model breaks down.  They need to use larger planes to make those flights but, since they fly point-to-point, they lack feeder traffic from a hub to fill the plane.  As a result, they can't fill all the seats and make the economics work.

On the other hand, JetBlue, with its London flights and other ones that it plans, is focusing on medium-haul routes.  They think this will be a sweet spot because flights between 3,500 and 4,000 miles will have peak profitability.

Why? Because JetBlue will use only a slightly larger aircraft (an Airbus A321 vs. the A320's that are used on short routes) that has less than 200 seats.  After JetBlue eliminates some of the economy seats to make room for its premium Mint class, it will have a seat count that it can fill without using the hub and spoke model.  The combination of economy and Mint seats will give them more profitability than they get from short-haul and would get from long-haul (where they would have to use larger aircraft with empty seats).

This is a good example of interesting, well-thought out business strategy.  This is the kind of strategic thinking I enjoy helping my clients with.