Monday, April 20, 2015 12:45:28 PM
Adam Levine-Weinberg - April 20, 2015
Last June, JetBlue (NASDAQ: JBLU) began a new chapter of its history with the introduction of its Mint premium service. Instead of using its standard all-coach configuration, JetBlue added a 16-seat premium cabin with full flat-bed seats for some of its new A321s. (Four of the seats even come as private mini-suites!)
JetBlue's Mint aircraft are configured with 16 premium lie-flat seats. Source: JetBlue.
JetBlue opted to make this change in order to boost its profitability on the ultra-competitive New York-Los Angeles and New York-San Francisco routes. Less than a year in, it's pretty clear that this move is paying off even more handsomely than originally expected.
Mint ramps up
The routes from New York's JFK Airport to Los Angeles and San Francisco are highly contested -- JetBlue competes with all three legacy carriers as well as Virgin America (NASDAQ: VA). Until last June, JetBlue had been the only one not offering a swanky premium section on these flights. Not surprisingly, this took it out of the running for attracting the most lucrative travelers.
JetBlue created Mint in order to narrow the revenue gap with its rivals. The idea was to offer a lie-flat seat at a much lower price than the prevailing fares in order to court the small/medium business and upscale leisure markets: i.e., people who were priced out of the premium cabin on other airlines.
JetBlue has been phasing in Mint flights since last June as the specially configured Airbus A321 planes have arrived. It is finally reaching a full schedule of eight daily round-trips to Los Angeles and five daily round-trips to San Francisco this spring.
Strong demand across the board
Ever since JetBlue launched its Mint service, company executives have noted that they were pleasantly surprised by the level of demand for its premium seats. As expected, Mint has been popular with small/medium businesses and well-to-do leisure travelers.
More surprisingly, Mint has also generated strong interest among large corporations. JetBlue had assumed that its rivals -- mainly the legacy carriers, but also Virgin America to some extent -- had that business locked up. Instead, JetBlue's entry into the market has disrupted the status quo.
JetBlue's management has been surprised by the strength of demand for Mint premium seats. Source: JetBlue.
Virgin America CEO David Cush noted in February that JetBlue's entry into the market had driven average premium fares down by 30%-40% on the Mint routes. This indicates competitors have had to at least meet JetBlue halfway in terms of pricing in order to prevent customers from bolting.
Fares strengthen
In the first few months of Mint's existence, JetBlue was offering a starting non-refundable fare of $599 one-way. There were two higher fare "buckets": $799 and $999. Depending on the level of demand for a particular flight, JetBlue's revenue management system would determine how many seats to sell at each price point in order to maximize revenue.
Because of the strength of demand, JetBlue's Mint cabin was frequently sold out last summer. As a result, in the fall, the company revised its Mint pricing tiers. In October, JetBlue's then-president -- and current CEO -- Robin Hayes explained that JetBlue had moved the refundable fare up to $1,199 and then to $1,209. Meanwhile, it had made the $999 price point a third non-refundable fare.
More recently, JetBlue has apparently determined that the market can support even higher fares. There's still an introductory fare of $599, but there seem to be fewer of these tickets available, especially on busy travel days.
Furthermore, on the San Francisco route, the refundable fare has moved up to $1,249, while the intermediate non-refundable fares have risen to $809 and $1,049. Fares are even higher for New York-Los Angeles flights. The refundable fare there is now set at $1,299, with the intermediate non-refundable fares at $899 and $1,149.
A big profit tailwind
JetBlue has been posting by far the best unit revenue growth in the industry recently. It would be naive to attribute this performance to a single factor, but the strong reception of its Mint premium offering is clearly having a big impact. JetBlue is regularly pulling in one-way fares of more than $800 -- and, increasingly, more than $1,000 -- on routes where just two years ago, its average one-way fares were less than $250.
Late last year, JetBlue told investors that for the month of September, its profit margin on the Mint route to Los Angeles had risen by 17 percentage points year over year. Given that it has raised prices several times since then, its Mint routes are surely even more profitable now.
For competitors like Virgin America, this is mixed news. In the short run, it's better if JetBlue is commanding higher prices, because it limits the need for other airlines to discount their fares to match JetBlue. But in the long run, JetBlue's massive success on the New York-Los Angeles and New York-San Francisco routes could encourage it to add flights, putting even more pressure on the competition.
Recent JBLU News
- JetBlue Announces Puerto Rico Expansion, New Mint Service to Three Cities, and Three New Destinations • Business Wire • 05/08/2024 03:20:00 PM
- JetBlue and Etihad Airways Announce Loyalty Partnership as part of Codeshare Agreement • Business Wire • 05/07/2024 12:00:00 PM
- JetBlue Elevates Seamless Living in the Sky with Blueprint by JetBlue™: A Personalized Inflight Experience • Business Wire • 04/24/2024 01:00:00 PM
- Coca-Cola and Microsoft Sign Billion-Dollar Agreement, Apple Event Set for May 7, and More News • IH Market News • 04/24/2024 11:28:02 AM
- Futures Pointing To Extended Rebound On Wall Street • IH Market News • 04/23/2024 01:11:27 PM
- U.S. Index Futures Rise in Pre-Market, Oil Prices Dip Slightly • IH Market News • 04/23/2024 11:26:41 AM
- JetBlue Announces First Quarter 2024 Results • Business Wire • 04/23/2024 10:30:00 AM
- JetBlue Announces Leadership Appointments • Business Wire • 04/18/2024 04:00:00 PM
- JetBlue Announces Webcast of First Quarter 2024 Earnings Conference Call • Business Wire • 04/04/2024 08:01:00 PM
- Exxon Mobil Forecasts Earnings Decline, Twilio Seeks Board Tenure Changes, and More News • IH Market News • 04/04/2024 11:30:20 AM
- JetBlue Expands Transatlantic Service to Paris With Launch of Daily Nonstop Flight From Boston • Business Wire • 04/04/2024 12:52:00 AM
- JPMorgan boosts dividends, Chipotle unveils 50:1 stock split, and Latest News • IH Market News • 03/20/2024 11:15:48 AM
- JetBlue Flights to the Emerald Isle Taking Off Today • Business Wire • 03/14/2024 01:21:00 AM
- JetBlue to Webcast Presentation at J.P. Morgan Industrials Conference • Business Wire • 03/08/2024 02:00:00 PM
- AMD Hits Regulatory Roadblock, GitLab’s Stock Tumbles on Disappointing Earnings, and Latest News • IH Market News • 03/05/2024 11:05:08 AM
- Form 3 - Initial statement of beneficial ownership of securities • Edgar (US Regulatory) • 03/04/2024 10:41:09 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 03/04/2024 01:31:06 PM
- JetBlue Announces Termination of Merger Agreement with Spirit • Business Wire • 03/04/2024 01:30:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/26/2024 10:40:15 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/26/2024 10:37:10 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/26/2024 10:31:39 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/26/2024 10:27:58 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/26/2024 10:21:35 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/26/2024 10:18:38 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/26/2024 10:14:05 PM
VAYK Discloses Strategic Conversation on Potential Acquisition of $4 Million Home Service Business • VAYK • May 9, 2024 9:00 AM
Bantec's Howco Awarded $4.19 Million Dollar U.S. Department of Defense Contract • BANT • May 8, 2024 10:00 AM
Element79 Gold Corp Successfully Closes Maverick Springs Option Agreement • ELEM • May 8, 2024 9:05 AM
Kona Gold Beverages, Inc. Achieves April Revenues Exceeding $586,000 • KGKG • May 8, 2024 8:30 AM
Epazz plans to spin off Galaxy Batteries Inc. • EPAZ • May 8, 2024 7:05 AM
Moon Equity Holdings, Corp. Announces Acquisition of Wikolo, Inc. • MONI • May 7, 2024 9:48 AM