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Could 2021 Be JetBlue’s Year To Disrupt The North Atlantic?

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The outlook over the coming months for airlines generally still looks distinctly gloomy, but for JetBlue there is a possibility that 2021 could hold a silver lining.

The airline has long intended to launch transatlantic services from its east coast heartlands and will likely commence services to Heathrow from New York JFK in August and from Boston in September.

It is still a big if, but provided there is in fact a meaningful opening up of services between the US and Europe later in the summer, then the airline will fulfil its ambition for service start up to London, putting its product to the test.

Good time to start?

The key question is whether now is the right time to start such new routes and it is certainly a tough one to answer. Pre covid-19, the transatlantic market between Boston, New York and London was highly profitable for the major players. Heathrow in particular, has long been a honey pot for lucrative business class travel. 

This is exactly the target which JetBlue has its eyes on, noting the eye wateringly high market price levels. CEO Robin Hayes told me in a recent interview that he sees the opportunity to “slash the fares” saying that “we plan to make some very significant downward adjustments to premium fares”. Combined with offering a quality product, he believes that JetBlue can win a profitable share of the market.

Business class in question

The immediate challenge beyond when the market will meaningfully open up, is what will happen overall with business class travel? It is currently virtually non-existent and there will be no quick return. In my view, as I have written previously, it is probable that a significant percentage will not return at all. Whilst this could be disastrous for the economics of incumbents, it could play to the advantage of JetBlue.

The airline recently revealed the seating for its lie flat Mint premium product, already successful on trans continental US flights, but upgraded for its North Atlantic debut. It offers significant privacy, something likely to become increasingly in demand in the post covid world and combined with the lower price point, could offer much appeal to a more price and space sensitive business clientele.

Which London airport and does it matter?

The London catchment area is so large that a number of airports could individually support a New York or Boston service, Stansted and Gatwick have arguments in their favour but Heathrow is the prize as the historic home of most business class travel. 

As initial frequencies will be limited, it is better to concentrate at one airport. JetBlue had complained to the US Department of Transportation about its initial failure to obtain slots at Heathrow but in these strange times, when the normally constrained airport will be running at a fraction of its normal capacity, I am not surprised that it has in fact succeeded in doing so.  

Competitor response

The airline has to factor in a strong competitor response, existing airlines on the routes are not going to give up traffic lightly, least of all any of the meagre volumes of business class customers.

Promotional offers are likely to abound as the market struggles back to life and I see the premium economy cabin becoming a new battle ground amongst existing operators for the price sensitive segment of the business travel market. JetBlue will be able to offer a superior product.

In a pre-emptive move, United has announced that it will launch a Boston-Heathrow service, a route it has not operated before.

Competitors will play the card of their loyalty programmes to hold on to business customers as well as keeping corporate traffic, as far as it still exists, locked in with volume discount deals. Having said that, JetBlue is not reliant on big corporates, garnering more support from small and medium seized business clients. It has its own loyalty programme in the US.  

Transatlantic graveyard

Airlines have died on the back of their transatlantic ambitions, many ventures were just too focussed on low price, fine in the peak months of summer but often fatal in the lean winter months.   Norwegian, also a price led airline, recently announced its decision to withdraw from the fray with its long haul low cost model. 

At the premium end of the market, three airlines tried previously and simultaneously, to offer a business class only concept between New York and London. EOS, Silverjet and MAXjet each differed in their product specification but all three had failed by 2008. As Robin Hayes observes, none of them had a well known brand in the market nor any level of existing customer loyalty. 

Right aircraft

It has always been tough to succeed in the transatlantic arena for independent players even before covid-19 intervened, but while no cake walk, jetBlue has a lot working in its favour. 

Firstly, it will use new generation Airbus A321 LR aircraft. These offer incredible fuel efficiency and as narrow bodied aircraft, reduce risk by offering only moderate capacity. If things do not work out, JetBlue can easily deploy the capacity elsewhere on its network, to the Caribbean for instance.  

Although being a hybrid airline with a focus on quality, JetBlue does have low cost genes and offers a price competitive economy product. Its cost focus will underpin its ability to compete in this market segment but its exposure in terms of seats offered per flight will be limited. The premium Mint product will be the key to its success or failure.

Established credentials   

Unlike airlines who have tried and failed, JetBlue is an established airline, well known in its US home market, especially out of its eastern seaboard bases. It has substantial domestic traffic in and out of New York JFK and Boston (where it is the largest carrier) allowing it to provide connecting opportunities to support the Trans Atlantic services.  It recently sealed a commercial partnership with American Airlines which will also add to its feed capacity at JFK.

Financially, it has a record of solid profitability and has good liquidity. It also happens to be run by a Brit, Robin Hayes, with many years career experience at British Airways. He knows very well the characteristics at the UK and European end of the intended routes, important given JetBlue’s current lack of profile in these markets.

They say that fortune favours the brave but I’d say JetBlue is rational rather than brave. It sees a real opportunity and knows best how to go for it. Robin Hayes wants jetBlue’s legacy to be “the airline that came along and profitably brought premium fares down for everyone for good”. I believe that 2021 could prove to be the airline’s time.

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