Earnings season, jetBlue style

It is earnings season on Wall Street, and jetBlue took their turn today.  They lost some money, but not too much, all things considered.  The earnings/losses bit is not really all that interesting to me.  What I like listening to is the details of how they got to those numbers.  Things like where capacity is shifting to and where they are realizing their revenue.  Yes, I am an aerogeek.

So what did jetBlue have to say today?  A couple interesting things, at least to me.

• They’re shifting away from transcons and into the Caribbean.  They’ve been pushing in this direction for a while, but I finally heard some specific numbers and they are pretty staggering.  Transcon capacity has been reduced about 30% since last year.  At the same time, Caribbean/international capacity has increased by about 40%.  And they did that while also reducing the number of planes in the fleet.  In line with this move they’ve announced a couple new routes, including launching a new city – Montego Bay, Jamaica.  They’re also going to be trying again for the LAX service to Boston and New York City, so they are not killing transcon capacity completely.
• They are not realizing revenue very far in advance, and it is getting worse.  This is a big one in many ways.  One thing that jetBlue does that limits them is that they have limited schedules releases.  So if you wanted to buy a ticket for October right now on jetBlue you wouldn’t be able to do so.  But it seems like that doesn’t really matter too much to them, as bookings are moving much closer to the date of travel rather than far in advance.  I have to say that I am seeing this in general, too.  Part of the drive in this direction is changes to the fare pricing systems that allow the carriers to be more flexible and manipulative in their pricing rather than just releasing all the seats day one and seeing the cheap seats sell first and most expensive seats later.  And part of it is that most folks are worried about their income so they aren’t planning vacations as far in advance.  The downside of this is that they don’t get to sit on the cash and earn interest waiting to actually realize the expense of carrying a passenger.
• They make a lot of money from non-fare events.  Sure, the bulk of the revenue for the carrier comes from the base fare price.  They averaged $151 per ticket last month, the highest in their history.  But on top of that they are realizing a LOT of revenue in non-fare events.  The Even More Legroom program accounted for about $45MM in income in 2008.  That is a drop in the bucket for $3.056Bn in total revenue, but it makes a big difference when you consider that it actually doesn’t cost them anything to realize that revenue.  Other incremental fees – like checked baggage, pets, etc. – weren’t detailed in this call, but in the last call they were something around $20 per passenger, on top of the fares.  That is a big deal, especially when no one carrier can really force fare prices up.  And the best part is that they seem to do it without making folks feel like they are being hit with tons of fees.  I’m not entirely sure how that works for them, but it does.
• They have international partners, but they barely use them.  From the customer perspective, the jetBlue partnerships with Lufthansa and Aer LIngus have pretty much been a bust thus far.  They talk about passing passengers back and forth and marketing with a global presence, but the fact remains that one cannot book flights via the jetBlue website for either of those partners.  Aer Lingus does allow booking through on to jetBlue flights, so it isn’t completely useless, but it is pretty close.  The good news is that jetBlue plans to link up with Aer Lingus in Orlando starting this year, in addition to their existing Boston and New York links.  And they expect that the Lufthansa partnership will finally start to actually exist from a passenger perspective later this year.  Of course, none of this is going to be a seamless benefit for jetBlue customers until they get a new reservations system in place, and they expect that to happen starting late this year and going live in early 2010, so we can hope.

Like I said, mostly aerogeek stuff, but I thought it was an interesting view into their perspective on the market and where they are going in the near future.