A Look At JetBlue’s Expansion Strategy For Its Premium Mint Services
The last couple of years have been revolutionary for JetBlue Airways (NASDAQ:JBLU). Apart from significant management level changes and falling fuel costs, the low-cost carrier has been flying high on the success of its premium seat offering, “Mint,” which it launched in June 2014 to tap the business travelers flying on transcontinental routes in the US. JetBlue initiated the Mint service as a premium product, offering it at affordable prices in order to protect its declining market share from the large network carriers such as American Airlines, United Continental, and Delta Air Lines. The product offering included comfortable lie-flat seats with a massage function, new in-flight entertainment systems with a variety of options, complimentary drinks and amenity kits, better food and beverage options, and dual power/USB ports on each seat.
Services Offered By JetBlue’s Premium Mint Product
Source: JetBlue website
Fortunately for the airline, this service became very popular rather quickly, mainly because of its affordability and higher quality of services compared to the expensive and poor services offered by other airlines. Thus, it proved to be a strategic move for JetBlue, since it allowed the airline to enter the high margin geographies, such as Los Angeles and San Francisco, and cater to the elite and corporate passengers in those markets to improve its profitability. In fact, the New York-based carrier managed to outperform the industry margins in 2015, largely due to better performance of its premium Mint seats and significant fuel cost savings from lower oil prices.
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Since the launch of the Mint service, JetBlue has gradually increased the frequency of its flights between New York (JFK) and Los Angeles and San Francisco. This has enabled the airline to earn the reputation of New York’s Hometown Airline within a span of 15 years. After the extraordinary performance of the Mint service on routes from its hometown, the airline now has plans to expand its premium services in one of its focus cities, Boston.
Over the years, JetBlue has become the largest airline at the Boston Logan International Airport, offering more flights and nonstop destinations than any other carrier at the airport. With the already significant presence in the focus city, it has recently initiated Mint services on its flights on the Boston-San Francisco route to capture the business travelers. Further, it operates seasonal flights to Barbados and plans to begin flights on the Boston-Los Angeles route, beginning in the Fall of 2016. In addition to this, the airline has added Seattle, San Diego, and Las Vegas to the list of new destinations that will see the Mint services from both New York and Boston in the 2017-2018 timeframe. Apart from New York and Boston, the airline also has a strong base at Fort Lauderdale and aims to add flights offering Mint services from Fort Lauderdale to Los Angeles and San Diego over the next year. In all, these planned route additions are expected to result in the Mint sub-fleet growing from 11 aircraft in 2015 to 26 by 2017. [1]
JetBlue’s Existing and Planned Routes With Premium Mint Service (As of May 2016)
Source: JetBlue website
With the success of this premium service, JetBlue became the only low-cost airline in the US to be offering a dedicated premium product to its customers at an affordable price. This has not only allowed the airline to improve its profitability, but has also reduced the structural disadvantage that the airline suffered due to the lack of a premium product. Thus, in order to leverage its cost advantage, the airline decided to marginally increase the prices of its premium services in April of this year. While the passengers remained inelastic to the move, the fare hike was matched by the larger network carriers. This enabled JetBlue to maintain its cost advantage over the premium services offered by other airlines.
Based on our analysis, we believe that JetBlue’s premium Mint service has performed much better than the airline had anticipated. For this reason, the low-cost carrier is expanding the reach of the product into new geographies, such as Seattle, San Diego, and Las Vegas, where it foresees strong demand for the premium product. If the airline continues to offer quality services to its passengers while maintaining competitive prices, we expect the Mint service to further boost the airline’s profitability in the long term.
See Our Complete Analysis For JetBlue here
Have more questions about JetBlue Corporation (NYSE:JBLU)? See the links below:
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Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for JetBlue Corporation
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Notes:
- JetBlue’s Mint a great example of innovation, CAPA Center For Aviation, 15th May 2016 [↩]