How Will The Mint Program Contribute Towards JetBlue’s Long Term Growth?
The low-cost carrier, JetBlue Airways (NASDAQ:JBLU), 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.
After the launch of the Mint program, the company saw a stark improvement in its margins. For instance on the JFK-LAX route, margins are much higher post the launch of Mint, as compared to before. The same stands true on JFK-SFO routes.
On the back of this success, the carrier decided to expand its Mint offering in more competitive markets. Currently, the Mint program connects mainly two cities on the East Coast, Boston and JFK, to two cities on the West Coast, SFO and LAX. Right after it started services from Boston to SFO and LAX, the route, as before, turned out to be extremely popular, with margins improving 11 points versus the system.
It has announced Mint services to start on JFK-San Diego route and Fort Lauderdale (FLL)-SFO route. This is a part of JetBlue’s initiative to roll-out Mint nationally on transcontinental routes.
The Mint expansion will allow JetBlue to capture some of the markets on the east and west coast, while introducing competition on the routes. Once completed, JetBlue will offer up to 70-plus daily Mint flights to 13 destinations across the east coast, west coast, and Caribbean. As of now, the number of options on these routes are not only limited, but also expensive. Most of the top destinations are dominated by the legacy carriers and lately, Southwest.
Airbus A321 On Mint Routes
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JetBlue is planning to launch the new Airbus A321 on its Mint routes, featuring the airline’s new core experience for customers. Some of these features include 10-inch television, high legroom, and accessible power outlets. Furthermore, it is planning to double the size of its Mint fleet in 2017. The doubling of fleet will cost the company a large capital expenditure. The additional capital expenditure will supplement JetBlue’s network growth and support Mint expansion.
Conclusion
With JetBlue entering new market of San Diego, Seattle, and Los Angeles, we can expect the air fares to go down dramatically, while the level of service is maintained. This would increase the competition, not only on the basis of price, but also on the quality of service offered, thus, benefiting customers. Furthermore, this is expected to help the company’s unit revenues. Already JetBlue has revised its guidance for PRASM numbers to a decline of 1%-2% y-o-y, from the earlier 3%-4% y-o-y. Going forward, if the carrier continues to perform consistently, manages execution and distinguishes itself from its competitors, we expect the pressure on its unit revenues to ease up, while contributing significantly to the company’s long-term growth.
Have more questions about JetBlue Corporation (NYSE:JBLU)? See the links below:
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- Rapid Capacity Growth And Lower Fuel Costs Drive JetBlue’s 1Q’16 Results
- How Has JetBlue Utilized Its Cash Flows Over The Last Three Years?
- How Has JetBlue’s Revenue And EBITDA Grown Over The Last Five Years?
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- How Would JetBlue’s Equity Value Be Impacted If Crude Oil Prices Reach $100 Per Barrel By 2018?
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- What Is JetBlue’s Revenue And EBITDA Breakdown?
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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