JetBlue Airways Sets Sights on South America

US low-fare carrier JetBlue Airways is exploring growth options into South America with destinations in Brazil, Ecuador and Venezuela all under consideration following the success of its flights to the Caribbean and more recently into Colombia.  Although perhaps best known for its activities at its main US hubs of New York and Boston, the carrier is also the largest commercial operator in the Dominican Republic while it also has focus city operations from San Juan in Puerto Rico. 

In the last year it has spread its wings still further with the introduction of flights to Routes Americas host city Cartagena and Colombia’s capital Bogota and it has recently confirmed the addition of Medellin, also in Colombia and San Jose, Costa Rica to its network from June 2013, both from Fort Lauderdale.  And, this is an area of the world set for further network growth, according to Director of Network Planning, John Checketts, who spoke exclusively to The HUB ahead of today’s opening of this year’s Routes Americas.

“Brazil obviously is of great interest and Manaus and Recife would be options for us, while Ecuador and Venezuela are also possible markets as well as the entire Central American region and markets like Guatemala, Panama and Nicaragua.”

John Checketts
Director of Network Planning, JetBlue Airways

“Our route to Cartagena may only be a new addition to our network but it is already far exceeding our initial expectations and forward bookings are looking strong,” explained Checketts.  “We were confident in the market as it fitted our development model and we have been able to work with local interests to maximise the opportunities for the route.  We are mainly seeing traffic down to city from New York but are beginning to see a little traffic originating in Colombia.”

Following this success, the next step is likely to see further growth across Latin American markets and the expansion of the JetBlue network further south.  “There are probably four or five key markets in this part of the world that we would seriously consider but it is difficult to pinpoint them and any timescale for development,” said Checketts.  “Brazil obviously is of great interest and Manaus and Recife would be options for us, while Ecuador and Venezuela are also possible markets as well as the entire Central American region and markets like Guatemala, Panama and Nicaragua.”

JetBlue’s innovative business model and its impressive growth over the last decade have made it a key player in the North American market since it launched operations in 2000 bringing a new dynamic to the skies of the US, and it is now becoming a more important network target for many airports across Central and South America.

With a single-class product that combined amenities such as spacious leather seating, and live TV and radio at a cut price, JetBlue’s product was not only structured differently from anything on offer from US legacy carriers, but also broke with Southwest’s low-cost model.  Starting with a network serving points from New York’s John F Kennedy International Airport (JFK), JetBlue quickly expanded to Boston and then added overnight west coast flights, significantly increasing the utilisation of its growing fleet of Airbus A320s.

Proving a hit with travellers, the carrier became profitable within its first six months of operations and it continued to grow in the post-911 world, adding destinations and aircraft such as the Embraer 190 and a new base at Boston Logan, while its rivals shrank or descended into bankruptcy.  Fast-forward to today and JetBlue continues on a strong trajectory, adding new routes into the Caribbean and the US north-east as competitors such as American Airlines have withdrawn, as well as expanding its international reach through ever more airline partnerships, to become a major player on the US aviation scene.

“The Caribbean extending down to Colombia has been the engine for our growth as we became Boston’s leading carrier,” explained Scott Laurence, Vice President of Network Planning, JetBlue Airways.  “Increasingly we are building schedules that are popular with people; this is about attracting key markets and higher frequency markets.”

JetBlue is the biggest carrier at JFK and Boston Logan by seats.  The airline holds a 24 per cent share at each and, with its JFK expansion, the airport has seen its passenger throughput rise approximately 45 per cent (by 14.8 million passengers) between 2000 and 2011.  Its operations also signalled a revitalisation for JFK, a facility that had been losing passengers as international flights bypassed the long-standing New York gateway.  Since 1995, aircraft movements and passenger numbers had remained essentially stagnant, leaving a capacity gap in the world’s largest aviation market.  The new airline saw the hole and took the chance to fill it.

In the 12 months between August 2011 and August 2012, JetBlue handled 11.9 million passengers at JFK, making it clear where most of that increase was generated.  And in Boston, the year-on-year growth has been ten per cent as operations have ramped up.

This year the carrier added Grand Cayman, in the Cayman Islands, Cartagena in Colombia and Samaná in the Dominican Republic to its New York offering.  Initially seen as a leisure carrier ferrying people between the north-east and Florida, JetBlue began to attract business travellers and changed the network and focus accordingly.

According to Laurence, in peak season they still get up to 15 hours of utilisation from the A320s and 13 for the E190s, despite the challenges of much of their network being on the east coast.  Because of the challenges in the north-east, they look forward to the arrival of the A321 (the airline has 30 on order), which will add 40 seats per operation over the A320.

In Boston, despite the airport’s closed footprint, JetBlue is anticipating further expansion next year that will give it a total of 24 gates at Logan, more than enough to manage the anticipated expansion.  Like JFK’s T5, the Logan renovation is being orchestrated by Gensler, and will provide the terminal with service perks that characterise the unique touches that the airline has tried to engineer into its value proposition.  When completed, the facility will offer 32 domestic and nine international counters.

Initially, the airline conformed to the low-cost template through its single-type fleet, the aircraft of choice being the A320 and remaining the only aircraft operated until 2005 when the first E190s entered into service.  It was one of the first ‘new generation’ carriers to add an additional aircraft type and the decision to do so became a topic among aviation observers, many believing that the model required single-type operations.  That has not proven to be the case and the E190s provide a scheduling flexibility and seat count alternative that have shown to be fully compatible with efficient, low-cost operations.

“If you look at our presence in Boston, it is these aircraft [the E190] that are predominating.  There is a lot of demand for multiple frequencies and we see opportunities to bring in the A321 into the market in the New Year,” said Laurence.  In 2013, A321s will begin to arrive, increasing capacity on heavily travelled routes, while in 2016, A320neos will begin to replace older A320s, adding a bit of range and lowering operating costs.  The neos will be especially welcome on transcontinental services where winter westbound flights can require an en route stop at Salt Lake.

In our exclusive The HUB interview, John Checketts confirmed that JetBlue is due to receive 14 new aircraft in 2013.  These deliveries are split equally between Airbus A320 Family and E190 aircraft and will include four A321s that will arrive towards the “back-end” of the year.  Configured with 190-seats the A321s will, according to Checketts be used to boost capacity on transcontinental routes but will also provide peak seasonal capacity growth into its Caribbean network.

While it continues to add domestic destinations, new service from Providence has just begun, Charleston is coming and it has stuck its nose under the door in Charlotte where it is looking to grow on US Airways’ home turf.  The ascendency of Charlotte as a banking and financial hub makes it an important inclusion for business travellers and the E190 capacity is ideally sized to begin such a challenge.

But as highlighted above, the real growth news is in the Caribbean and near South America (what they call “the deep South”). JetBlue’s coverage of the Caribbean continues to expand, helped more than just a little by the decision of American Airlines to draw down its presence at San Juan.  It is now refreshing its terminal facilities and building a network that not only connects San Juan to mainland cities but also to other Caribbean points.

Its unique business model has well served JetBlue so far and it currently needs no big changes.  When the airline was mentioned as a possible merger partner with post-bankruptcy American Airlines, the rumours were quickly quashed by Dave Barger, the airline’s Chief Executive Officer, who said: “We’re just not interested in participating in the consolidation path, either being acquired or in acquiring another company. Independence is our plan today, and it’s our path on a go-forward basis.”

According to the JetBlue sales folk, this drive into business markets has been accelerated by the corporate policy decision of many firms to use the “lowest logical fare” rather than being tied exclusively to a carrier or group of carriers.  Between Boston and Washington Reagan, JetBlue offers ten daily frequencies, creating a strong competitive offer on one of the nation’s most heavily travelled routes.  And, as we know, frequent use builds loyalty and accumulates points.

The carrier’s decision to serve and then expand in Boston has been fully vindicated.  Unlike New York, which is a hub city for a number of airlines, Boston had no dominant carrier and since the demise of Eastern Airlines has not had a single major player operating to Florida; another hole to be filled.

But JetBlue’s desire for independence has not dulled its desire to expand its international partnerships.  The carrier currently has 22 agreements in place with carriers across the globe, ranging from tiny Cape Air to industry giants like Emirates Airline, Singapore Airlines and Lufthansa.  In each case, the agreements provide interlining across JetBlue’s JFK and Boston hubs for connections between a host of domestic and foreign destinations.  According to Laurence, they continually try to build on the existing partnerships, extracting the greatest value in each case.  He said that the current basket of partners is working well and they are not “waiting for the phone to ring”.

And the reasons and benefits are equally diverse. For American Airlines, which has doubled down on its cornerstone operational model, JetBlue provides feed from many interior points that the US major no longer serves with its own flights.  For Star Alliance members, JetBlue offers a connection network to and from JFK and Logan that is not provided by the alliance partners, with Star’s primary New York connection point at United’s Newark Liberty International Airport base.

Unaligned carriers like Emirates Airline, El Al and Royal Air Maroc similarly benefit from a network that encompasses a large basket of destinations that would require multiple agreements for the same coverage.  But, of course, the chief beneficiary is JetBlue, which through such agreements has primary access to thousands of international passengers who transit its two primary bases.  Plus the added side benefit that newcomers who might not know of the carrier are immediately exposed to the product – a great way to make a first impression!

Its loyalty programme, ‘True Blue’, has just enhanced its appeal with the roll-out of True Blue Mosaic, an enhancement of the current scheme for very frequent travellers which provides added benefits for members, such as extra legroom, early boarding and additional free bags.  The programme also has links to other airlines, car rental companies, hotels and a branded credit card.  These enhanced perks are especially targeted at frequent business travellers who may enjoy more direct and frequent benefits than can be realised in larger, legacy offerings.

There is an impression of confidence among JetBlue’s management in the carrier’s service, clientele and future and Laurence believes the business is in a good position.  He said it has “the draw of a strong successful company working in their favour”.  People no longer see the company as an “alternative”, he noted, but rather as a fully recognised and established player in the market, having created a ‘value airline’ that is “working well, is profitable and sustainable”.

This story was expanded from an original feature that appeared in the latest issue of Routes News and which is available to delegates at Routes Americas.

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