Ahead of a keynote interview at Routes Reconnected next week, JetBlue CEO Robin Hayes discusses the airline’s network plans, his projections for the future, and how the industry can overcome barriers to travel.
What’s the airline’s current status?
It's significantly impacted us like everybody else. We've seen some signs of recovery, but we are still running about 30 to 40% in US domestic system compared to where we were.
In terms of load factors, we've seen those come up significantly. Our average load factor on a certain day is usually between 50 to 60% and bearing in mind we are capping at under 70% that's probably about 80% of what we're capping, which isn't too different than normal. The issue really is more the number of flights, which is significantly down on where we were.
How are your markets performing?
This is all relative, so nothing has recovered to where it was. But into the Caribbean we've seen good recovery, especially as markets have opened up. In markets like the Dominican Republic, Cancun and Aruba we've seen good strength. And we also see pretty strong demand between New York and Florida, and the transcontinental between the north-east and California.
What's been weak is a lot of the shorter flying like Boston to New York, Boston to Washington, markets that have traditionally required more business travel or are perhaps easier for people to drive.
How is the relationship with your airport partners?
Airports have been challenged to the same degree we have. If our business is really hurting, their business is really hurting too. We recognize that and I think most airports have been really good partners this year, working through what we can do together to mitigate and defer costs.
I think the issue is really going to be into next year as we look at 2021 because you're still going to have volumes down on normal. And so, airports are going to start to want to spread some of the fixed costs that they have over a smaller number of flights and so that has the potential to drive up ground handling charges.
And we would expect next year that fares are going to be down, so you you've got lower fares and higher airport related charges. Also, the excise tax relief from the US Government is due to expire; there's 7.5% that you were retaining before is that going to the government. I think that's going to force airlines to focus much more on the airports that have found a way of keeping their costs down and charges lower because it's going to be a faster way of returning to profitability.
Is the situation causing you to rethink your network?
I think this has given us the need, but also the ability to experiment with destinations that we've never flown before. People's interests in leisure have changed; we see a lot of interest in national parks and outdoor type vacations.
The other thing in the US is that legacy airlines have contracted so much that the connectivity between destinations is much lower. That's actually creating pockets of opportunity for direct flights where there just aren't any connections anymore.
So, those aren't necessarily very large markets but it does allow us to fly two, three or four times per week a week to places that would not have been on our radar before. We recognize that we have to be nimble; if things are working you add capacity quickly, and if they’re not you make an adjustment quickly.
What about your planned routes into London?
We're still planning to start next year in quarter three. That is something we still feel is the right thing to do, given that we expect that next summer there will be a lot of pent-up demand for international travel. We believe actually we'll be entering the London market at the right time to take advantage of that.
How can airports highlight the opportunities available in their market?
Historically when we plan networks, we look at a lot macro data which informs the decisions. If you have a mature network, and are growing say 4-5% a year, once you’ve added frequency to routes that are working well you’ve got very little room for new airports
Now we're in a very different world; the airplanes are parked on the ground and we're looking for opportunities to fly them again, provided we can generate cash. So, some of the specific local insights such as companies coming back, the local economy, local unemployment rates or amenities opening again can indicate an interest in flying.
If you look at some of the markets we've added this year, such as Montrose Telluride (MTJ), that was based on an assessment of what we think was going to happen there this winter based on data the local community provided to us.
What are your projections for the future?
I still think we're going to be in a very uncertain environment in Q1 next year. Domestic travel will definitely come back first and summer 2021 should be relatively strong from a leisure travel perspective as there is a lot of pent-up demand. If you go back to April/May this year we had 3-4% of the normal traffic in the US system. And now we’re running about 30-40%.
It's not a straight line, but that's about a 5% improvement each month because people either get pandemic fatigue or they need to fly to visit family, kids, or go to college. So next summer from a leisure point of view we think we’ll be closer to 70/80% if that trend continues.
Business travel isn't going to start coming back until the second half of next year, and when it does come back, there's still a portion of business travel that won't come back for a while. However, we do think that there are going to be more companies where some of their workforce no longer lives in the area so they're still going to have a requirement to travel occasionally, and this new type of business travel might offset some of the more traditional travel we’ve lost.
We will be able to handle that by redirecting capacity; we also have our partnership with American Airlines that we announced, and if that's approved by the regulators, I think we'll create a significant opportunity to add more flights and low fares from JetBlue to the northeast region.
How do you overcome barriers to travel?
The industry is doing a really good job at promoting how safe it is to fly; it really is as safe as anything else that you would choose to do in your life. I think the world will evolve into either a vaccine—so you might be required to show proof of a vaccine—or a negative COVID test within a certain period of time, or a rapid test at the airport.
You need to create a reasonable level of for confidence for people that when they get on an airplane it is COVID free. At some point people will want an exit from face coverings and social distancing protocols and will want to go back to normal.
A health pass or something similar is definitely going to be a feature of international travel. It's confusing for people because different governments and countries are doing different things, so hopefully in the next six or seven months we can adopt more of a unified standard that everyone can work to.
How can we ensure the entire travel ecosystem uses the same standards?
People want it to be easy to jump on a JetBlue flight down to Florida, stay in the hotel, and visit a few theme parks, for example. If every company introduces a different testing protocol, it's very complicated for people and it could discourage travelers. It would be better if we could create a common platform that we could use. For example, a test available in every pharmacy in the US; you can get tested, upload your results to your app, then JetBlue or your hotel can access it. The travel industry needs to work together on that.
Will COVID-19 change anything in the industry permanently?
People are going to be much more conscious of the environment they're in and who's around them; wherever that may be. In an airplane context people are sat close together for a large period of time, so the focus on air quality will be higher, along with cleaning and disinfecting protocols. We’ve all been on airplanes—not JetBlue of course—where there's chips on the floor and the tray tables are dirty; those days are probably in the rearview mirror.
I also think it’s going to be socially unacceptable to get on an airplane when you're sick, so I think we need to look at change fees. Airlines are going to have to find different ways of monetizing their product, because if someone's ill, charging them to money to not fly, would create an economic disincentive to travel.
Photo credits: JetBlue