Free-luggage era ends at Jetblue on cheapest fares
JetBlue Airways Corp. will add a bag-check fee for fliers buying the cheapest tickets, ending its status as a holdout in the U.S. industry against charging extra for luggage.
Three fare classes starting in the first half of 2015 will give travelers the choice of getting the lowest price with no free bag, or paying more for fares that would have one or two pieces of luggage included, JetBlue said today in an investor presentation in New York.
JetBlue is trying to boost revenue after failing to reach targets for return on invested capital and trailing rivals in revenue from each seat flown a mile, an industry benchmark. The New York-based carrier has been an outlier among its peers by not taking advantage of new slimmer seats for planes and by letting passengers check one bag for free.
The stock rallied 3.2 percent to $13.13 at 10:11 a.m. in New York, leading gains among U.S. carriers, as the airline laid out its new fare structure and cost-control efforts. The savings steps include deferring delivery of 18 jets from Airbus Group NV's A320 family to as late as 2022-23.
Planned capital spending will fall by $900 million through 2017, JetBlue said, while the fare changes and other initiatives will produce $450 million annually by 2017.
Slimmer Seats
As many as 130 of the A320 jets will be retrofitted with so-called slimline seats, boosting the count by 15, according to JetBlue. Those lighter-weight seats use less padding than traditional models and are shaped differently, letting airlines handle more people in the cabin without little or no change to the spacing between the rows.
The seat additions will start in 2016, JetBlue said.
JetBlue said its seat pitch, or distance from one seat back to another in coach class on A320s is now about 34.7 inches (88 centimeters), and will drop to 33.1 inches. The industry standard is 30 to 31 inches. The A320 makes up 65 percent of JetBlue's 199-aircraft fleet.
With JetBlue's new fee, Southwest Airlines Co. will become the only major carrier that doesn't charge passengers for the first checked bag. Larger full-service carriers led by United Airlines began instituting luggage charges in 2008, starting with a traveler's second piece, a practice that has since become standard in that segment of the industry.
Industry analysts including Hunter Keay of Wolfe Research LLC had called on JetBlue for months to follow peers with steps such as charging for more optional products or services. U.S. airlines as a group collected almost $1.7 billion in bag fees in the first half of 2014, according to the U.S. Transportation Department's Bureau of Transportation Statistics.
While the stock surged 49 percent this year through yesterday, that advance was good enough for only eighth place among 11 carriers on the Bloomberg U.S. Airlines Index, which jumped 62 percent in the same period.
To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.sbloomberg.net To contact the editors responsible for this story: Ed Dufner at edufnerbloomberg.net John Lear