Anger over bag fee, legroom cut surprises JetBlue

JetBlue Airways Corp. executives weren't surprised at investors' embrace of a new bag-check fee and additional seats on planes. What they didn't expect was the harsh response from travelers.

While the shares rose today to the highest in almost eight years, complaints on Twitter and blogs poured in after JetBlue announced the changes, ending the carrier's status as one of the holdouts in the U.S. industry without a luggage charge.

"We're very excited about what we're doing in the cabins," Marty St. George, senior vice president for commercial, said in an interview, citing changes that include more power ports and live-TV choices. "We see this as an upgrade. Maybe we're naive, but I was very surprised to get blasted like we did. I think this is a very good story."

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 airline 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.

Starting in 2016, as many as 130 of JetBlue's Airbus Group NV A320 jets will be retrofitted with so-called slimline seats, boosting the count by 15. The lighter-weight seats use less padding than traditional models and are shaped differently, letting airlines handle more people in the cabin with little or no change to the spacing between the rows.

Seat Pitch

JetBlue said its seat pitch, or distance from one seat back to another in coach class on A320s will drop to 33.1 inches from about 34.7 inches (88 centimeters) now. That compares to a 33- inch pitch on JetBlue's A321s and the industry standard of 30 to 31 inches.

"JetBlue has become yet another flying bus ... bad move. jetbluenomore," one customer tweeted, echoing others on the airline's Twitter page. "JetBlue more fees, less legroom not what customers want."

Southwest Airlines Co. will become the only major carrier not charging for a first checked bag. Full-service carriers led by United Airlines began instituting luggage fees in 2008, starting with a traveler's second piece, a practice that has since become standard in that segment of the industry.

JetBlue rose 4.1 percent to $13.25 at the close in New York. That was the highest since February 2007, according to data compiled by Bloomberg. JetBlue was the only member of the Bloomberg U.S. Airlines Index to advance today.

Fare Structure

The no-bag-fee policy is ending as JetBlue implements a new fare structure. With the lowest-price tickets, passengers will have to pay extra for checked luggage. The next-costliest fare includes one free piece, and the top tier will cover two.

President Robin Hayes, who will become chief executive officer in February, declined to discuss specifics of the fare categories or what it may cost to check a bag. Those details won't be made public until the tickets go on sale in the first half of 2015.

"Our product and our offering will continue to evolve," Hayes said in an interview. "Customer needs change. We want to adapt and give customers what they most value. The changes we announced today are about how we can drive better shareholder returns and deliver the best possible product for our customers."

Analysts' Urgings

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.

JetBlue's cost-saving steps include deferring delivery of 18 A320-family jets 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.

JetBlue opted not to add a charge for its FlyFi onboard Wi- Fi service, which the airline said is being used by an average 43 percent of passengers.

After failing to meet its target of improving returns on invested capital 1 percent per year on average, JetBlue said that the planned changes will improve that gauge by at least 10 percent by year-end 2017.