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Will JetBlue have an EOS/MAXjet/SilverJet Problem with Their New Premium Service?

Much digital ink has been shed about jetBlue’s announcement that they’ll be adding (essentially) business class seats (similar to what SWISS has) to a handful of their new A321 aircraft for transcon flights between New York and LAX/SFO. Reactions ranged from apoplectic that these (incorrectly it turns out) seats could be ANGLED LIE FLAT – HOW COULD SOMEONE ENDURE THAT HORROR FOR 4 HOURS AND 27 MINUTES??????? To Cranky’s more down-to-earth overview, which I’ll link to here rather than regurgitate.

I just thought I’d throw this out there:

jetBlue is putting these seats in because they believe that they can’t compete for the business traveler unless they offer a premium cabin. Delta, American and United have all been upgrading their premium cabin on Transcons (or are in the process thereof) offering lie-flat seats on the 4.5-6 hour journeys. Their front cabins on transcons are filled with people flying on corporate deals (where they have to choose that airline), Elites who have upgraded themselves (free upgrades are difficult to come by — or are not offered at all — on these routes), with much of the remainder going to airline loyalists who choose to fly a given airline because of the miles.

jetBlue will have a difficult time grabbing many of these travelers. Corporate contracts are already in place, with banks, movie studios and others who fly those routes frequently tied in with legacy carriers. Loyalists pooh-pooh jetBlue’s frequent flyer program (rightfully so) because of the lack of international redemption options (among other reasons).

Lots of articles I’ve read about this suggest that jetBlue is going after legacy carriers on these routes with the new product. But I don’t think that’s true. I worked for EOS Airlines, which was competing (on some level) with MAXjet and Silverjet to offer all-premium-service flights between New York and London. They had a good product at a great price. And they all failed. Why? Lots of reasons, but in large part because business travelers were locked in with legacy airlines, and those arrangements (plus the pull of their frequent flyer programs) made it difficult to compete. Plus – they were constantly being matched on price, taking that advantage away because legacy airlines had deep pockets. If jetBlue’s plan is to compete with AA, UA, and Delta for those same customers, I think they lose.

But jetBlue is run by smart people, and I suspect they have a different target. Virgin America’s much-beloved product (if you have tech-y friends, you’ve been probably endured listening to them blabber about it nonstop) offers just a recliner seat up front on their transcons. Oh, and they’ve lost money hand-over-fist. And they share a similar, younger demographic with jetBlue. Is jetBlue thinking they can off Virgin America, by offering a wayyyyyy better front cabin for the same price that Virgin America offers their suddenly-crappy product? And Virgin America couldn’t really handle a price war for a prolonged period because they’re a bit cash strapped for that. Nor will they likely be able to make the investment in lie-flat beds in their planes.

If that’s their strategy (and I’ll assume it is), then bravo to jetBlue. Well played. Good luck competing with that, Virgin America.

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  1. JetBlue has two things that the other airlines didn’t – a great network and a partnership with a major airline.

    If you live in NYC, JetBlue can get you to a ton of different places. MaxJet, eos, etc could get you one place. So there’s enough heft that corporates can move a sizeable chunk over to JetBlue.

    Where this gets more interesting is with the American partnership. If American de-emphasizes NYC as I expect will happen after the US Airways merger, then the parternship with JetBlue could strengthen. Of course, they’ll fight it out on JFK-LA and SF, but the value of the two airlines combined makes it much more attractive to corporates vs DL and UA.

    That’s not to say this’ll all work out, but I have a tough time comparing to eos and those guys.

    • They absolutely have more going for them than EOS, etc. it’s more that I feel the opportunity to destroy VX seems more realistic than stealing much share on those routes from DL/AA/UA. Very very few (any?) new entrants have been able to steal premium traffic from legacies in these routes. If it were easy, wouldn’t you throw flat beds on EWR-LAX, charge 40% less than UA and laugh all the way to the bank?

      But going after VX seems like a win – no real frequent flyer program; no AA partnership; an inferior product; similar pricing; customers who clearly don’t care much about loyalty programs. That alone makes this move worth it, no?

  2. The corporate contracts don’t really work the way you’re describing. They are rarely exclusive and rarely long-term deals. It won’t be all that hard for JetBlue to offer up fares – whether before or after back-end discounts – which are competitive with the legacies. And at that point there’s not much stopping the customers from choosing to fly JetBlue instead.

    • But my point is why would people switch from a legacy carrier? If a company had a preferred relationship with, say, United and JetBlue, (my company had United and Delta), why would a frequent traveler switch to JetBlue just for those routes?

      You know who would switch? VX travelers.

  3. Doesn’t JetBlue have some sort of a partnership with Lufthansa? If they codeshare with Lufthansa, maybe that opens up some different ways to use JetBlue miles.

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