JetBlue Eyes Expansion

By Jens Flottau
Source: Aviation Week & Space Technology

Another possibility is a broader partnership with American Airlines. However, the planned US Airways/American merger seems to have put that plan on the back burner for the time being. Laurence notes nonetheless that “the fundamental reason why we would partner with American has not changed.”

American could indirectly provide JetBlue with some nice growth opportunities, too, if it (or US Airways) was forced to give up slots at Reagan Washington National Airport. “We absolutely hope for slots at National,” says St. George.

JetBlue's management has been discussing joining one of the three alliances, weighing the pros and cons in trying to figure out whether the benefits would be worth the investment. Two-way code-sharing may be a step in between or it could be as far as the airline is prepared to go for a long time. “Everything is on the table, and that includes alliances longer term,” says Laurence. JetBlue has been working with members of all three—Star, Skyteam and Oneworld. In fact, Lufthansa's 2007 investment in JetBlue was based on the assumption that it would need feed in New York. That need has diminished significantly as a result of the United-Continental merger that gave the Star alliance a hub at Newark (N.J.) Liberty International Airport.

Independent of future partnerships, the airline is investing billions of dollars in its fleet. The company ordered 40 A320NEOs. It still has 14 more A320s coming from an earlier order and is moving into operating larger aircraft through its commitment for 30 A321s, the first of which is due to arrive in October. JetBlue's large A320NEO order brings two major benefits. “The NEO will totally eliminate any transcontinental restrictions,” says Laurence. Today, JetBlue still needs fuel stops on around 2% of its transcontinental flights because of the current A320's range limitations. The range benefits of the NEO will be important on some of JetBlue's longest existing and new routes such as Fort Lauderdale-Lima and Boston-San Francisco. The NEO is also opening up opportunities for JetBlue to go “a bit deeper into Latin America.”

In ordering the A321, the carrier is also taking the next step toward operating larger aircraft. But the largest Airbus narrowbody is only about a 20% capacity step up from the 156-seat A320s. And it does not allow true long-haul flying. “At some point, we could operate widebody aircraft,” says Laurence. “There is no short-term plan, but we always evaluate it.” He even says “widebodies could make sense in the current network.”

Becoming a long-haul operator would be the next natural step once its short- and medium-haul networks are mature. JetBlue is already flying to previously unforeseen destinations. “Nobody would have predicted that we would be in Colombia or in Anchorage,” says St. George. “The network is dramatically different [from] the original plans in 1999.” So chances are it will continue to broaden its blueprint. The airline has already identified Latin America as one of its main growth targets, but narrowbody technology limits that. Widebodies don't, and the new generation of aircraft, particularly the 787s as the smallest long-haul aircraft, would seem like a good fit. JetBlue is not discussing aircraft choices at this stage, but one thing is clear: “If we go long-haul, it would probably be Latin America first,” says St. George.

Because of range issues and JetBlue's approach to opening up markets, fleet choice has always been a very strategic item. The airline was the first in its segment to trade down in terms of aircraft size and introduce a 100-seater—the Embraer 190. Its experience has been mixed: Commercially, the fleet has been valuable in many aspects, but the technical side is still difficult. Barger has a clear opinion by now: “We should never have been the worldwide launch customer of a new airplane. We weren't big enough.” He is still disappointed because of the higher-than-expected maintenance cost of the aircraft. He also expressed unhappiness with the Brazilian aircraft's General Electric CF34 engine. “We're not pleased with what we're seeing on the Embraer [with] the GE motor.”

JetBlue operates 54 100-seat Embraer 190s. Barger, who stretched out deliveries of the Brazilian jets after becoming CEO in 2007, stopped short of saying he regretted ordering the aircraft. He notes that they are optimally sized for JetBlue's expansion in Boston and other key growth markets. He says the airline has been able to drive down maintenance costs, but not enough. “We're seeing our later 40 [190s] performing better than our first 20.”

JetBlue ordered 100 Embraer 190s in 2003 and took its first delivery in 2005. The airline struggled with early maintenance challenges and delivery delays, hiccups that have been acknowledged by the manufacturer. “Back in 2006-07 we were still struggling on the [E-Jet] production ramp-up, dispatch reliability of the aircraft and we were late on deliveries,” Embraer CEO Fred Curado told Aviation Week in 2010. “JetBlue was the most visible, but other customers also had problems.”


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