Coming Soon on JetBlue: Bag Fees, More Seats (less leg room)


Wall Street is finally getting its way with JetBlue.

The airline had been one of the last to hold out against charging fliers more for checked bag. But JetBlue announced Wednesday that customers will soon have to pay extra if they want to do so, leaving Southwest as the last big U.S. airline that doesn’t.

JetBlue’s bag charges will come as it rolls out multiple fare types sometime during the first half of 2015. The cheapest fare will be a basic one that will not include checked bags in the ticket price. The other two fare types will include the option for either one or two checked bags as well as increased frequent-flier points and other perks.

JetBlue did not specify how much more expensive bag-inclusive fares would be, noting that the fare types would fluctuate by route and in response to demand. Currently, fewer than half of JetBlue’s customers check bags, according to the airline.

JetBlue also will add more seats to its Airbus A320 aircraft, with the retrofitting expected to begin in mid-2016, according to the airline. Once refitted with newer, slimmer seats, the capacity of those planes will jump to 165 from the current 150. The average “seat pitch” — or a standard measure of distance between seats — will decline to about 33 inches, down from more than 34 inches currently. Despite that, JetBlue President Robin Hayes claimed via the company’s corporate blog that JetBlue will still offer have “the most legroom in coach by a significant margin.”

JetBlue projects the new fare strategy will eventually boost operating income by more than $200 million a year. The extra seats on its A320 jets should add $100 million, the carrier said.

JetBlue says in a statement the changes are part of a “long-term plan to drive shareholder returns through new and existing initiatives.”

“We believe the plan laid out today benefits our three key stakeholders,” Hayes said in a statement, “It delivers improved, sustainable profitability for our investors, the best travel experience for our customers and ensures a strong, healthy company for our crewmembers.”

TODAY IN THE SKY: JetBlue CEO Barger to step down; Hayes to take over

The move add seats and to boost money made from “extras” comes after Wall Street analysts had voiced increasing disappointment during the pat year about the carrier’s efforts to boost revenue. In particular, some analysts clamored for the airline to start charging for checked bags, something the airline had been reluctant to do. Currently, JetBlue allows customers to check one bag for free.

The pressure from Wall Street is thought to have played a significant role in the decision of current CEO Dave Barger to step down from that post. Barger announced in September that he’ll resign effective Feb. 16. He’ll be replaced by Hayes.

Wall Street appeared to cheer JetBlue’s moves . In afternoon trading, shares of the New York-based airline were up 55 cents, or 4.3%, to $13.27. They hit a 52-week high of $13.48 earlier in the session.

The move also leaves Southwest Airlines alone among big U.S. carriers for allowing all customers to check up to two bags at no charge.

Like JetBlue, Southwest has faced similar calls from Wall Street analysts to boost revenue by adding fees. So far, however, Southwest has given no indication it would consider such a move.

“We have absolutely no plans to charge, especially for bags,” Southwest CEO Gary Kelly told Today in the Sky during a June interview at the company’s Dallas headquarters. “You look at our results, and they’re very good.”

Kelly said he believes Southwest gains more with its “bags fly free” strategy in additional passengers than it loses in unrealized revenue from such fees.

“We’re different. We’re distinctive,” Kelly added. “We have fans as customers and we are trying hard to win their hearts and their pocket books. I think what would make sense for us is to continue to evaluate things that are truly choices for customers. And, if we can bring those (things) to them and … ask them to pay for it, I don’t feel bad about that. But bag fees don’t fit.”

Now that JetBlue’s move has left Southwest as the only carrier without bag fees, it’s likely Wall Street will again clamor for a change at Southwest.

“You won’t see us charging for bags. I won’t promise that into infinity, I don’t think that’s fair,” Kelly said during the June interview. “But we have absolutely no plans to ever charge for them, and I hope we never do.”

Back to JetBlue, it also said in Wednesday’s announcement that it would push back the delivery of 18 Airbus jets as part of an effort to cut capital spending by more than $900 million through 2017. The aircraft had been scheduled to be delivered to JetBlue between 2016 and 2018, but now will arrive in 2022 and 2023. JetBlue said the move would allow it to “to optimize its fleet to better match capacity with demand.”

“We think the new CEO is showing a good focus on revenue improvement and prudent capital deployment with today’s news,” Jim Corridore, equity analyst at S&P Capital IQ, said in a research note out shortly after JetBlue’s announcement.

“We are positive on the bag fees,” he added, calling it “a change in strategy that we thought was necessary to increase revenues and yields.”


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