Must-know: JetBlue’s competitive airline positioning

JetBlue’s position in the industry

JetBlue Airways (JBLU) operates a hybrid business model—refer to Must-know: Airline business models for more details on models. It offers point-to-point service like most low-cost carriers and combines differentiated product offerings, including various in-flight facilities that are generally not provided by other low-cost carriers. JetBlue caters to the niche market comprising customers that it defines as “underserved customers”—those looking for better features and benefits that aren’t provided by low-cost carriers and at a reasonable price that aren’t provided by network carriers.

JetBlue’s RASM and CASM

JetBlue’s stage length–adjusted revenue per available seat mile (or RASM) and cost per available seat mile (or CASM) are higher than most of its low-cost peers and closer to network carriers such as Delta Air Lines (DAL), United Continental Holdings (UAL), and American Airlines Group (AAL). See the chart above. Stage-length is the average distance flown per aircraft departure. RASM and CASM vary according to the stage-length. As the stage-length increases, the fixed costs decrease as it’s spread across greater number of miles. So, stage length—adjusted RASM and CASM are appropriate to compare airlines that fly different distances.

The additional amenities provided to the customers increases the CASM for the airline but also enables it to increase its RASM by charging a slightly higher fare compared to other low-cost carriers. JetBlue’s average passenger fare was $163.19 in 2013 compared to Southwest Airlines’ (LUV) $154.72.

JetBlue’s customer amenities

JetBlue’s core competency is its differentiated products and services. It believes that competitive fares and quality air travel need not be mutually exclusive. Below is a list of some of JetBlue’s customer amenities.

• In-flight entertainment systems include 36 channels of free DIRECTV, 100 channels of free SiriusXM satellite radio, and options to view premium movie channels.
• Comfortable leather seating provides sufficient legroom with an option to purchase “Even More” space, additional legroom. Part 6 in the series will discuss “Even More” products.
• Free and unlimited brand-name snacks and beverages and the option to purchase premium food products and other products such as blanket and pillow sets are available for customers.
• One 23-kilogram carry-on bag is free of cost, but additional baggage will be charged.
• Fly-Fi, an in-flight internet service, will be available on all Airbus fleets by the end of 2014.
• “Mint” transcontinental service is available from New York to Los Angeles and New York to San Francisco. This will include 16 lie-flat beds, four of which will be private suites—the first of its kind in the U.S. domestic market.