The headline in the JetBlue Airways press release today said it all: JetBlue Outlines Plan to Drive Shareholder Returns. Beginning next year, JetBlue passengers will have a choice of three “branded fare bundle options.” The first of these will incur checked bag fees while the other two include one or two free checked bags “along with other attractive benefits.” Translation: The latter two ‘bundles’ will include a built-in additional charge for checked bags.
According to JetBlue, the changes announced today will generate an additional $400 million in annual revenue as well as reducing capital expenditures by an additional $900 million due to a six-year delay in ordering new aircraft.
Within a couple years, JetBlue also plans to increase seating capacity on their A320’s by adding fifteen more seats. Of course that space has to come from somewhere so seat pitch will be reduced by one inch.
While the response has been everything from disappointing to aggravating, I admire JetBlue for at least not calling this an enhancement that the passengers will appreciate. With complete honesty, CFO Mark Powers said, the changes were designed to “enhance JetBlue’s revenue performance, control costs, and reduce capital commitments through 2017.” No lipstick on the pig here, Powers made it clear this is all about shareholder return.
Of course, this leaves Southwest Airlines as the lone primary holdout on the checked bag issue. Will they cave to their investors and change policy, too? They say no but the time will come when they will either offer so-called bundles like JetBlue, raise their prices enough that they will struggle even more with the Low Cost Carrier moniker they love to toss around, or lose investors to the other carriers.
In today’s economic environment, it is very obvious who the tail is that wags the airline dog. Hint: It’s not frequent fliers.