JetBlue is Sticking to its Plan
It is far from fixed. But it's not making stupid moves anymore. In fact, it's a being a fully rational airline.
Dear readers,
One time, I congratulated a non-U.S. airline executive for revitalizing a bloated loss-making airline. In a moment of candor this person said, essentially, it was an easy job — previous executives had erred so often that the new team merely needed to make rational, obvious changes (like cutting loss-making routes and above-market lease agreements) and that was enough. It’s the next step that’s the tough one, this person told me, because an airline can’t shrink its way to profitability forever.
I think about that interaction as I watch JetBlue. It's now in the post-Robin Hayes honeymoon period, where executives only must slash the bloat of the past and stop doing stupid things for them to look like conquering heroes. Eventually, JetBlue will need to grow its customer base and its relevancy outside Boston and New York — two things Hayes (who had good intentions) tried to do but failed at (miserably). But those are jobs for the future.
For now, these turnaround artists are doing OK with the basics. JetBlue has deferred aircraft orders,1 altered the network to focus on its strengths, and moved to cut costs. And it worked well enough in the third quarter. JetBlue posted a net loss of $60 million ($93 million less than a year earlier) on total revenues of $2.37 billion. On the operating side, its $38 million loss represented a $118 million improvement year-over-year. If you squint really hard at adjusted numbers, the airline almost broke even on an operating basis, with a -0.4 percent operating margin, a nearly 5-point improvement year-over-year.
Revenue trends look OK, too. Unit revenue increased by 4.3 percent year-over-year, with the airline attributing the improvement to healthy peak demand, better close-in bookings, and less Latin America competition, as well as its own network adjustments. The fourth quarter looks decent, too: the airline predicts revenue will drop more or less along with capacity.2
Someday, I expect I'll need to write a story about JetBlue’s next steps. We know an airline can't shrink forever, nor can it survive by being No. 2 or 3 in its most important markets. But before that happens, I’ll evaluate JetBlue based on whether it meets the intermediate goals (its JetForward plan) set by CEO Joanna Geraghty — to return to profitability by focusing on East Coast leisure business, and by making rational decisions about what to fly and what products to offer.
During their third quarter earnings call on Tuesday, executives discussed some of the changes they have made. Here are the ones I found most interesting.