How do they make money?
Actually, that's a good question. Jet Blue has been doing quite well for a start-up---they reported their first month of profitability in August 2000 (just six months after commencing service).
Why has JetBlue proven successful?
It all comes down to having the money to do things right from the start....
JetBlue was the most heavily capitalized start-up in US aviation history, with nearly $130 million in capital funding. Instead of leasing old, gas-guzzling, high maintenance 737s, they were able to purchase brand new A320s. They could also afford to give their passengers tangible benefits. Airlines with customer loyalty do not just have good on-time performance---they offer their passengers defining features such as an exceptional frequent flier program, better food, or in JetBlue's case, better seats and IFE. Every passenger will notice that JetBlue offers leather seating and complimentary Live TVs at every seat. Even if the flight is delayed, the passenger still knows the airline has redeeming features.
JetBlue was not the only start-up with the foresight to employ the "spend to save" strategy. However, they were one of the few airlines with an initial capitalization sufficient to pull it off.
Another key to JetBlue's success was their choice of destinations. They chose routes which were underserved, but still reasonably low-risk. By choosing JFK as their hub, they did not encroach on the fortress hub of a major airline, and they were able to achieve on-time performance better than any carrier at EWR or LGA. Steady growth helps companies to remain profitable, and with more than 20 million people living in and around New York City, JetBlue is just beginning to tap a huge market.
Jet Blue does operate with a fairly low cost platform. Labor costs are cheap right now, although they will rise with employee seniority. Also, the A320s are fillied to the brims with seats---162 to be exact, which JetBlue achieves through removing the galleys. Obviously, they cannot serve hot meals, but they can snacks which are cheaper and better tasting. I don't know the details of the DirecTV agreement, but I guarantee you JetBlue would not offer it for free if it was costing them money. DirecTV and the cable networks are receiving tons of publicity through this whole deal, so I suspect they are covering the brunt of JetBlue's costs. Also, as I mentioned earlier, the satellite TV is the sort of feature that will attract new customers and increase customer loyalty.
JetBlue is a success in every way so far. At first I questioned the choice of A320s in place of A319s, but the planes are filling up. The combination of low fares, great operational performance, and a modern, high-tech travel experience has been winning with passengers. I think the next step for them is form frequent flier partnerships, further soldifying the airline's customer base.
By setting such a good foundation, JetBlue can work their way upwards.