JetBlue Examines Network To Gauge Route Performance
JetBlue has no plans to mirror the double-digit city growth it posted in 2006 and may even pare its network after reviewing second-quarter market performance data.
JetBlue added 16 new cities last year, and yesterday CFO John Harvey told analysts the carrier wouldn't sustain that pace going forward. He predicted annual city additions would fall between two and four destinations.
While emphasizing that the financial community shouldn't "read too much" into the route review, if certain routes aren't maturing fast enough, "we'll make that tough decision [to cut the market]."
The route review is part of JetBlue's strategy to return to and sustain double-digit operating margins. Second-quarter operating margins were 10%, compared with 7.7% a year ago. Harvey pointed out that a carrier could add only so many new markets at a time, and 16 in one year is a drag on profit and loss. Last fall, one-third of JetBlue's available seat miles were in markets that were 12 months old or younger, the CFO explained. He said JetBlue needed to look at markets with a maturity time of 18-20 months and decide if frequencies needed to be pulled or the carrier should exit the station.
JetBlue is also keeping an eye on new competitors, when questioned about Virgin America, noting that the carrier is "a significant brand entering the landscape." But he also countered that JetBlue had built up its own brand loyalty in the San Francisco Bay area in the past seven years. Still, JetBlue is aware that its overlap with Virgin America in measured seats is north of 10%.
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