Posted by Seth on November 18, 2010 under frequent flyer, News, points | 
Earlier this week saw two announcements regarding growing alliances in the airline world. Russian carrier S7 joined the OneWorld alliance while JetBlue added another interline partner, Emirates.
The S7/OneWorld deal adds 55 destinations and 9 countries to the OneWorld route map, nearly tripling the alliance’s coverage in Russia, Central Asia and Eastern Europe. That’s a big chunk of the world that is now open to OneWorld partners. Additionally, frequent flyer reciprocity – including EQMs – is now in place for travel on S7 and credit to other OneWorld partners.
The Emirates/JetBlue deal continues the efforts of JetBlue to grow their airline partner portfolio for interline connections. The deal covers only ticketing and baggage check-through for now. Discussions about frequent flyer reciprocity are ongoing, as is the potential for ticketing through JetBlue channels; currently the interline itineraries are only available via emirates.com or other 3rd party booking engines. Emirates is the 6th interline airline partner for JetBlue, joining South African, El Al, Lufthansa, American Airlines and Aer Lingus.
In both cases it is nice to see partnerships grow. Ultimately that’s better for customers in just about every case.
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Posted by Seth on April 6, 2010 under News |
The more I think about the recently announced deal between American Airlines and JetBlue the more I am struck with just how similar JetBlue is to Alaska Airlines. And I cannot help but think that is a good thing for JetBlue; Alaska ha been incredibly successful in their strategy and the JetBlue approach seems quite similar.
Just how similar are they? The numbers tell the tale. Each is the dominant carrier in at least one airport in a major metro area. OK, that’s not too impressive since pretty much every successful airline has a hub in a major metro.
- The fleets are almost identical in size and are very similar in makeup. JetBlue operates 110 Airbus A320s and 41 Embraer E90s. Alaska operates 114 Boeing 737s and 58 regional aircraft (18 CRJ-700s, 40 Dash8-400s) through their relationship with Horizon Air.
- Both airlines focus significantly on north-south routes of about 1,000 miles or less, JetBlue on the East Coast and Alaska on the West Coast; they each also operate a few transcons and mid-con flights, but those are not the bulk of the flights. They each have a few international routes but nothing too long in the air; they’re limited in many ways by their fleet.
- JetBlue is actually a bit larger in terms of flights operated and passengers carried but the revenue numbers are very similar: both are in the $3 Billion annually range.
And then there are the partnerships they have. Neither is part of a major global alliance. They for partnerships of convenience for specific needs. JetBlue partners with Aer Lingus, Lufthansa and soon with American. Alaska partners with a whole bunch of folks, including codeshares with American and Delta. Both are stable and would likely survive without those partnerships but having them makes a huge difference in attracting frequent flyers.
The market opportunities that the Alaska Air’s partnerships offer are smaller than the global alliances but not by much. They have relationships with enough domestic and foreign carriers that folks earning miles in their Mileage Plan program can redeem for travel pretty much anywhere in the world. JetBlue isn’t quite there yet, but they seem to be moving in that direction and the new TrueBlue 2 program was designed to permit such opportunities.
It will be a while before the AA/JetBlue deal really plays out to the point that there are palpable results for either carrier. Further developments in the relationship will take even longer. In the meantime, it appears – at least to me – that JetBlue is following the same trajectory as Alaska Air, and they’ve got good reason to do so. They may actually be in a stronger position to make such a move given their positions in the New York City and Boston markets. Those are much harder to break in to than Seattle would be should someone want to challenge them.
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Tags: Aer Lingus, Airbus, Alaska Air, Alaska Airlines, American Airlines, Boeing, Boston, Delta, Embraer, JetBlue, Lufthansa, New York City, Seattle
Posted by Seth on March 31, 2010 under frequent flyer, News |
American Airlines and jetBlue announced an agreement today that will see the carriers begin to sell flights on each other’s metal and also shift a number of landing slots around. American will cede eight slot pairs at Washington, DC’s National Airport to jetBlue in exchange for twelve slot pairs at New York City’s JFK airport. jetBlue will remain the leading carrier at JFK measured by frequencies even after this swap. At the same time, in conjunction with the five slot pairs at National that they are expected to acquire from US Airways, jetBlue will be able to build a significant operation up very quickly at the airport starting late this year.
In addition to the slot swap the two carriers have announced plans to offer interline connections to each others’ flights at JFK and in Boston. American Airlines’ customers will be able to leverage jetBlue’s position as the leading domestic carrier at both of these airports by booking single tickets through for routes where AA doesn’t offer service but jetBlue does. At the same time, jetBlue customers will be able to book connections onto AA’s international flights through the two airports. American is second only to Delta in international operations at JFK, offering connections to London, deep South America, Tokyo and a number of destinations in continental Europe. AA is also a leader in the transatlantic market in Boston.
It should be noted that, at this time, the agreement does not specify code-sharing between the two carriers or interline ticketing beyond the very specific destinations. It is a very limited partnership, at least for now. Mostly it means a single ticket can be issued for the connections and that luggage can be checked at the originating jetBlue station for outbound long-haul international travel.
Of course, any discussion such as this one leads to questions about additional tie-ups in operations and in the loyalty programs. And, this announcement still leaves plenty of opportunities and options, but no definitive answers on most of those issues. Will jetBlue be joining up with OneWorld, the global alliance that AA is a major player in? Not right now but the future is wide open? What about jetBlue’s interline agreements with partial owner Lufthansa and with Aer Lingus? Both of those will continue as they have been operating previously. Oh, and still no details on how the frequent flyer loyalty programs will integrate in terms of earning points or other benefits across the new partnership.
For American this seems to be a move to retain market share in the transatlantic market. They currently offer very few onward destinations for passengers connecting through JFK who aren’t staying in New York City. The move will allow them to increase that coverage significantly with a minimal investment. For jetBlue the ability to attract customers who are keen to travel more outside the Americas is a significant hole in their route network that they will be able to better fill now.
In many ways this partnership seems to be placing jetBlue into a role similar to that of Alaska Airlines. They provide a broad regional coverage and partner with a number of different airlines from a variety of alliances. They don’t have to declare loyalty to just one alliance and they don’t have to fully integrate their loyalty scheme with those programs. They forge alliances of convenience and partner to fill strategic gaps. Customers from both sides win and the airlines are able to grow without significant capital outlay.
At this point it probably doesn’t make too much sense for jetBlue to join one of the global alliances, particularly given their strong position at JFK and Boston and their ability to strike opportune partnerships to improve their route footprint with whichever partner presents that opportunity to them at a particular connection point.
Tags: Aer Lingus, Alaska Air, Alaska Airlines, American Airlines, Delta, frequent flyer, JetBlue, London, Lufthansa, New York City, OneWorld, Tokyo, Washington DC
Posted by Seth on December 3, 2009 under News |
Well, they haven’t up and moved out of the country yet, but Aer Lingus is still doing what they can to cut costs, mostly but announcing a bunch of route cuts and the associated job redundancies that would go along with them. The Irish carrier announced today that, "in the absence of real cost savings being delivered from all employee groups," they will "have to resort to other measures."
Those other measures seem to include cutting a number of routes and up to 1,000 jobs across the company. Of course, there are no specifics being released yet on exactly what routes or jobs would be cut and another meeting of the board is scheduled for Friday. Either decisions will be made then or this is more brinksmanship with the unions. Or they’re just bored and trying to have some fun on a Thursday afternoon. I doubt it is that last one.
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Posted by Seth on November 28, 2009 under News |
It is hard to tell if this is a negotiations ploy or a serious move, but Aer Lingus appears to be making overtures towards moving their base of operations out of the Republic of Ireland. The Irish carrier has applied to the CAA in the United Kingdom for an operating license. Should the license be granted it would be possible for planes that are currently operating under an Irish license to be transferred to a newly established company in either Belfast or London to operate from there. Even more importantly, however, is that the “new” company would need to hire a whole bunch of new employees and the old company would have no planes and would simply dismiss all their employees. Folks who want to continue working for Aer Lingus would then reapply for their existing jobs at the new company.
Obviously the move would be a huge blow against the labor unions, the same groups that Aer Lingus is currently locked in rather contentious negotiations with. So maybe this is posturing and maybe it is for real. But reading this bit in the article was particularly interesting:
Aer Lingus has a huge issue with it long-haul pilots, who make up to $500,000 a year on the Atlantic route and have golden pension plans as well. Ryanair pilots, by comparison, are only paid half that amount.
Making half a million a year is a quite posh salary level. Of course the implication that the Ryanair pilots are making a quarter million annually seems high so I’m not sure that the other numbers are really legit. But that’s an awfully large salary base to handle with the current financial woes that many airlines are facing. Even in good times I’m not sure how it was profitable to fly while paying out salaries at that level.
Supposedly there is a deadline in the coming week for negotiations with the unions to be successful in identifying cuts or there will be layoffs and route cuts. And there is no timeline on the application for the new operating certificate. Lots of fun in the Isles with plenty more on the horizon. Still, having the flying shamrock actually being a British company baase would be just plain strange.
Posted by Seth on July 30, 2009 under Uncategorized |
I’ve been speculating for a while on some of the changes that will be coming out as part of the new TrueBlue 2 program, jetBlue’s planned re-launch of their loyalty program. I heard some bits direct from the horse’s mouth, so to speak, and other bits were inferred from some of the surveys they’ve sent around and other bits of information that have made their way onto the intertubez. Now, finally, the carrier has actually announced some of the details of the new program. And, as with any change in a program, there is some good news and plenty of not so good news, too. The impact will depend on one’s personal travel patterns but the new program definitely looks to be an improvement for at least some customers.
The new program is going to be based on dollar-spend on flights with the carrier. This isn’t really a surprise (I mentioned it as far back as March). Now they’ve released some of the details of that earning. Earning will be at 3 points per dollar spent on airfare. The earning will double to 6 points per dollar for flights booked online, keeping with jetBlue’s double credit for online booking approach that they’ve had since the launch of the original TrueBlue program. The fact that the earning is on fare and fees (like EML seating or checked baggage) but excluding taxes is likely to cause some confusion for some customers (Why did I only earn 291 points if my ticket cost $110??) but such is life.
The new program will also be much better for the customer in terms of point expiration. The current program expires all points 12 months after they are earned, regardless of whether there is additional activity with the TrueBlue program (with an exception for folks who carry the co-branded AmEx card). The new program will not expire any points as long as there is activity on the account within 12 months. That is a pretty good deal, though the 12 month horizon is still at the short end in the industry. But at least the points no longer expire just because. And there will also no longer be a forced issuance of rewards once a customer hits the magic 100 point threshold, another problem with the old program. I actually think that this is a major improvement in the program.
And then the bad news. They haven’t released a reward chart yet. The only information available is this:
You will need at least 5,000 points to earn an Award for a oneway flight. The number of points required to redeem an Award flight will vary according to the flight chosen; for example, some flights may require more than 5,000 points depending on your choice of destination, day of the week, time of year and how far in advance you are booking your flight.
Considering that the lowest price jetBlue traditionally publishes fares at (excluding most sales) is $44-49 each way, that pretty much puts the value of the points earned at a penny each. Not too much of a surprise. So lets extend that out a bit. Earning 5,000 points will actually cost somewhere between $833 in airfare purchases (excluding taxes) assuming an online customer. And as a reward for that spend you get a $50 plane ticket. That’s actually a 6% ROI for the travel spend (excluding taxes). This scheme should appeal to folks who are constantly buying more expensive tickets, as they are now going to get more value for their short flights. And compared to the programs of the legacy carriers it actually is much better in that regard since short, expensive hops are a terrible value in the legacy programs. But that seems to be where the benefits end.
Looking at a leisure traveler, one who does really well in the program today, however, and things are not quite as clear. Take the customer who pays, on average, $250 for a transcon round trip (which is a pretty good price) and buying everything online. Those folks used to get a free reward flight for spending about $1,200 and earning 100 TrueBlue points. That same spend will earn 7,200 points in the TrueBlue2 program at the online rate of 6 points per dollar spent. That’s enough for about $75 in travel credit, nowhere near enough for a round trip ticket. That $1,200 spend used to be enough for a flight anywhere within the jetBlue network. Now it might get you from Long Beach to Las Vegas. That pretty much sucks.
For the Florida or Caribbean commuter – jetBlue’s other major traffic center – the number are similarly bad. At around $200-300 for a round trip flight (again, at the low end of the price scheme) it would generally require about $1,500-2,000 in spend to realize a reward. Now that same spend nets 9,000-12,000 points, or about $100 in travel credit. So the amount of travel required would at least double to realize a reward. At the most expensive end of the jetBlue fare structure – a $439 ticket one-way from New York to Ft. Lauderdale – it would take just over $5,000 in spend to get to 100 TrueBlue points and a reward in the current scheme. In the new scheme that would be 30,000 TB2 points. Assuming the value applies linearly that’s about $300 in travel credit, barely enough for a discount round-trip ticket.
Finally, a quick look at the earning options for the credit card folks. The TrueBlue AmEx will now earn points at a straight $1 = 1 point rate. That is basically in line with every other program out there. At $25,000 in spend that’s 25,000 in TB2 points, or about $250 in credits. Not horrible, but not the same as a reward ticket anywhere in the jetBlue network, which is what $20,000 in spend used to accomplish. Moreover, at $50,000 in spend ($60,000 on Delta) one normally could redeem for last seat availability. At $439 each way on jetBlue that will cost many more points.
There are still no details available about the potential for redemption on jetBlue partners such as Aer Lingus or Lufthansa, something that was supposed to be part of this program. I’d be disappointed, but at the rates involved for other redemptions I’m not really sure it matters at all.
The marketing guys are going to work really hard to sell no blackout dates and great availability since they no longer will need to restrict inventory. But the cost of these improvements, and the commensurate loss of value in the program, really hurts. I was afraid that this was coming. The writing was on the wall. And now the writing is on their website and it doesn’t look good at all. TrueBlue will remain an “also ran” in the world of loyalty programs, at least for me. There are too many great earning opportunities elsewhere for my money.
Update: Wow did I ever screw this one up. I received an email shortly after this post and just got to have a conversation with Dave Canty, the Director of Loyalty for jetBlue. Suffice it to say that I made a pretty big ass out of myself and umption with some of the stuff posted above. The revised and much more accurate details can be found here. Sorry about that.
Posted by Seth on March 13, 2009 under frequent flyer, News, points |
JetBlue’s loyalty program, TrueBlue, is due for a revision. As far back as last June during the JFK T5 tour that I arranged they were telling us that a new program was on the horizon. When I was talking to executives at the JFK T5 grand opening opening they specifically mentioned that major improvements were on the horizon. The rumors have been flying wild and their online focus group/survey program has been pretty good about showing what they are thinking as they attempt to validate the plans. Sadly, the news doesn’t look good for customers.
The program looks to be headed straight towards rewarding customers directly based on how much they spend with the airline. That’s great for the very high spend customers, but reality says there aren’t many of those. And in those situations the low spend customers tend to lose. Badly. Basically they’ll give you some number of points for each dollar you spend. Those points can be redeemed at a fixed dollar value against the price of any ticket available for sale. The good news that comes with that is no blackout dates. The bad news is that earning sufficient points becomes horribly difficult.
Say you fly back and forth between New York and California a few times a year on cheap fares for vacations. You earn your 100 TrueBlue points and cash them in for a vacation somewhere random. That reward ticket probably cost more than you were paying for the individual tickets you were buying, at least if you’re taking full advantage of the program. In the new program, however, a $1,000 spend (~4.5 transcons at the low end of the price spectrum, enough for 100 TB points today) may only earn you enough points for $100 in travel credit. Now, instead of getting a round trip reward to San Juan or Aruba you’ll be lucky to get a round trip ticket to Pittsburgh (no offense) during a sale. Note that I do not know the specific earning numbers that TrueBlue 2 will have, but 10% is where Virgin America placed the value of their points at for their program so it isn’t too far out of the realm of possibility.
The other interesting thing that this opens up is access to redemption partners. One major limitation TrueBlue has suffered from is the inability to redeem points for anything other than JetBlue flights. With their Aer Lingus and Lufthansa partnerships I would expect redemptions to happen with these carriers, too. The problem is that the numbers make redeeming for these rewards horribly uneconomical. A typical coach ticket to Europe from the East Coast will cost between $300-600 at the low end, depending on the season. Using the same 10% number that translates to a $3,000-6,000 spend to redeem. And that is at low season and in coach. Those numbers just aren’t competitive with the legacy programs and their earning potential.
One good thing that seems to be coming is their TrueBlue “SuperFan” designation, their version of an elite program. It is poised to include “priority seating in the first five rows, priority boarding, reseating and rebooking priority in case of a cancellation, and more.” Those are all great benefits, especially the first one, as those front rows are the Even More Legroom seats that normally require a $10-30 up-charge per flight. Getting access to those for is a pretty nice benefit. The catch, however, is what the qualification threshold is rumored to be: $5,000 in annual spend. That is a ridiculously high qualification level, particularly because the benefits are pretty limited. Again, the new TrueBlue program would come up horribly short against legacy programs and similar benefits. Sure, lots of folks spend that much or more on air travel annually, but most of those folks are getting real value, like first class seats, copious amounts of points in a program and the ability to redeem those points at reasonable levels for domestic and international travel.
The problem as I see it is that JetBlue is banking on the upside of this plan, but that upside is all marketing fun. “No expiration of points” is great, though it is sad just how long you’ll need to collect enough points to redeem for a great reward. “Earn points based on what you spend” seems good since you know you’re going to earn points but once you realize how many points you actually need to get a cool reward you’re going to be pretty disappointed. “SuperFan status for big spenders” sounds awesome until you realize that the vast majority of folks won’t get anywhere close. But it all markets well so folks are going to be really excited initially, right up until they read the fine print.
The legacy programs may not be pretty and they may have a lot of fine print and rules to deal with, but those rules can at least be manipulated in the favor of the customer. The new programs don’t seem to have much opportunity on that front. That’s bad for those of us willing to pay attention and play the games, and it isn’t particularly good for the casual traveler either.
Disclaimer: I’m basing a lot of these observations not on actual announcements but on the details I gathered over the past few months from online surveys. JetBlue has stated outright in the surveys that they are being used to refine the details of the new program but has not confirmed and of the specific details yet. So don’t hold me to any of the specific details, but it all looks pretty likely to me.
Posted by Seth on January 29, 2009 under Uncategorized |
It is earnings season on Wall Street, and jetBlue took their turn today. They lost some money, but not too much, all things considered. The earnings/losses bit is not really all that interesting to me. What I like listening to is the details of how they got to those numbers. Things like where capacity is shifting to and where they are realizing their revenue. Yes, I am an aerogeek.
So what did jetBlue have to say today? A couple interesting things, at least to me.
- They’re shifting away from transcons and into the Caribbean. They’ve been pushing in this direction for a while, but I finally heard some specific numbers and they are pretty staggering. Transcon capacity has been reduced about 30% since last year. At the same time, Caribbean/international capacity has increased by about 40%. And they did that while also reducing the number of planes in the fleet. In line with this move they’ve announced a couple new routes, including launching a new city – Montego Bay, Jamaica. They’re also going to be trying again for the LAX service to Boston and New York City, so they are not killing transcon capacity completely.
- They are not realizing revenue very far in advance, and it is getting worse. This is a big one in many ways. One thing that jetBlue does that limits them is that they have limited schedules releases. So if you wanted to buy a ticket for October right now on jetBlue you wouldn’t be able to do so. But it seems like that doesn’t really matter too much to them, as bookings are moving much closer to the date of travel rather than far in advance. I have to say that I am seeing this in general, too. Part of the drive in this direction is changes to the fare pricing systems that allow the carriers to be more flexible and manipulative in their pricing rather than just releasing all the seats day one and seeing the cheap seats sell first and most expensive seats later. And part of it is that most folks are worried about their income so they aren’t planning vacations as far in advance. The downside of this is that they don’t get to sit on the cash and earn interest waiting to actually realize the expense of carrying a passenger.
- They make a lot of money from non-fare events. Sure, the bulk of the revenue for the carrier comes from the base fare price. They averaged $151 per ticket last month, the highest in their history. But on top of that they are realizing a LOT of revenue in non-fare events. The Even More Legroom program accounted for about $45MM in income in 2008. That is a drop in the bucket for $3.056Bn in total revenue, but it makes a big difference when you consider that it actually doesn’t cost them anything to realize that revenue. Other incremental fees – like checked baggage, pets, etc. – weren’t detailed in this call, but in the last call they were something around $20 per passenger, on top of the fares. That is a big deal, especially when no one carrier can really force fare prices up. And the best part is that they seem to do it without making folks feel like they are being hit with tons of fees. I’m not entirely sure how that works for them, but it does.
- They have international partners, but they barely use them. From the customer perspective, the jetBlue partnerships with Lufthansa and Aer LIngus have pretty much been a bust thus far. They talk about passing passengers back and forth and marketing with a global presence, but the fact remains that one cannot book flights via the jetBlue website for either of those partners. Aer Lingus does allow booking through on to jetBlue flights, so it isn’t completely useless, but it is pretty close. The good news is that jetBlue plans to link up with Aer Lingus in Orlando starting this year, in addition to their existing Boston and New York links. And they expect that the Lufthansa partnership will finally start to actually exist from a passenger perspective later this year. Of course, none of this is going to be a seamless benefit for jetBlue customers until they get a new reservations system in place, and they expect that to happen starting late this year and going live in early 2010, so we can hope.
Like I said, mostly aerogeek stuff, but I thought it was an interesting view into their perspective on the market and where they are going in the near future.
Posted by Seth on January 26, 2009 under Uncategorized |
Another entrant has decided to take the plunge in the open skies market between the USA and Europe, but this one is rather strange. United Airlines is teaming up with Aer Lingus to provide service from Washington Dulles to Madrid, Spain.
The flights will operate under both United and Aer Lingus codes, but will be operated fully by Aer Lingus. Basically United is using Aer Lingus to operate the flights as a means to get a toehold in the market without investing in an aircraft or crews to operate the flights. There is little doubt that the Aer Lingus costs to operate the flight are going to be significantly lower than United’s costs would be if they were operating the flights directly.
So, on the plus side, some competition to the 5x weekly service that Iberia offers. On the down side, some potentially troublesome labor relations issues for United. Considering the quality of their labor relations already I don’t know how much worse things can get, but outsourcing their operations seems like a good way to find out.
Ooohh….I just saw that Cranky Flier has a great post on this one.
