justageek
Mar 1, 06, 10:36 am
http://www.nytimes.com/2006/03/01/business/01jetblue.html
In Search of Profitability, JetBlue Increases Prices
By JEFF BAILEY
JetBlue made its name in the airline business with low fares. But in the bruising battle for passengers and profitability, it is trying a new tack: raising prices.
A central testing ground for this approach is the heavily traveled New York-to-Florida corridor.
JetBlue Airways — at six years old too new to have built up excessive costs that can now be trimmed — is trying mightily to raise fares in a bid to restore profits after surging fuel prices caused it to lose $42.4 million during the fourth quarter.
Along the East Coast, JetBlue, which is based in New York, competes head to head against traditional carriers like Delta Air Lines and Continental Airlines. JetBlue's low fares, matched by the competition, have stimulated a big increase in demand for travel in recent years.
JetBlue says it needs a $10 increase on one-way tickets, which averaged $110 last year. If the carriers can pull off a major price increase without scaring off a lot of those price-sensitive passengers, it would be an encouraging sign for the health of the industry.
It would also help JetBlue continue its rapid growth. It plans to add 35 planes this year and 35 next year, and to take on billions of dollars in debt in the hope of becoming one of the country's biggest and most successful airlines.
[...]
But now that fuel prices have pushed up expenses for all airlines, and older carriers have sharply cut their own labor costs, the advantage JetBlue enjoyed as a start-up is greatly reduced.
"Many JetBlue investors we speak with are under the impression there's something patently different about its model, some core über-profitability that's waiting to be tapped," Jamie Baker, an analyst at J. P. Morgan Securities said in a report last month. "We doubt it."
(The rest of the article is pretty interesting too.)
In Search of Profitability, JetBlue Increases Prices
By JEFF BAILEY
JetBlue made its name in the airline business with low fares. But in the bruising battle for passengers and profitability, it is trying a new tack: raising prices.
A central testing ground for this approach is the heavily traveled New York-to-Florida corridor.
JetBlue Airways — at six years old too new to have built up excessive costs that can now be trimmed — is trying mightily to raise fares in a bid to restore profits after surging fuel prices caused it to lose $42.4 million during the fourth quarter.
Along the East Coast, JetBlue, which is based in New York, competes head to head against traditional carriers like Delta Air Lines and Continental Airlines. JetBlue's low fares, matched by the competition, have stimulated a big increase in demand for travel in recent years.
JetBlue says it needs a $10 increase on one-way tickets, which averaged $110 last year. If the carriers can pull off a major price increase without scaring off a lot of those price-sensitive passengers, it would be an encouraging sign for the health of the industry.
It would also help JetBlue continue its rapid growth. It plans to add 35 planes this year and 35 next year, and to take on billions of dollars in debt in the hope of becoming one of the country's biggest and most successful airlines.
[...]
But now that fuel prices have pushed up expenses for all airlines, and older carriers have sharply cut their own labor costs, the advantage JetBlue enjoyed as a start-up is greatly reduced.
"Many JetBlue investors we speak with are under the impression there's something patently different about its model, some core über-profitability that's waiting to be tapped," Jamie Baker, an analyst at J. P. Morgan Securities said in a report last month. "We doubt it."
(The rest of the article is pretty interesting too.)