Travel to Europe could be Upended by JetBlue’s New Airbus

A European expansion that could start by 2019 is the target of JetBlue and the airline is positioning itself to grab some of that market share.

15 Airbus A321neo, the new engine option aircraft, would be converted to the A321LR, a single-aisle plane with pond-crossing capacity, the airliner announced this week. The A321LR is a part of Airbus’s newest variant in its A320 family.

The new A321 would offer an opportunity for lucrative growth and transatlantic disruption and fitted with the kind of Mint premium cabin JetBlue launched two years ago from New York to Los Angeles and San Francisco. This was used repeatedly by company executives to describe the opportunity.

No decision will occur before the end of next year and that their options for the A321LR were merely contractual obligations required of its order book, stressed the JetBlue executives. The transatlantic status quo could be jostled nonetheless by the new JetBlue flights to Europe.

“When you look at why Mint was successful, it was a very high fare, premium high-fare environment. And when you look at the opportunity across the Atlantic, it suffers from the same thing—extremely high premium fares,” JetBlue Chief Executive Officer Robin Hayes, a former British Airways Plc executive, told analysts.

Marty St. George, JetBlue’s executive vice president for planning, said in an interview that with London as No. 2, right now, the highest-revenue market from Boston is travel to San Francisco

The antitrust immunity that regulators gave to joint ventures established by the three major network alliances covers 87 percent of the airline capacity across the Atlantic, JetBlue says. This allows legal collusion on schedules and pricing which would help in boost financial returns for the Big Three U.S. carriers—American Airlines Group Inc., Delta Air Lines Inc., and United Continental Holdings Inc., with their European partners.

Since 1993, when the Department of Transportation first blessed a Northwest Airlines-KLM joint venture, almost two dozen airline alliances have been protected.

George Ferguson, an aviation analyst with Bloomberg Intelligence notes the declining fares in Latin America and says that JetBlue’s option to head east for future growth is “a pretty smart move”. JetBlue would probably take share from other leisure players such as Aer Lingus Group PLC, Air Canada, Norwegian, SAS AB, and WestJet Airlines Ltd. as it will likely affect Northern European leisure routes the most, Ferguson wrote in an e-mail.

“The full service carriers may have to cut some of their capacity to maintain fares, as it is likely they won’t carry as much leisure travelers with more low-cost airlines in the fray,” Ferguson said.

More corporate traffic could be attracted to JetBlue and some new demand could be created, as the carrier found when it began luring new customers with Mint by the carrier’s lie-flat beds and gourmet foods on transatlantic routes, St. George said.

Conversion of its order for 30 Airbus A320neos to 30 A321LRs was announced by Norwegian Air Shuttle ASA, a low-cost player in the U.S.-Europe market, less than two weeks ago. The LR version, which is expected to hit the market in 2019, have also been ordered by TAP Air Portugal and Air Lease Corp.

(Adapted from Bloomberg)


Categories: Economy & Finance, Uncategorized

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