Why Airlines Need Competition .
Airline Industry Struggles to Learn from Legacy of JetBlue's Mistakes
[Associated Press]
NEW YORK - JetBlue made headlines in February when an ice storm that socked the Northeast collided head-on with the carrier's policy of not canceling flights ahead of bad weather.
Thousands of people were trapped on aircraft for hours or stranded in terminals for days.
"We gridlocked ourselves," said Dave Barger - named chief executive in May when JetBlue's board asked founder David Neeleman to step down.
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Over the next month, JetBlue implemented a slew of changes to win back customer loyalty, including a pre-cancellation policy and a "remote exit" procedure to get passengers off planes when terminal gates are full.
Most visibly, JetBlue drafted a "customer bill of rights," promising vouchers in some cases when passengers are stranded or delayed.
The action has prompted calls for a national policy that all carriers would abide by.
JetBlue's efforts may have partially repaired its tarnished image, but the February incident has had a lasting impact on the carrier's bottom line.
Vouchers cost the company $24 million in the first quarter, which included the storm.
Even worse, the extra expense comes at a time when the nation's airlines, in general, are seeing shrinking profit margins.
As a result, JetBlue's revenues per available seat mile have grown only 9.4 percent over the last five years, compared with growth rates of 23.5 percent at Southwest Airlines Co. and 28.6 percent at AMR Corp., which operates American Airlines.
Per-seat costs, meanwhile, have jumped 29.4 percent at JetBlue, compared to a 20.7 percent increase at Southwest and a 3.3 percent hike at AMR.
Fuel expenses, which make up nearly a quarter of airline costs, have risen sharply in recent years. Labor expenses have increased, too.
JetBlue's new management team knows that boosting the airline's financial performance is imperative.
But they also have no choice but to keep their focus on operational issues. Another systemwide misstep could be fatal.
Compounding the carrier's problems are investor concerns about future growth.
JetBlue has been forced to scale back its expansion plans as it faces new competition from startup Virgin America and other carriers.
Wall Street analysts say the seven-year-old carrier's high debt load, along with its chronically congested JFK hub and reliance on cutthroat domestic routes, are crimping profits and leave it vulnerable to a takeover.
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Source: http://www.azcentral.com/
[Associated Press]
NEW YORK - JetBlue made headlines in February when an ice storm that socked the Northeast collided head-on with the carrier's policy of not canceling flights ahead of bad weather.
Thousands of people were trapped on aircraft for hours or stranded in terminals for days.
"We gridlocked ourselves," said Dave Barger - named chief executive in May when JetBlue's board asked founder David Neeleman to step down.
advertisement
Over the next month, JetBlue implemented a slew of changes to win back customer loyalty, including a pre-cancellation policy and a "remote exit" procedure to get passengers off planes when terminal gates are full.
Most visibly, JetBlue drafted a "customer bill of rights," promising vouchers in some cases when passengers are stranded or delayed.
The action has prompted calls for a national policy that all carriers would abide by.
JetBlue's efforts may have partially repaired its tarnished image, but the February incident has had a lasting impact on the carrier's bottom line.
Vouchers cost the company $24 million in the first quarter, which included the storm.
Even worse, the extra expense comes at a time when the nation's airlines, in general, are seeing shrinking profit margins.
As a result, JetBlue's revenues per available seat mile have grown only 9.4 percent over the last five years, compared with growth rates of 23.5 percent at Southwest Airlines Co. and 28.6 percent at AMR Corp., which operates American Airlines.
Per-seat costs, meanwhile, have jumped 29.4 percent at JetBlue, compared to a 20.7 percent increase at Southwest and a 3.3 percent hike at AMR.
Fuel expenses, which make up nearly a quarter of airline costs, have risen sharply in recent years. Labor expenses have increased, too.
JetBlue's new management team knows that boosting the airline's financial performance is imperative.
But they also have no choice but to keep their focus on operational issues. Another systemwide misstep could be fatal.
Compounding the carrier's problems are investor concerns about future growth.
JetBlue has been forced to scale back its expansion plans as it faces new competition from startup Virgin America and other carriers.
Wall Street analysts say the seven-year-old carrier's high debt load, along with its chronically congested JFK hub and reliance on cutthroat domestic routes, are crimping profits and leave it vulnerable to a takeover.
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Source: http://www.azcentral.com/
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