NEW YORK – At the Skift Global 2022 conference (September 19th-21st) last week Jetblue and American Airlines presented themselves as airlines that are truly seeing hope in the future.
“Today we launched Boston-London Heathrow, obviously with the Queens passing it’s much more muted celebration but we’re very excited about our entry into London and flying across the pond.”
“So far it has been fantastic. The product is amazing 24 seats Mint configured, great food, Dig Eats, if you’re from New York you know Dig. I think our core at the back of the cabin will disrupt as well. A number of awards. Really, really excited about that inflight chain that delivers that service. Our load factors are through the roof so it’s quite tough to get a good seat.”
“It’s something we look forward to as we aim to get an additional Gatwick frequency later this year. Who knows what’s next for European expansion,” said Jetblue’s Chief Operating Officer Joanna Geraghty.
American Airlines on the other hand doesn’t see its route expansions as a new light of hope post COVID-19 but the way passengers book tickets.
Vasu Raja, American Airlines Chief Commercial Officer said “What we find is that half of the revenues of American Airlines now, and has been the case for most of the last several months in addition to seeing it in the future, are blended trips.”
“People aren’t flying what we historically have called business or historically have called leisure. That’s meaningful for us as that figure is almost double. It’s either more meaningful as the real revenue growth in the airline is powered by that.”
“That’s a very significant thing as our airline is flying about 90% of the seating capacity that it did in 2019 but it’s producing 110% of the revenue of 2019. That increment is really journaled by these blended trips. One of the great mediums of the airline is that we have tons of information about every transaction that comes through but we’re also very fortunate that we can survey and collaborate things from our customers.”
“Through the data we can see things for example what we call something a business trip we have algorithms that look at. Say that you’re a single person in the itinerary, you don’t check a bag, you’re not staying Saturday night and you’re going to New York.”
“High probability that you’re here for business and we can ask you that and people can correlate. That was very much the case and along the way through the pandemic a couple of strange things happened. The first that got our attention was it was March of 2020 and we lost 90% of our passengers. That’s not what got our attention though. What got our attention was that we kept 10%.”
“It’s March 2020, who’s traveling? Whoever that was, let’s just think about it differently and everything that happened before it. What if this is almost like adopting a new technology. What if they are all the early adopters.”
“Who are they and what utility do we see in this product and as they started coming back what we found was that the second thing was really this blended trip. These customers that were traveling would travel with the one person in the reservation.”
“There wouldn’t be a checked bag, they’d be traveling in the middle of the week but were going to Bozeman, Montana. There’s to be something in the algorithms that would just be off. Though people would grade themselves as business or leisure it made us realize the next thing.”
“The only way that we have ever given a customer a choice of business or leisure which took us to the 3rd thing which if you go back and look at the history of airlines business and leisure is itself a nomenclature thing.”
“Business and leisure are transactions and not customers. What we were actually finding was that what the customers were doing along the way was indeed not that realizing 50% of our trips were blended but that in a bygone era 25% of our trips were blended and we never realized”.
Problems still arise though as the hope is maintained in the industry.
Skift Moderator Ned Russell as a question to Jetblue stated “Our audience says staffing is the biggest challenge (62.96% vs 29.63% for fares, 4% for service hurdles and 4% for sustainability),” with Jetblue’s Chief Operating officer responding:
“Staffing is definitely challenging. I’m pleased a lot of it has stabilized. Staffing was the number 1 item we were all trying to navigate and I think a lot of the capacity changes that you saw both from April into the summer were largely results of pilots in training. There’s a whole training process for pilots. If any part of training is off you see an elongation of pilots going from hiring into service.”
“Obviously, our ground staff whether it’s our baggage handlers or aircraft operations team above the wing, that’s challenging but we’ve stabilized much of that so all of those core processes whether it’s the recruiters, background checks, training that’s all working very well so we feel in a much, much better way.”
“I do think we have some acute challenges in Northeast Boston. It’s a smaller talent market so if you look at some of the challenges on the ramp in Boston. On the staffing front wage rates are also quite concerning and everything is becoming more expensive.”
“We want to make sure our crew members feel engaged to work in Jetblue and are appropriately paid. Staffing is appropriately challenged but definitely stabilizing.”
The good news or bad news depending on how you look at it is that every airline is seeing this pressure. Jetblue is not an outlier. We’re at a point in time where almost every collective bargaining agreement that flight operations or pilot group has with an airline is open for negotiation right now. You’ve seen the news. United, American others.
I believe UPS is the only one that has been ratified recently. Everybody is in negotiation with their pilots, and the pilots are in a pretty strong position given the labor shortage of pilots. All carriers are experiencing the same issues.
On the other hand, American Airlines Chief Commercial Officer identified future decisions it will make for its customers based off of its new blended travel groups:
“Fortune Company XYZ is 0% back to travel but 75% of their travelers were out there taking trips and they had status and things like that. What we realized was that we had this one customer complaint which was actually very transformative to us and this person said look I bought the lowest fare on the airline. When I used to travel 3 times a week for business you treated me like a king.”
“I earned executive platinum the highest level of loyalty but now flying on the cheapest economy ticket with my family to Las Vegas and I’m not treated that way but this is the most important trip for me. So again, think about it through the lens of the customer.”
“For the customer the thing when they were traveling was for their employer. Wake up at 5am in New York, fly to Chicago and fly back at night. The thing that they really valued doing was to fly the family to Hawaii. We built our business to try and reward people and make it easy for them to do the thing they were least excited about doing in some cases.”
“We made it harder for them to do what they were most excited to do. 70% of what we have called historically leisure is actually something more expensive than the cheapest fare.”
Amidst the following with more historic American airlines dealing with its customer types and loyalty Jetblue is dealing with more regional and internal issues. Both carriers’ recent discoveries play a critical role as both carriers go to court next week to save their North East alliance from being broken apart by the DOJ.
Only time will tell as Jetblue also has a game changing merger with Spirit to happen hopefully very soon.