Just a few issues with that strategy, and I'm not saying I disagree with it...
Shorter stage length = higher CASM
Smaller airplane = higher CASM
Smaller cities = more stations & fewer flts per station per day = less efficient use of personnel = higher CASM
Greater use of E-190s = more eggs in the basket of an airplane that has had teething trouble = slow (if any) improvement of abysmal operating indices (on time record) and
Lower utilization of E-190s = higher CASM
I recognize that the yields on the shorter hauls are quite good - I play a lot of statistical games with what WN does - but $70/bbl oil wreaks havoc on pretty much everything - short or long haul.
Neeleman did this backwards. Had he been as smart as he thinks he is, he would have started with short haul (like his upstate NY stuff) and then slowly proceeded to expand his participation in longer haul markets.
What he has done is run a long haul, ultra low cost airline with seat mile costs so low as to be almost incredible.
The problem is those costs came with really crummy yields.
The other problem is the costs have no place to go but up.
The stock and/or options that employees got have been rendered pretty much valueless.
New York City is not a cheap place to be domiciled and JetBlue employees are not compensated anywhere near well enough to stave off unionization attempts.
But we'll see what happens. Certainly, some change in their current strategy is a must if long term survival and prosperity is to be achieved.
Needleman and his team (and LUV, DAL etc.
😉 ) obviously thought US Airways would be gone, hence a larger airplane to start operation. (The 80-100 seat new generation aircraft were not available.)
Even though cost will be higher with the E190's, the smaller cities with less passengers will help JetBlue get back to making profits.
The prime example of this is US Airways. We fly to the ROA's/ELM's/ITH's, and those cities make us big $$$. And that is using mostly RJ's, on a guaranteed contract.
Also, re getting less use out of employees. JBLU are using contract employees below wing, above wing most employees are part-time, so that should not be a huge cost item.
I agree with flying to ultra-low yield markets. No room (or very little) for error; hurricanes/competition etc. That is a looser game, for sure.
Payscales/benefits are just about the same across the industry, except Southwest, so I'm not so sure that will be a huge problem, nor will be a union one day. Stock/options are under water, and that could destroy morale, but if/when the employees feel a plan is working, stock price will take care of itself.
If industry consolidation happens, why wouldn't they be a potential takover candidate? If foreign ownership rules are changed, wouldn't a BA or Lufthansa love to get their hands on a East Coast operation? (Even with their alliances!)
Interesting, nonetheless!
SoftLanding
