Why Airlines Should Be Worried About JetBlue's Mint Business Class

JetBlue gives business class cross-country fliers more room. What might that mean for profit margins overall on America's most lucrative route?

Jul 11, 2014 at 9:13AM

It's no secret that airline profit margins are low -- around 2.4% worldwide -- or that first-class and business-class fares are where the airlines actually make money. That's why formerly all-egalitarian value carrier JetBlue (NASDAQ:JBLU) rolled out Mint, its version of premium class, in mid-June. The airline was very selective about deploying Mint. It's currently available only on two planes that fly the country's most popular air route, JFK-LAX. That route also happens to be the biggest revenue generator for the domestic airline industry, bringing in $701 million in 2013, according to Quartz and PlaneStats.

So far, the reaction from travelers has been good, said JetBlue public relations manager Anders Lindstrom. Lindstrom didn't share booking numbers but described the early response as "beyond expectations." If Mint really takes off -- there are expansion plans on the calendar -- it could poach business passengers from carriers that have had a lock on first-class transcontinental travel.

Luring business-class flyers with perks and privacy
Mint raises the question of how a budget airline can compete on luxury against carriers like American (NASDAQ:AAL), Delta (NYSE:DAL), and United (NYSE:UAL). It looks like the answer is by going over the top on amenities and getting flyers hooked with low introductory rates. The market's longest fully flat seats, 15-inch flat-screen monitors, DirecTV (NASDAQ: DTV), Sirius XM radio, tapas platters, and curated grooming product assortments from Birchbox are all part of the Mint package.

Mint Suite

Mint suite. JetBlue

The truly unique selling point, though, is the private suites. Each Mint flight has four single-seat suites with doors that close -- an amenity many travelers would love to have at the office, let alone in the air when they want to nap or avoid making small talk. JetBlue is the only domestic airline with this feature, and Lindstrom said "the ultimate private experience" has been "extremely popular among travelers flying on their own."

Hitting the competition on price
JetBlue is also competing hard on fares. At the lowest Mint price each way, a JFK-LAX round trip would cost $1,200, as much as $900 less than competitors' business-class fares. Lindstrom acknowledged that the introductory rates won't last indefinitely, but said prices will be competitive going forward.

"JetBlue always focuses on overpriced markets," Lindstrom said. "And with the majority of markets we enter or operate, we have brought average fares down significantly."

That's great for business travelers and a potential issue for American, United, and other carriers who count on transcontinental first-class fares for big revenue. A recent search showed JFK-LAX business class round-trip fares hovering at or above $2,000 -- without a door.

If those carriers are forced to drop their rates or upgrade their offerings on the New York-to-L.A. route, their strongest revenue source will take a hit. According to David Yanofsky at Quartz, 30% of the revenue American and United made last year on the New York-to-L.A. route came from those $2,000 fares.

Right now, JetBlue only has two Mint planes -- new, custom-configured Airbus A321s -- flying New York to Los Angeles. But all the airline's JFK-LAX flights will offer Mint seating by Aug. 3, and JetBlue plans to add Mint service on its New York-to-San Francisco flights beginning Oct. 26. There may be additional Mint routes to come.

"We see future opportunities from Boston, which has a major business travel focus for JetBlue," Lindstrom said.

For business travelers, Mint looks like a sweet deal, especially with the low intro rates. Even a few thrifty coach flyers might be tempted to shell out a couple hundred extra bucks for the privilege of privacy and legroom on such a long flight. Time will tell if Mint is a moneymaker for JetBlue and whether American, Delta, and United will have to accept lower business-class margins on the most profitable route in response.

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