The Best Airlines: Why JetBlue Makes the Cut and American Doesn't

An intriguing mix of premium services sold at lower-than-average fares could have a big impact over the long term.

Aug 24, 2014 at 3:37PM

Come Sept. 1, American Airlines Group (NASDAQ:AAL) will no longer offer first-class and business-class meal service on flights shorter than two hours and 45 minutes.

For American, the change is practical. A spokesperson told The Los Angeles Times that the carrier is in the process of synchronizing operations with acquired peer US Airways, which in April set a similar cutoff. For me, the change is more evidence of a movement to increase fees and cut perks industrywide.

Are there any carriers left that deliver premium perks at a price that's within reach for everyday business fliers? After looking at the data, I think JetBlue Airways (NASDAQ:JBLU) may be among this increasingly rare breed.

Best Airlines Jetblue

JetBlue's mix of enhanced services and reasonable fees makes it one of the best airlines. Credit: JetBlue

Stacked up, ready to taxi
In particular, I took SKYTRAX's ranking data for overall performance,'s breakdown of known fees, and added in operating margin data from S&P Capital IQ. My goal? Find a carrier that didn't splurge too much on fees to fund margins while also delivering quality service as determined by an outside evaluator. (In this case, SKYTRAX.)

To be fair, the data reflects the entirety of each airline's performance. And yet if you consider that a huge portion of daily commercial flights are inter-U.S. business travel -- i.e., flights of three hours or less -- these rankings must naturally skew to reflect the experience of short-haul frequent fliers. 

Why these sources, in particular? S&P Capital IQ does a good job of accounting for anomalies and one-time items in calculating margins, making comparisons easier. SKYTRAX has been ranking national and international airlines for years using a variety of criteria. tracks airfares and offers would-be passengers money-saving tips and access to cheap tickets.

Now, let's review how the major American independent carriers ranked:

SKYTRAX Rating (1-5 stars)
Latest Operating Margin
Max. Estimated Fees

Alaska Air Group

3 of 5



Allegiant Air

3 of 5



American Airlines

3 of 5



Delta Air Lines*

3 of 5



JetBlue Airways

4 of 5



Hawaiian Holdings

3 of 5



Spirit Airlines

2 of 5



Southwest Airlines

3 of 5



United Continental

3 of 5



Virgin America

4 of 5



Sources: SKYTRAX, S&P Capital IQ, and
* Includes significant one-time items

Sometimes, the best airlines are gougers
Frankly, I was surprised with the fees that some carriers levied.

  1. Heaping on fees doesn't necessarily lead to a worse experience. Virgin America isn't exactly cheap when it comes to add-ons with a max of $1,319, according to my read of Airfarewatchdog's data. The killer on its list: up to $399 each way for upgrades.

  2. Big fees don't always equal big margins. Both American and United Continental list fees fit for a big spender, but you wouldn't know that from their operating margins. Other costs are taking too large a toll for these carriers to earn a profit on fees the way that Spirit Airlines does.

  3. Carriers with the best cost controls, win. Not surprisingly, Southwest levied the fewest fees among the carriers I saw on Airfarewatchdog's list. Yet the carrier also had one of the better operating margins, coming in just under JetBlue. Fervent cost controls and operating with an all-737 fleet, boosting maintenance efficiency, appears to be having an impact.

JetBlue: premium services from a lower-fare airline
Of them all, none are so promising as JetBlue, though I suspect that Alaska gets close. The carrier's decent but not overwhelming fee schedule and double-digit operating margins might even put it over the top. The problem is that SKYTRAX ranks it a three-star airline; it doesn't rank among the top tier. Fresh competition from Delta in Seattle could make it difficult for Alaska to climb the ladder next year, as well.

Meanwhile, JetBlue is earning high marks for service while building a better flying experience. Consider the "Even More" program, through which the carrier sells extra legroom to A320 passengers. There's also "Mint," a premium cabin service offered on flights between New York and Los Angeles. Flights to San Francisco begin in October. What's interesting is that JetBlue started by pitching Mint and its lie-flat service for $599 each way -- a steep discount to first-class fares shopped by larger peers. Even if prices increase over time, which they will, JetBlue should be able to take plenty of premium business from the likes of American and United.

Final takeaway
Ranking the best airlines is a subjective process and Virgin America also scored well in SKYTRAX's rankings, naming it the top low-cost carrier for 2013. JetBlue, for its part, is moving upmarket, delivering a premium experience at a reasonable price -- earning accolades and improving margins along the way.  Add in a growing fleet of new, fuel-efficient aircraft and improvements for boosting efficiency and you've a stock poised to keep climbing.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information