Four months ago, JetBlue Airways (NASDAQ:JBLU) got into a bidding war with Alaska Air over which airline would gobble up smaller rival Virgin America (NASDAQ:VA). JetBlue was particularly interested in Virgin America as it offered a chance to quickly bulk up on the West Coast while combining two beloved brands.
Ultimately, JetBlue lost the bidding war. But it's not giving up on the West Coast. Last week, the company showed once again that it is determined to build a bigger presence in the western half of the U.S. over time.
Mint is the main weapon
JetBlue only has one focus city in the western U.S. -- and its smallest one at that. JetBlue is mainly an East Coast airline, and that's where most of its customer base is.
That said, JetBlue does operate numerous transcontinental flights to the West Coast, mainly from its New York and Boston focus cities. The first prong of JetBlue's West Coast growth strategy is to gain share in the transcontinental market. To do that, it plans to dramatically ramp up its Mint premium service.
Mint began as a relatively small-scale initiative to fix JetBlue's revenue underperformance on the transcontinental routes from New York to Los Angeles and San Francisco. JetBlue introduced a fleet of specially configured A321s with a premium cabin consisting of 16 lie-flat seats. It also offered upgraded amenities like bigger TVs and a free self-serve snack bar for coach customers.
JetBlue's Mint service ended up vastly outperforming management's expectations. As a result, JetBlue experimented by offering Mint service on some flights to the Caribbean -- mainly during weekend and holiday periods. Mint was also successful in this very different environment.
Last year, JetBlue started to become more aggressive. After United Continental cut its transcontinental flights from JFK Airport in New York last fall, JetBlue stepped in with additional Mint flight frequencies. It now offers twice as many flights on the New York-Los Angeles and New York-San Francisco routes on peak days as it did two years ago.
Earlier this year, JetBlue expanded Mint to Boston. It is in the process of rolling out Mint on the Boston-San Francisco route, with Boston-Los Angeles flights getting Mint service this fall.
JetBlue has really kicked things into high gear since losing the bidding for Virgin America. Just a week after it conceded defeat there, JetBlue unveiled plans to expand Mint to four more cities and seven more routes: Boston-Seattle, Boston-San Diego, New York-Seattle, New York-San Diego, New York-Las Vegas, Fort Lauderdale-Los Angeles, and Fort Lauderdale-San Francisco.
To meet this aggressive growth plan, JetBlue converted most of its 2017 A321 deliveries (and some of its 2018 deliveries) to the Mint configuration.
Last week, it took the next step, ordering 30 more airplanes from Airbus, many of which will come in the Mint configuration. By the end of 2017, JetBlue will have 31 Mint-configured planes. This should allow it to roll out Mint service on all seven new routes announced in April and perhaps add frequencies on some of those routes. It is also planning further transcontinental Mint growth in 2018 and 2019.
JetBlue's Mint expansion is clearly targeted at Virgin America fans. Right now, Virgin America is unique in offering an elevated domestic first class experience across its network, not just on the New York-San Francisco and New York-Los Angeles routes. JetBlue hopes to attract more West Coast point-of-sale business by offering its own differentiated inflight experience.
Growing in Long Beach, too
The Mint expansion is clearly JetBlue's weapon of choice for the moment as it looks to attract customers on the West Coast. However, it is also planning a more modest expansion at its Long Beach focus city.
JetBlue holds 35 of the 50 currently available daily departure slots for commercial airlines at Long Beach Airport. Yet it hasn't fully utilized its Long Beach slot portfolio in recent years.
That may be about to change. Next month, JetBlue is adding four additional daily departures in Long Beach, opening a new route to Reno and adding frequencies to San Francisco, Oakland, and Las Vegas. And beginning in late 2016, JetBlue plans to add nine more daily departures at its Long Beach focus city.
It's a modest start. Still, between the expansion in Long Beach and the rapid growth of the Mint transcontinental franchise, JetBlue is slowly gaining a foothold on the West Coast -- perhaps planting the seeds for bigger growth opportunities down the road.
Adam Levine-Weinberg owns shares of Alaska Air Group, JetBlue Airways, and United Continental Holdings and is long January 2017 $17 calls on JetBlue Airways. The Motley Fool recommends Virgin America. 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.
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