In the past year or so, JetBlue Airways (NASDAQ:JBLU) has started to talk seriously about expanding into Europe using Airbus' (NASDAQOTH:EADSY) new A321LR. It still hasn't committed to doing so, but JetBlue does seem to be moving in that direction.
This week, JetBlue CEO Robin Hayes shed some more light on how the company is thinking about a potential move into the transatlantic market. Not surprisingly -- given the massive success of JetBlue's Mint premium transcontinental service -- tapping into the high end of the market is key to the business case.
A perfect match
In early 2015, Airbus formally launched the A321LR: a long-range version of its popular A321 jet. It will have 4,000 nautical miles of range, according to Airbus. (That said, range in "real-life" conditions would probably be 15%-20% lower.) This would be enough to fly from New York and Boston to many of the biggest cities in Western Europe.
From day one, the A321LR has seemed like an ideal airplane for JetBlue. It has a high degree of commonality with JetBlue's existing fleet of A320s and A321s, simplifying maintenance and pilot training. Meanwhile, its additional range opens up a host of potential new markets for the carrier.
Initially, JetBlue was coy about the idea of using the A321LR to fly to Europe. But last July, it negotiated an option to upgrade its A321neo orders to the A321LR in 2019 and beyond, as part of a new Airbus order. In December, JetBlue noted that it currently flies nonstop to all but 11 of the top 50 destinations from Boston; four of those 11 missing cities are in Europe.
Since then, management has consistently stated that it will decide whether or not to expand into Europe based on an analysis of whether transatlantic flying with an A321LR will be more profitable than domestic flying with an A321neo. That analysis is ongoing.
A look at what could be
At the recent IATA annual meeting, JetBlue CEO Robin Hayes stated that JetBlue won't try to compete with transatlantic budget carriers like Norwegian or WOW Air, according to Air Transport World. Instead, the company sees the premium side of the market as its main opportunity.
JetBlue has had enormous success on transcontinental routes recently as it has rolled out its "Mint" premium service. Mint flights use a dedicated fleet of Airbus A321s equipped with a 16-seat premium section. All 16 seats convert into fully flat beds, and four of them are set up as individual mini-suites.
JetBlue has undercut rivals' first class and business class fares with its Mint product, while also offering attentive service and upscale inflight amenities. Meanwhile, it continues to offer more legroom than rivals for "core" coach seats, along with amenities like free satellite TV and unlimited free snacks and soft drinks.
For transatlantic flying, JetBlue would use the same general Mint concept. However, it would definitely offer a higher mix of premium seating, according to Hayes.
A larger Mint cabin will become feasible thanks to Airbus' new Cabin-Flex design for the A321LR. The current size of JetBlue's Mint premium cabin was determined by the position of the A321's second pair of doors (as well as the mid-cabin galley and lavatory). Airbus' Cabin-Flex concept will give airlines full discretion on how big to make their premium cabins by rearranging the locations of the emergency exits. It will also allow airlines to fit more seats on each plane.
So far, JetBlue isn't sure how many premium seats it would want for transatlantic flights. The most basic solution would entail adding another six seats to the Mint cabin: another pair of mini-suites and another row of four seats. JetBlue would likely have to shrink the coach cabin by two to three rows to accomplish that, resulting in a 147-153 seat A321LR configuration.
It's understandable that JetBlue wants to do its homework before plunging into the ultra-competitive transatlantic market. Nevertheless, with Delta Air Lines breathing down its neck in Boston, adding the A321LR is starting to seem like a no-brainer.
Mint's success in the transcontinental market shows that plenty of people are willing to pay up for a premium JetBlue experience. Additionally, JetBlue would solidify its position with Boston-based business travelers by adding service to key markets like London and Paris. Lastly, the A321LR would allow JetBlue to offer its high-quality coach-class experience at very reasonable fare levels.
A formal decision about whether to go ahead with an A321LR order is likely to come in the second half of 2017. But at this point, it would be pretty shocking if JetBlue abandons the idea of transatlantic expansion.
Adam Levine-Weinberg owns shares of Delta Air Lines and JetBlue Airways and is long January 2019 $10 calls on JetBlue Airways. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy.