I have been anxiously awaiting JetBlue's (NASDAQ:JBLU) announcement of where it plans to fly its new 100-seat airplanes -- all the more so given the fact that these planes mark a departure from a business plan Southwest Airlines (NYSE:LUV) has used successfully for years: Keep life simple by flying a single type of aircraft. But from now on, JetBlue will now be flying two types of airplanes.
Today, Motley Fool Stock Advisor recommendation JetBlue announced the first routes it's going to fly using fellow Stock Advisor pick Embraer-EmpresaBrasilier (NYSE:ERJ) aircraft. The focus won't be on only second-tier cities where high ticket prices reign. The company will also be adding 10 flights a day between Boston and New York. Introductory promotional fares will be $25 each way.
JetBlue is trying something legacy airlines have not been willing to do -- put the corporate bread-and-butter logo on non-Boeing (NYSE:BA) or Airbus aircraft. And although I'm not sure it bears relation to the aforementioned, we know where most of the legacy airlines have ended up.
JetBlue is trying to match capacity to demand. Flying smaller planes during non-peak times or to second-tier markets, of course, makes sense. JetBlue is betting it will make cents, too. As promised, JetBlue did pick second-tier cities for new routes. The business centers of Austin, Texas, and Richmond, Va., will be getting a combined total of seven round-trip flights every day.
To the extent that JetBlue's foray represents an endeavor into markets with adequate demand, use of the smaller Embraer planes make excellent sense. The idea is simple -- they'll find themselves better able to operate their planes at capacity from a cost standpoint, enabling higher revenue per seat and better marginal coverage of costs.
The question everyone is looking to answer is this: Will JetBlue customers see the new planes, with their leather seats, 100 channels of XM (NASDAQ:XMSR) satellite radio, and 36 channels of DirecTV (NYSE:DTV), in the same way they view the larger Airbus A320 the company currently flies? If so, this will be a breakthrough in airline transportation.
The 100-seat planes have to be a success. While JetBlue will take delivery of 16 A320's in 2006, the company is also currently taking delivery of the Embraer aircraft at the rate of one every 20 days (or 18 in a year). JetBlue, with debt to equity at a jaw-dropping 252%, has little wiggle room to attract customers with the new planes.
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Fool contributor W.D. Crotty does not own shares in any of the companies mentioned. Click here to see The Motley Fool's disclosure policy.
