Despite being the fifth-largest airline in the U.S., JetBlue Airways Corporation (NASDAQ:JBLU) is not a true national airline today. JetBlue has elected to focus on serving "high-value" geographies where it thinks people will pay a premium for superior service.
The Midwest hasn't made the cut in the past, and JetBlue has a very sparse route network in the region. But that's gradually changing. On Tuesday, JetBlue announced that it will begin flying to Cleveland next April, giving it another foothold in the region.
An unbalanced network
JetBlue's four largest focus cities -- New York, Boston, Fort Lauderdale, and Orlando -- are all on the East Coast. They support a fairly dense network up and down the East Coast, in the Caribbean, and in northern Latin America.
JetBlue has a comparatively modest presence in the western U.S. However, it does serve more than a dozen destinations west of the Rockies, including significant transcontinental service to New York and Boston, as well as some intra-West Coast flights from Long Beach, California.
By contrast, JetBlue is more or less a non-factor in the Midwest. At the beginning of this year, Chicago was the only city between Pittsburgh and Denver with any JetBlue service. In March, JetBlue began flying to Detroit, the second largest Midwestern metro area. It now operates three daily flights between Detroit and its hub in Boston.
JetBlue's recently announced twice-daily flights from Boston to Cleveland will fill in another major gap. However, JetBlue still has no service to numerous key cities in the region, including Columbus, Cincinnati, Indianapolis, Louisville, Nashville, Memphis, St. Louis, Kansas City, Milwaukee, and Minneapolis.
Going for business travelers
JetBlue has been trying to build up its credentials as a business airline. It has been pleasantly surprised by the demand from corporate travelers for its new "Mint" premium service from New York to San Francisco and Los Angeles. It's also had increasing success in winning corporate accounts in Boston, where it is the largest carrier.
However, if it wants to become more appealing to business travelers, it needs to fill in some of the big holes in its route network. This was the main strategic rationale for adding flights to Detroit earlier this year. With United Continental rapidly downsizing in Cleveland, JetBlue probably sees an opening to grab some business travelers on the Boston-Cleveland route, too.
JetBlue has tried to serve some other cities in the Midwest in the past. In 2006, it began flying to Nashville from its New York hub, and to Columbus from both New York and Boston. The service was unprofitable due to tough competition and the rapid rise of oil prices at the time. As a result, JetBlue pulled out of both cities in early 2008.
Flying to these markets and other major Midwestern cities would probably be more profitable today. First, the U.S. legacy carriers are committed to capacity discipline now, so JetBlue would face less competition -- particularly for flights to Boston.
Additionally, JetBlue was focused squarely on leisure travelers in 2006. By contrast, it now has a much more credible network for business travelers, especially in Boston. With a bigger share of the lucrative corporate travel market, a return to Columbus and Nashville and an expansion elsewhere in the Midwest could make sense for JetBlue.
As JetBlue adds new flights from Boston, its "relevance" with business travelers will continue to improve. If all goes well, that will further boost its corporate travel share in Boston, stimulating a virtuous cycle of more flights and more demand.