JetBlue CEO Robin Hayes is ready to take on the "obscene" premium fares between the U.S. and London as the carrier prepares to launch its first European flights in 2021. Speaking this week at BTN Group's The Beat Live conference, Hayes called air service to London an incredible opportunity for JetBlue amid an "erosion of competition." He was referring to a decrease in competition on flights between London and the U.S. now that all major U.S. and European carriers are involved in joint ventures on such routes.
Fares between New York and London have been growing at a rate 8 to 9 percent higher than transcontinental fares, Hayes said. "[The fares] are really obscene compared with the true cost of providing the offering. Premium transcontinental fares are now about half of what they were before we came along, so we know we can win."
JetBlue has been considering opportunities in Europe "for a while," and long-range, narrowbody Airbus 321 aircraft enabled it to happen, Hayes said. In addition to the range, the aircraft has a unit cost similar to widebody aircraft, whereas narrowbody aircraft typically have higher unit costs. The newer A321 is more efficient than other narrowbody planes, which provides the "cost advantage to offer significantly lower fares" on U.S.-London routes, he said.
The routes likely will attract sizable corporate business, Hayes said. Many business travelers who do not have access to corporate fares fly the route, and a lot of companies like to add JetBlue to their portfolio simply to "have options," according to Hayes. The biggest challenge for the sales team would be "knowing which business to take because there will be a lot of interest," he said.
JetBlue still has some decisions to make, not the least of which is exactly which London airport or airports it will serve. The carrier also is deciding what its premium Mint product will look like on the routes. Hayes said it will be designed to "build on the Mint experience, taking it to the next level."
Over the next several years, JetBlue will build up a fleet of 26 of the long-range A321s and will look at additional routes to Europe, as well, Hayes said. In the meantime, he isn't concerned about the possibility of competing carriers ratcheting up their own London networks in response to JetBlue's entry. "When we did the Mint business case for transcon, we assumed we wouldn't do any corporate business, but when you cut the fare as much as we did, you stimulate the market. People are flying that couldn't before, and the demand massively increases. When we're up to speed with 26 A321s, that's a pretty small part of the total market, and what will happen is that the market will get stimulated beyond the size of our additional capacity."