By Alison Sider | Photographs by Amir Hamja for WSJ

JetBlue Airways spent years trying to take on the biggest airlines. After nearly $3 billion in losses since 2020 and two scuttled business deals, it wants to do fewer things better.

JetBlue is installing first-class seats and opening its first airport lounges in New York and Boston, a strategy that envisions some passengers are willing to pay a premium for a nicer flying experience. The New York-based airline also is jettisoning dozens of money-losing routes across the country in an overhaul that leaves it focused on serving leisure-trip seeking passengers in the Eastern U.S.

"This is all about getting back to our roots," said Chief Executive Joanna Geraghty, who took the helm in February.

The airline has struggled to tamp down rising costs, while bigger airlines have pulled ahead with more upscale offerings. It also has had trouble running reliably in recent years, with its on-time performance -- and reputation -- dragged down by its heavy exposure to the challenging New York skies.

Geraghty assumed the CEO post weeks after a federal judge shot down JetBlue's merger with Spirit on antitrust grounds. The airline needed to move swiftly on a turnaround plan, she said, having lost "that kind of luster and mojo" with its attention on deals with other carriers.

JetBlue's new playbook of cost cuts and operating improvements will preserve its ability to remain a low-fare carrier, while enhancing its high-end appeal, executives said. It expects the changes to generate an additional $800 million to $900 million in earnings before interest and taxes over the next three years. Shares in the airline rose 11% in Wednesday trading.

Analysts say JetBlue's situation isn't as dire as Spirit, which landed in Chapter 11 bankruptcy court last month, but that its long-term prospects remain cloudy as a smaller carrier.

First-class playbook

JetBlue is among several airlines sinking more money into tonier travel for fliers. That strategy has paid off for behemoths like United Airlines and Delta Air Lines, which have divvied up their cabins and rolled out new amenities to engender passenger loyalty. Even ultra discounters like Frontier Airlines and Spirit Airlines are banking on premium offerings enticing travelers.

JetBlue had a head start on launching its Mint business class cabins a decade ago featuring lie-flat seats for long flights.

"I think we're in a much better spot than some of our [ultralow-cost carrier] brethren who are out there saying, 'Oh I have a premium product now, too,'" said Marty St. George, a longtime executive whom Geraghty recruited back this year as the airline's president.

JetBlue's new first-class seats will look similar to what other airlines offer at the front of their domestic planes. The seats, which will start to arrive in 2026, will be wider than those in the back, arranged two-by-two featuring more legroom and deeper recline.

"We want it to be accessible for people who want to fly domestic first and maybe can't afford to do it on the legacy carriers," said Geraghty, who declined to give pricing details.

The changes risk JetBlue's boast that it offers the most legroom in coach as it rearranges cabins to fit two or three first-class rows. Executives said the seat pitch in JetBlue's economy cabin will remain "at or above" what larger airlines offer.

Shrinking routes

New York-based JetBlue started flying in 2000, quickly winning customers over with the proposition that inexpensive didn't have to mean low quality. It combined bargain ticket prices with creature comforts like seat-back screens that showed live TV, roomy seating and trendy snacks like blue potato chips. It was the first major airline to offer free Wi-Fi.

But it has been boxed in. With around 5% of domestic passenger traffic, it sits between ultra discounters catering to the most cost-conscious fliers and big carriers that dominate the market for business travel.

It tried to solve that problem by linking with other airlines. In 2020 it struck up an alliance with American Airlines, agreeing to coordinate schedules and sell seats on each others' flights in New York and Boston. And in 2022, it won a bidding war for Spirit in a move that then-CEO Robin Hayes said would supercharge the airline's growth. Government lawyers successfully challenged both deals, saying they were anticompetitive.

JetBlue is now jettisoning its ambitions to be a nationwide alternative to larger airlines -- exiting 16 cities and culling more than 50 routes. It has deferred receiving nearly four dozen new planes, and a Pratt & Whitney engine defect is keeping some planes grounded.

JetBlue is doubling down on service to East Coast leisure destinations. It is adding flights from Manchester, N.H., and New York airports in Albany, Buffalo, Long Island and Syracuse to Florida. The airline is also adding routes from San Juan, Puerto Rico.

"If we can't get national scale, by God, we're going to get regional scale," Geraghty said.

The airline isn't giving up on flying to Europe -- a move it said fits with its aim to serve vacationers. On Tuesday it announced new flights from Boston to Madrid and Edinburgh for next year.

Some industry analysts have questioned whether the airline can shrink its way to profits, and balance the investments that its premium ambitions require with the urgent need to cut costs.

"I think JetBlue has a pathway to success, but it is a narrow slalom trail," said Samuel Engel, senior vice president at consulting firm ICF.

Tyesha Best, who heads the union that represents JetBlue's flight attendants, said the airline's efforts to rein in costs have, in some cases, come at the expense of passengers' experience -- like switching to cold food on some trans-Atlantic flights.

But Geraghty has said the new meals, which only affect a handful of flights, are still better than most airplane food. A spokesman said the airline is monitoring the customer response.

And the airline's changes appear to be working, executives said. A key customer satisfaction metric is up by double digits. A larger share of JetBlue's flights are arriving on time this year compared with last year, according to government figures released Wednesday. Its losses have narrowed, and its share price has climbed more than 35% this year through Wednesday's close.

"We have something different that customers really do love, and we've got to make sure we're there to compete with the big guys," Geraghty said.

Write to Alison Sider at alison.sider@wsj.com

(END) Dow Jones Newswires

December 11, 2024 16:50 ET (21:50 GMT)

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