OMAAT reader Paul posed an interesting, about why Alaska Airlines is so much more successful than JetBlue Airways.
In many ways, I’d consider the airlines to have similar concepts — JetBlue is to the East Coast what Alaska is to the West Coast, sort of. Both are brands that people generally like, and both try to offer a pleasant passenger experience. Despite that, Alaska has some of the industry’s best margins, while JetBlue hasn’t turned a profit in years, despite having a huge presence in some really lucrative markets.
JetBlue is sort of facing the same challenges as low cost carriers (though not as bad as at Frontier and Spirit), while Alaska is enjoying similar success to carriers like Delta and United (though at lower volume). What’s driving this difference in financial performance, and what can JetBlue learn from Alaska?
Let me share what I’d consider the key factors to be. For the purposes of this, I’m excluding Alaska Air Group’s takeover of Hawaiian Airlines, since it’s too early to fully know how that’s going to play out.
Alaska understands the importance of being number one
JetBlue has a significant presence at airports like New York Kennedy (JFK) and Boston Logan (BOS), which you’d think are awesome places to have hubs. The challenge is that at both of these airports, JetBlue trails Delta in terms of market share.
The other issue is that if you view the New York market in terms of all three main airports, JetBlue only has a strong presence at Kennedy, and not at LaGuardia (LGA). That’s a major disadvantage compared to Delta, which has a leading position at both airports.
That’s different than the situation at Alaska, where the airline enjoys the number one market share spot at its most important hubs, like Seattle (SEA), Portland (PDX), and Anchorage (ANC). Furthermore, thanks to the size of Alaska’s network and fleet, the airline can at least compete in Los Angeles (LAX), San Diego (SAN), and San Francisco (SFO). Alaska also has a huge network to Hawaii, with point-to-point routes not served by other airlines.
Why is it so important to be the dominant airline in your most important hubs? It’s something that United CEO Scott Kirby has talked about, in the context of becoming a premium airline. When you’re the dominant airline in a market, you have a lot more pricing power, and you also have a lot more upside with loyalty.
JetBlue’s issue is that it’s always going to be in a number two position behind Delta, and that’s not a good place to be. Delta also offers a great passenger experience, the airline has a more global network, and Delta can price competitively to keep JetBlue in check, by using basic economy.
The dynamics here are interesting, because Delta’s power is very different against JetBlue in New York vs. against Alaska in Seattle.
Alaska gives people products that they’ll pay for
JetBlue was founded with the concept of offering a pleasant economy experience across the board. We see the airline offering great legroom, seat back TV, free Wi-Fi, and more. There are only two issues.
The first issue is that JetBlue isn’t able to get a revenue premium for offering a better product (as American learned in its “More Room Throughout Coach” era). The second issue is that JetBlue’s biggest competitor is Delta, which is an airline that people enjoy flying as well. JetBlue has been really slow to adapt to consumer trends — JetBlue hasn’t offered lounges or first class, but that’s finally expected to change (eventually).
This is all such a contrast to Alaska, which has no seat back TV, charges for Wi-Fi, and essentially offers people the products they’ll pay for. The airline has a pretty standard economy product, but then has extra legroom economy, first class, and a robust lounge network.
JetBlue needs to do a better job monetizing its onboard real estate. You shouldn’t be offering everyone more legroom if they’re not willing to pay for it, but instead, offer products like first class.
When I say things like that, some people like to accuse me of being anti-consumer. “Wow, you’re one of those people against legroom.” No, I’m one of those people who wants the airline industry to remain competitive, and airlines shrinking and becoming increasingly irrelevant (like what we’re seeing at JetBlue) isn’t good for anyone.
Alaska knows how to lean into the power of loyalty
Alaska has long used its Mileage Plan program as a point of differentiation. It has been one of the most compelling airline loyalty programs out there, and Alaska has long established partnerships with global airlines, giving people the ability to earn and redeem miles.
In many ways, Mileage Plan has been way ahead of its time, and has been able to generate an impressive amount of money and loyalty from its program. While JetBlue has TrueBlue, for years, the airline didn’t do nearly enough to make the program lucrative and engaging, especially given the carrier’s direct competitors in the Northeast.
That’s slowly starting to change for TrueBlue, as we’re increasingly seeing partner redemption opportunities. However, the airline is at quite the disadvantage, and has a lot of catching up to do.
Alaska has a disciplined management team
Alaska probably has one of the most disciplined and focused management teams in the industry. Executives at the airline know what the airline is, and know what the airline isn’t. Now, some people might argue that some of that focus has been lost with the acquisition of Hawaiian, but for this post, I’m focusing on comparing the historic reality of the two airlines.
It’s just such a contrast to JetBlue. Admittedly JetBlue’s top two executives only took over last year, but at least prior to that, JetBlue management was all over the place in terms of its strategy. Former CEO Robin Hayes seemed to completely ignore the struggles the airline was having with its core business model, instead thinking that the solution was to focus on shiny things, ranging from launching transatlantic flights, to an acquisition of Spirit.
The attempted Spirit takeover ended up being a very costly distraction, while the transatlantic flights — not surprisingly — haven’t proven to be the solution to all of JetBlue’s problems.
Bottom line
The US airline industry has become tougher than ever before, between increased labor costs, and profits increasingly coming from loyalty programs. Therefore I think it’s interesting to compare the difference in success between Alaska and JetBlue, since I’d argue they’re generally similar, but just on different coasts.
If you ask me, JetBlue would be in a very different situation if it had taken some notes from Alaska’s playbook a little earlier. JetBlue has some valuable assets — specifically, a large presence in New York and Boston — it just doesn’t know how to use them properly.
What’s your take on the difference in success between Alaska and JetBlue?
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