As readers who have followed Flight Chic for a while now will remember, I’ve discussed the trend in the industry for a hybrid Low-Cost Model–Low Cost LUX.
This trend is best represented in the US by airlines like Virgin America and JetBlue, in Asia by Skymark and SilkAir and in Europe by Norwegian Air Shuttle.
This Low-Cost LUX Model has the potential to ideally fit the needs a unique (and growing) market niche: the entrepreneur flyer.
Low-Cost LUX Dreams
While generally offering lower-fares than the majors, these airlines offer an inflight product far superior to the service from the traditional Low-Cost and Ultra-Low Cost Carriers.
This model blurs the lines between the two extremes. In doing so, it gives passengers a Goldilocks travel option. I use Goldilocks here just as astronomers use it–for the relatively small range of distance from the sun in which planets must be located to optimally support life.
Low Cost LUX is the sweet-spot, breathing new life into aviation.
Or so I have previously posited.
Then, in a recent article, I shared the views of market analysts on the long-term viability of providing cabin comfort. Some of their arguments were sound. Certainly, IATA’s recent update on the anaemic airline net profit per seat gives further weight to this argument.
As Tony Tyler, IATA’s Director General and CEO told members gathered for the 70th IATA Annual General Meeting and World Air Transport Summit in Doha, Qatar:
“Our financial performance does not yet match the value that we deliver. Airlines are expected to achieve a global net profit of $18 billion in 2014. That’s a net profit margin of just 2.4%, or less than $6 per passenger carried.”
Hardly the numbers of a healthy industry or a sustainable business model. Passengers get a lot for their six dollars, even if the popular opinion that airline service is getting progressively worse were entirely true.
An industry facing those numbers would be wise to do anything it can to cut its costs of operations and increase profit margins. Any other industry could get away with doing that.
The Passenger Perspective
Though airlines are businesses, public perception leans towards viewing airlines as a public service. As though they were still the vital element of transport infrastructure which governments are willing to subsidise. Facts don’t enter into this conversation.
To quote Terry Goodkind:
“Reality is irrelevant; Perception is everything.”
Addressing this perception by passengers that they are either being cheated out of a decent travel experience–or that they are gouged by airlines–is a tricky business.
As I’ve said before: you can please some of the people some of the time, but not if they’re flying.
The Low-Cost LUX airlines, however, have come close. That’s why I believe this model has a future.
Of course, this being aviation, the minute airlines get close to satisfying the passenger, they begin making the markets uncomfortable.
That brings us back to the title of my earlier post: Forget the Passenger Experience–This Is What the Market Wants from Airlines.
According to the market analysts I quoted in this post, JetBlue had gone too far trying to please finicky passengers.
One area where we believe JBLU has an opportunity to improve earnings is cabin densification. Simply put we think JBLU doesn’t have enough inventory for sale. The concept of flying planes with 34” of legroom in coach is an idea that’s not only shunned by the most profitable airlines in the country, but it’s also one that has failed in the past. American tried it and failed 15 years ago – what makes JBLU so different?–Wolfe Research’s Hunter Keay and Jared Shojaiain.
Yeah. Why should JetBlue be so different?
Well, sometimes different is good. Sometimes different is exactly what the market needs. Don’t we all love a good disruptor?
Why can’t the Low-Cost LUX model become aviation’s ultimate disruptive model?
Well, JetBlue certainly feels it can carry it off. They have revealed a solid inflight product, and have made some concessions to the concerns expressed by analysts–thereby hitting that magical Goldilocks zone.
Dennis Schaal explains it all.
Skift’s incomparable Dennis Schaal attended what he describes as a modest debut of JetBlue’s brand new fresh Mint business class service, and wrote a great article about what he found onboard. No surprise there–Dennis Schaal always writes great articles.
But there were surprises in the cabin, many of which will please passengers in the front and in the back, and some of which might make the most skeptical analyst think twice.
Mint is configured with 14 double suites and four singles with privacy doors and fully lie-flat seats (6’8″).
JetBlue has cleverly configured the front of the plane for optimised use of that expensive real-estate, while managing to give passengers who pay the competitive fare comfort comparable to what they might receive on Business Class with traditional carriers.
[Read more on the blurred lines between today’s Business Class and First Class products, compared to yesterday’s inflight product for both classes of service.]
The new JetBlue Mint gives passengers features they value.
By utilising the cabin space well on Mint, JetBlue stands a chance of convincing the market that they haven’t gone overboard.
The airline conceded to market-watchers that leg-room must give to make sure that critical load factors don’t suffer.
JetBlue it cleverly selected a seat which will make the tighter squeeze less evident to their passengers in “core seating.”
The airline maintained the Even More Legroom product offering (at a pitch reduced to 37″).
It also added some inflight experience perks:
- A self-serve mini-bar “Marketplace” where passengers can purchase snacks and soft drinks.
- Up to 100 channels on DirectTV, more movies and SiriusXM radio. Once again, JetBlue banks on IFE to satisfy passengers and they’ve been proven right on this bet before.
- JetBlue even upgraded the hardware on that IFE offering 10″ screens in the back and 15″ screens in the front.
JetBlue’s New Mint has refreshed my faith in the future of Low-Cost LUX in a big way.
Will passengers love it as much as I believe they will? Well, again, Skift’s Dennis Schaal has the perfect answer:
Will it be enough to convince the markets? Investors and analysts should think beyond the onboard product to the smarts JetBlue has demonstrated for raising revenue from its in-flight services.
Fly-Fi may eventually silence any doubt.
As reported by Mary Kirby of the Runway Girl Network, the airline recently told investors that it will find a way to monetize their popular high-speed Wi-Fi product.
They stand a good chance of carrying that off. It is JetBlue, after all.
What else can I say: I’m loving the JetBlue Mint. It’s refreshing–like any good mint should be. It restores my faith in Low-Cost LUX. And I wouldn’t be surprised if JetBlue mints gold with this one.
JetBlue featured image taken by Anthony Quintano and used under Creative Commons Licence.
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