JetBlue Mimics Larger U.S. Rivals by Adding No-Frills Fare Class

(Bloomberg) -- JetBlue Airways Corp. will offer its own version of a basic economy fare, saying its “success is at risk” if it doesn’t match the discounted, no-extras tickets being sold by larger rivals.

The change will be part of a broader shakeup of JetBlue’s fare system that will debut next year, President Joanna Geraghty told airline employees in a message Friday. JetBlue’s version will retain services like free WiFi and a carry-on bag and personal item at no charge, she said.

The new lowest-price option will compete with basic economy fares offered by larger rivals like American Airlines Group Inc. and deep discounters including Spirit Airlines Inc. Those tickets, which generally don’t allow changes, seat selection or early boarding, were created to appeal to passengers willing to sacrifice some services for much lower prices.

“At JetBlue, we never liked the ‘no frills’ approach,” Geraghty said. But “customer behavior suggests our success is at risk if we do not disrupt this market by lowering fares without sacrificing the experience.”

Brand Risk

The carrier attracts a revenue premium over other airlines in some markets, partly because of more legroom on average, onboard service and amenities like seat-back screens with more than 36 television channels and unlimited snacks and soft drinks. JetBlue will have to be careful to not let the discount fares hurt its brand, said Hunter Keay, a Wolfe Research analyst.

“At the end of the day, basic economy is a brand-dilutive concept for all the airlines that have adopted it,” Keay said in an interview. “JetBlue’s biggest advantage is its brand. For them to do something like this takes a lot of guts and commercial courage. I applaud it.”

JetBlue shares slipped 0.1 percent to $19.36 at the close in New York, and are down 13 percent this year.

Geraghty’s message didn’t offer details on features or a brand name for the new basic economy ticket. Customers buying the lowest fare “will agree to some limits, which might include boarding order, seating and change/cancellation flexibility,” she said.

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