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JetBlue to Start Offering Flights to London

The toughest challenge could come from the biggest carriers that have dominated traffic across the North Atlantic for years.

JetBlue to Start Offering Flights to London
A JetBlue Airways Corp. Embraer SA 190 aircraft is pushed back from the terminal at Ronald Reagan National Airport (DCA) in Washington, D.C., U.S. (Photographer: Andrew Harrer/Bloomberg)

(Bloomberg) -- JetBlue Airways Corp. rallied after saying it would join the hyper-competitive market for business travelers flying between the U.S. and Europe, using Airbus SE jets with an expanded version of its premium cabin.

Starting in 2021, JetBlue will make multiple daily flights from its hubs at New York’s John F. Kennedy and Boston Logan to an unspecified airport in London, the carrier told employees in New York. The Wednesday evening announcement, repeated Thursday in London, capped months of vows from Chief Executive Officer Robin Hayes that JetBlue could bring new travelers to the market by undercutting “obscene” business-class fares and offering its posh Mint service.

The trans-Atlantic jump is a gamble for JetBlue, which carved out a domestic business starting in 2000 by offering plush leather seats and innovative seat-back video screens at discount fares. The carrier will immediately face competitive threats from entrenched global airline alliances and from struggling low-cost operators, while also needing to secure space at crowded airports.

“The Atlantic is not just any international market,” said Samuel Engel, head of the aviation group at consultant ICF. “The trans-Atlantic is a graveyard for airlines. JetBlue is better positioned to succeed than almost any other airline that has grown into it.”

The shares rose 2.4 percent to $17.33 at 10:22 a.m. in New York following a rally Wednesday in anticipation of the announcement. That brought the two-day gain to 6.1 percent, on pace for the most since January 2018.

Long Planned

JetBlue has been deliberating making trans-Atlantic flights since at least 2016, when it ordered A321 single-aisle planes with the right to convert some of the aircraft to a version with extra fuel tanks for longer routes. For London service, it will switch 13 existing orders to the A321LR, which can fly 4,000 nautical miles -- sufficient to hop from the U.S. Northeast to Western Europe -- and can seat 206 passengers. That’s similar to a Boeing Co. 757-200.

“London is the largest metro area JetBlue doesn’t yet serve from both Boston and New York, and we could not be more thrilled to be changing that in the years ahead,” said Joanna Geraghty, the carrier’s president and chief operating officer. “The fares being charged today by airlines on these routes, specifically on the premium end, are enough to make you blush.”

The airline might fly to Paris and Amsterdam down the line, Hayes said Thursday.

Converting Orders

JetBlue, which has 85 A321s on order, retains the right to shift more to the long-range option and said the switch won’t affect its external financial commitments or capital-spending plans. The carrier has created an internal team to begin securing U.S. regulatory approval for extended flights over water.

JetBlue’s entry would add to the rise of narrow-body planes plying the Atlantic. Norwegian Air Shuttle ASA already was operating flights with the Boeing 737 Max before that plane was grounded following two crashes of the model within five months. The airline has had to scrap some flights and switch others to bigger aircraft, increasing its costs.

Discount carrier Wow Air Hf, which used single-aisle planes to connect European cities to the U.S. with a stop in Iceland, shut down last month after failing to secure rescue funding.

“JetBlue will have to contend with greater seasonality, reduced efficiency and higher cost -- albeit with higher competing fares,” Savanthi Syth, a Raymond James Financial analyst, said in a note Thursday. “While a logical move longer term, we believe JetBlue’s entrance into the trans-Atlantic could be an overhang on investor sentiment.”

Big Rivals

The tougher challenge for JetBlue is likely to come from the biggest carriers that for years have dominated traffic across the North Atlantic. American Airlines Group Inc. and IAG’s British Airways form one alliance, while Delta Air Lines Inc. and Air France-KLM are joined in another and a third includes United Continental Holdings Inc. and Deutsche Lufthansa AG. The incumbents hold the majority of slots, or rights to take off and land.

“There’s a difference between going in as a little water skimmer taking off some of the leisure traffic at the bottom,” Engel said. “A Wow in that market is annoying but not an existential threat. A JetBlue serving it and going after core business traffic is a real threat to the established players and they are going to fight hard.”

Regulators’ Role

JetBlue has been calling on regulators in the U.S., U.K. and European Union to force airlines that are members of global alliances to give up some valuable flight slots at congested airports like Kennedy and London’s Heathrow airport.

“The big airlines will tell you that competition has never been more robust, but the smaller airlines have never found it harder to get access,” Geraghty said.

The competition is also tough at less trafficked hubs. Delta last week announced it will begin flights to Boston and New York from London’s Gatwick airport with trans-Atlantic partner Virgin Atlantic starting in 2020. Delta is a major competitor to JetBlue in both of those northeastern U.S. cities.

In addition to its U.S. routes, JetBlue has flights to nearly two dozen countries in the Caribbean, Mexico and the northern part of South America.

--With assistance from Benjamin Katz, Christopher Jasper, Julie Johnsson, Richard Clough and Lucca de Paoli.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Tony Robinson, Susan Warren

©2019 Bloomberg L.P.