Airline Fanatic

The NYTimes blog DealBook is reporting that Lufthansa is in talks to buy a 20% stake in JetBlue Airways.  I for one never expected JetBlue to be open to a sale, even for a portion of the company, to any airline, but it looks as if I’ve been proven wrong.  An official announcement on the deal could be made as soon as the market closes on Thursday in New York.

JetBlue’s stock, which has been in the dumps as of late, was up as much as 35% on the news of the potential deal to almost $8.50.  Why make this bid now?  DealBook indicated it was because of the relative strength of the Euro against the Dollar, making the deal cheaper than ever before for Lufthansa.  All of this still remains a rumor until an official announcement, but it seems quite possibly real to me.

Because Lufthansa is only taking a 20% stake in the company, they stay way below the foreign-ownership requirements for US airlines, something Virgin America has to battle when they started operations earlier this year.  According to people familiar with the matter the investment would only be a passive one, but would not rule out some kind of partnership (read:code sharing agreement) in the future. 

 Via [DealBook]

UPDATE: The AP has confirmed this story.  Lufthansa actually purchased a 19% stake in JetBlue for $300 million.  This is based on a share price of $7.27 per share, or a 16% premium of JetBlue’s closing price Wednesday.  Even more important, the two airlines said they would seek “an operation cooperation.”  What this means was not elaborated upon, but more details will be forthcoming.

Engadget just took JetBlue Airways’ debut flight of BetaBlue, their free inflight wifi service, and has posted an in-depth look of their experience.  So far their story makes it seem like BetaBlue has a way to go before it becomes a truly useful service (unless you operate on Yahoo), but is a good first start.  Airline Fanatic wrote about this flight when JetBlue announced BetaBlue last week.

The Wall Street Journal is reporting that JetBlue is about to start testing their inflight wifi services with parterns Yahoo! and RIM.  For now at least the service will be completely free, and offer access to customized Yahoo Mail and instant messaging services.  People with wifi enabled Blackberries will also be able to access their corporate email and instant messages while inflight.    Best of all this service is starting almost immediately – with the first flight on December 11th.  The project, called BetaBlue, is only hooked up on one plane right now.  The first flight to get this feature will be flight 641 from JFK to SFO next Tuesday, but will shift thereafter depending on the normal schedule of the aircraft.  This is still a very limited test, so users will only be able to access the services mentioned above.

This test news puts JetBlue way ahead of other domestic carriers who are also in the market to install WiFi across their fleet.  Virgin America announced earlier this year they intend to use wifi on their entire fleet (though that is considerably easier than equipping JetBlue’s fleet).  JetBlue also said this testing will go on for months, so don’t get your hopes up too much for catching this first of a kind plane.  Either way, sooner or later JetBlue will be forced to open up BetaBlue to the entire internet.  The days of liveblogging my flights are upon us!

Well news from JetBlue hasn’t been so great of late, what with their stock hitting all time lows, and the departure of long time CFO John Harvey.  But all is not lost thankfully as today they’ve put out a press release announcing new service between Orlando and Santo Domingo, DR.

This newest route is the latest in a slew of new service announcements from Florida.  It seems that with the delicate political situation around schedules at JFK, JetBlue doesn’t want to add any more fuel to the fire.  The beneficiaries of this have been Ft. Lauderdale and Orlando, which will see six other routes added as well in the coming months.

Also of note in this announcement is the fact the route will be operated using the E190, the first time that aircraft will be used outside the US by JetBlue.  It certainly makes sense to use a smaller aircraft for what will probably be a low volume route for JetBlue, but also indicates they are now more confident in their new aircraft.

Here are the nitty gritty details: service starts on March 6th of next year, with introductory fares starting at $79 each way, then raising to between $99 and $349 each way under normal operation.  For now the flight will operate once daily between MCO and SDQ.

The Wall Street Journal is running a piece today about the recent round of fare increases across the airline industry.  American carriers unfortunately bare the brunt of this price increase because oil is priced in dollars.  As the US dollar falls in value against other currencies around the world, even if the price of oil remained stagnant, the domestic price would continue to rise.  That fact combined with increasing demand and limited supply results in a huge spike in prices over the past few months.

Delta is leading the way with these price increases, initiating seven out of ten this year.  While most of the time these increases probably wouldn’t have been matched by other carriers, the dramatic increase in the price of jet fuel has pushed even AirTran and JetBlue over the edge.

The practice of raising ticket prices in the face of ever increasing fuel costs is a long and storied one, and one that always rides the fine line between profit maximization and customer rejection of the increase.  For the most part, customers are ignorant and don’t understand airlines buy gas too, and even if they do understand it, they want the airlines to eat the loss and still give them $39 tickets each way.  This time however, consumers seem to be accepting the rise in prices, but airlines have to watch demand very closely as public acceptance can change quite quickly.

So what happens when oil finally does hit $100 a barrel and airlines continue to raise prices?  Customers will eventually reject the high cost of flying and stay closer to home when it comes to vacation time.  Business travelers will probably still pony up for most trips, but might see a slight reduction in volume.  The carriers most dependent on leisure travel will be hit the hardest probably – the low cost carriers.  If that happens we might be looking at consolidation among airlines that today are thriving, instead of those that are aging.

We’ve all been wondering when JetBlue would finally get around to flying to our great neighbor to the North – Canada.  Well with this post I’m happy to announce that – we all have to wait a bit longer to find out.  Canada’s Globe And Mail however, has a fairly detailed piece about Big Blue’s attitudes and plans for Canada.  The paper gets a little bit more this time than the usual “Yes we are interested in that destination” and “no we have no firm plans at this time” from JetBlue’s PR man Sebastian White.  Instead he says JetBlue will start charter service to Canada in the spring, but is waiting on starting discussions on regularly scheduled service until it gets “regulatory clearance.”

This news isn’t too surprising, as JetBlue’s founder and recently ex-CEO David Neeleman used to run a little airline up in Canada called WestJet, and so has a lot of experience to lend in the area (although he has lots of experience to lend in every area of the airline industry).  The biggest stumbling block seems to be cost though, as Toronto’s Pearson airport has the highest landing fees in the whole wide world, something that you might consider radioactive in the low cost market.  JetBlue frequently gets airports to lower landing fees in exchange for new service, so I highly doubt they would jump into Toronto without a big reduction in landing fees, or compensation from the airport in some other area.

That doesn’t mean they won’t start service to Canada at all though, since there are a few other cities in the great white north.  I could definitely see JFK-Vancouver flights and Oakland-Vancouver flights, perhaps with a little bit of Calgary and Winnipeg thrown in.  With JetBlue’s big Ft. Lauderdale expansion coming up this winter, they could also add some leisure routes to Florida from Canada.  Leisure routes are JetBlue’s bread and butter, so it would make sense to see them go after this, especially in the high demand winter months.

Finally lets face it, flying to Canada is a great way to make money.  Current round-trips between Toronto and New York can run over $1200!  JetBlue typically can lop off up to 50% of the cost of existing airfare, but that still leaves the cost at around $600, which is a nice little cash cow for such a short route.  Though I sometimes like to think of JetBlue as egalitarian and providing service to everyone for great prices, they are still in this thing to make money after all.  Only time will tell exactly how long it is before they make an announcement for public service, but I suspect it is still several months, if not a full year away.

More JetBlue news keeps winging its way this direction with some more new service announcements.  After its surprising quarterly earnings, the low cost carrier announced it was adding service between Buffalo, NY (BUF) and Ft. Myers, FL (RSW) as well as between White Plains (HPN) and Ft. Myers.  This service will run during the winter high season and then be discontinued come April, 31st.  JetBlue has been doing quite a few of these announcements recently, which is a departure from their traditional investment in year round markets.  Why the change?

Well I see it more as testing the waters with seasonal service before they make the major announcement of year round service.  This way they can gauge demand for the route, as I’m sure JetBlue knows the change in seasonality in North – South traffic; they do make their living that way after all.  If they project service could be maintained even in the off season, then I’m sure you will see service continue.  If not, then it will be pulled and it can be claimed it was part of the plan all along.

I am actually somewhat confident JetBlue might be able to make the White Plains to Ft. Myers service stick.  HPN is in their home town New York area and RSW’s area is growing like wild fire.  Buffalo would be a stretch though, just in strict terms of the number of people there with access to the airport.