NEW YORK — JetBlue Airways said on Monday it is overhauling its fare options, giving customers more flexibility to choose seats, as well as change and refundability options, as airlines rely increasingly on segmented pricing to boost revenue and offset higher costs.
The New York-based carrier, which is set to report second-quarter earnings before the bell on Tuesday, said the update will roll out in the coming days. Customer choice and fare segmentation have grown crucial to revenue performance even as fuel-price volatility is expected to remain a major risk.
“Customers will be able to book what’s right for them. First, the onboard experience, and then the fare option depending on their preferences around seat selection and refundability,” JetBlue President Marty St. George said in a statement.
Investors will be watching how JetBlue fared in recapturing higher fuel costs through higher ticket fares during the second quarter. Peers including United Airlines UAL.O, Delta Air Lines <DAL.N> and Alaska Airlines ALK.N reported generating more revenue through fare increases.
“Now that we’ve seen a few airlines talk about that, now all the airlines have to reflect that. If they don’t, then there might be an issue,” said Peter Trombetta, vice president of corporate finance at Moody’s Ratings. “The revenue side is important. We know costs are going to be higher.”
Carriers raised fares this spring to offset a surge in jet fuel prices tied to the Iran war, but those increases — averaging around 20 per cent — have not fully covered the hit. U.S. spot jet fuel has climbed to $3.67 a gallon as of July 24. Prices remain well below an early-April peak of roughly $4.88 a gallon.
JetBlue said in April that it expects revenue per available seat mile to rise 7 per cent to 11 per cent year-over-year and 30 per cent to 40 per cent of fuel recapture during the second quarter.
The airline said it was anticipating an average fuel price per gallon of $4.13 to $4.28 during the second quarter.
Consumer choice and flexibility are levers that airlines are pulling to drive stronger revenue performance.
Southwest Airlines LUV.N noted that expanding its basic economy product led to more base-fare sales and a higher rate of customers trading up when they had the option. Delta said last month that it will offer basic fares across all premium cabins to allow travelers to access premium products at a lower cost.
While JetBlue has offered tiered fare options in the past, it said its overhaul will prepare travelers for the introduction of BlueFirst, the airline’s new domestic first-class experience.
“We want to make sure customers know that JetBlue offers the experiences they are looking for,” St. George said.
(Reporting by Doyinsola Oladipo in New York; Editing by Will Dunham and Nick Zieminski)
