MIAMI — Earlier this week, JetBlue announced a major expansion of its second largest hub at Boston, headlined by the debut of its ultra-premium Mint product on routes to Los Angeles (LAX), San Francisco (SFO), and Barbados. The expansion will also see JetBlue add frequency to 13 additional destinations and add new twice daily nonstop service to Nashville, and will push JetBlue’s operation in Boston (BOS) to nearly 140 peak day departures in Summer 2016.
The new Mint service in Boston will launch with three daily flights to San Francisco in March 2016. Barbados will join the same month with Saturday-only service the same month, mirroring a recent addition to Barbados and Aruba from JetBlue’s largest hub at New York JFK. Los Angeles will follow in Fall 2016, once again with up to three flights per day.
JetBlue’s Mint product has been expected at Boston since the day the product was announced, almost two years prior. While New York to SFO and LAX are much larger markets, Boston is far less competitive. And given JetBlue’s strength amongst high-yielding business travelers, their Boston Mint experiment should have a strong chance of success. Between the two markets, San Francisco has the stronger fundamentals. Not only is San Francisco is a larger overall market, with origin and destination (O&D) demand of 1,730 passengers per day each way (PDEW), versus 1,504 for Los Angeles, but it also has higher average fares, at $312.41 one-way versus $276.64 to Los Angeles. The advantage is only magnified in premium cabins, where the average one way fare is $65-70 higher for San Francisco, also the larger market (at 478 PDEW versus 429 PDEW for LAX).
Now obviously the average one-way premium fares in the ~$300 range at LAX and in the ~$340 range at SFO are far beneath the cheapest one-way fare for JetBlue’s Mint ($599 nonrefundable). While that $599 is a premium cabin discount in the JFK-LAX/SFO markets, it represents a substantial raise over the current market equilibrium, to say nothing of costlier fares with some degree of flexibility. JetBlue will have to target the upper quartile of current premium cabin flyers but filling 48 Mint seats daily (or 36-40 of the 48) is not an impossible task. Particularly in the BOS-SFO market, JetBlue can draw on its point-of-sale strength with business travelers in Boston, and the naturally high yielding business traffic in the tech industry.
LAX will be a harder market to crack. The business ties between Boston and LAX are broad of course, but there is no single industry tie that drives high yield business traffic like technology does for BOS-SFO. Moreover, on BOS-LAX, JetBlue will have to contend with competition from United, who is introducing its premium service p.s. Boeing 757-200 aircraft onto one of two daily flights from Boston this summer. JetBlue will have the edge in overall product (catering, ground services, etc.) but United will at least be competitive on in-flight product, which will challenge JetBlue’s market penetration in premium cabins.
For the moment, it is unlikely that JetBlue’s move will spark a flood of competition like that seen on NYC-LAX/SFO. But if JetBlue is able to convert a significant portion of premium cabin traffic with Mint, it is not inconceivable that United would move to protect its San Francisco hub with internationally configured 757-200s. Delta too has plenty of flexibility with internationally configured aircraft to defend LAX, and even American (despite its premium-heavy configuration and dedicated subfleet) could be pressured into adding BOS-SFO as the pressure ratchets up in Los Angeles. But the most likely scenario is for JetBlue to only be joined by United, if anyone.
Boston is Now a Powerhouse
The underlying story of JetBlue’s move is the resounding strength of its Boston hub. Nashville will become the carrier’s 60th destination from Boston and additional frequency to Orlando, Ft, Lauderdale, Tampa, San Juan, Raleigh/Durham, New York (JFK), Cleveland, Barbados, Aruba, Cancun, Turks and Caicos, Punta Cana, St. Maarten, and Liberia, Costa Rica from next summer will only re-iterate JetBlue’s market dominance. Already, JetBlue’s Boston operation is impressive, as indicated by the table below (which covers JetBlue’s operation for the week of June 29 – July 5).
The 888 weekly flights (~126 per day) peak at 131 daily departures on Thursdays, but what is most impressive is JetBlue’s frequency to key business destinations. JetBlue offers 14 or more weekly departures (2 flights per day) to 28 different destinations, and this frequency has been a critical source of its strength with Boston based business travelers.
In the long run, Boston may well end up being JetBlue’s largest hub (given New York JFK’s slot constraints – JFK is at ~170 daily departures today) and the Mint introduction is likely a precursor to JetBlue’s launching a trans-Atlantic gateway at Boston. On the domestic side, there aren’t too many markets that have the premium cabin demand and stage length to justify Mint service from JetBlue, so near-term Mint expansion (before the A321neo) will likely consist of additional frequencies. The one exception to that might be Seattle, which has some of the same technology links that drive business traffic to San Francisco, as well as premium cabin O&D demand 2/3 the size of Los Angeles with similar one-way fares.