Filed under: Travel, Travel Industry, Consumer Issues, Airfare, Financial Education
It will soon cost you money to check a bag on JetBlue if you buy the cheapest level of tickets.
JetBlue Airways (JBLU) said Wednesday that it will create three ticket classes beginning in the first half of 2015, and only the top two include at least one free checked bag.
JetBlue executives declined to give a price for the bag fee, but they said pricing would fluctuate with demand. They said fewer than half of JetBlue passengers check a bag.
The airline will also add 15 seats to its Airbus A320 planes, increasing capacity to 165 from 150, and reduce average legroom to 33 inches between rows from more than 34 inches. The retrofit of cabins will start in late 2016, take two years and still leave more legroom than in the main cabins of bigger airlines, JetBlue executives said.
JetBlue expects that the new fare classes and bag fees will generate more than $200 million a year in operating income, and the extra seats will raise another $100 million a year.
JetBlue announced the changes as it met with investors in New York. JetBlue has been under pressure from investors to boost revenue.
In afternoon trading, shares of the New York-based airline were up 55 cents, or 4.3 percent, to $13.27. They hit a 52-week high of $13.48 earlier in the session.
Other big airlines have added fees on checked bags since 2008.
JetBlue's move will leave Southwest (LUV) as the only large U.S. airline that allows all passengers to check at least one bag for free. Southwest CEO Gary Kelly has said the lack of bag fees has attracted enough additional passengers to more than offset money that would be raised by fees.
JetBlue also announced that it would delay 18 Airbus jets that were scheduled for delivery from 2016 to 2018 until 2022 and 2023 to cut capital spending by more than $900 million through 2017.
The news on fees and legroom comes just two months after JetBlue announced that CEO Dave Barger will step down in February and be replaced in February by the company's president, Robin Hayes. S&P Capital IQ analyst Jim Corridore praised Hayes on Wednesday, saying that the incoming CEO was showing a focus on boosting revenue and being careful on spending.
The U.S. airline industry is reaping huge profits due to full planes and modest increases in fares. Airlines have kept planes full and avoided profit-slashing fare wars by limiting their expansion plans.
