Friday, June 14, 2013

JetBlue: Does Adding Business Class Seats Make Sense?

According to Businessweek, JetBlue will be rolling out a 16-seat business-class cabin on certain transcontinental routes aboard new Airbus 321 planes in the near future.   JetBlue VP Scott Laurence told Businessweek,  “I think the incumbent pricing at $2,500-plus, each way, is something we think doesn’t make a lot of sense.  It doesn’t stimulate an already existing market. We think we can stimulate demand there and really have an impact on that market.”  In other words, look out legacy carriers!  Your first class service is about to be challenged by a less expensive, high quality service from JetBlue.  

Is this a good idea?   It strikes me that an opportunity does exist in the market.  A significant gap exists between the price (and associated service) of a first class seat on one of those transcontinental flights and the price and service associated with an economy seat.   JetBlue may be able to come in with an attractive offering at a price point that induces some economy customers to upgrade, while stealing some first class customers from other airlines. 

What's the downside?   JetBlue has succeeded in part because it made good tradeoffs.  It chose NOT to do many of the things legacy carriers do (no first class, no bulky cart used to deliver drinks, no hub and spoke system, etc.).  Those tradeoffs made JetBlue unique and hard to imitate.  Now the company is relaxing one of those key tradeoffs.   Companies often find that they violate key tradeoffs when they strive to grow.  Sometimes, abandoning key tradeoffs damages the power of a unique business model.  JetBlue will face some questions: Will it slow down the boarding process when you add a business class cabin?  Will stocking the cabin require more time, and thus slow down turnarounds?   Will providing service to the business class cabin cause flight attendants to sacrifice the quality of service to the rest of the passengers?  Given these questions, it's a good idea that JetBlue is launching this new model as an experiment.  The key will be to learn and adapt quickly as challenges arise.  The deeper question will be:  Are we sacrificing key elements of our competitive advantage by pursuing this opportunity, or are we enhancing our competitive advantage by further differentiating from the competition? 

1 comment:

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