Within 24 hours of JetBlue’s announcement that it planned to impose fees for checked bags and reduce legroom in coach, the reactions of two of the airline’s key stakeholder groups have been expressed loudly and clearly. Wall Street is elated (company shares were up almost 6 percent); and customers are bummed (typical comment from my Facebook feed: “Say it ain’t so, JetBlue”).
Predictably, the reaction of Southwest, a JetBlue competitor, focused on its own branding, as “America’s low-fare airline.”
Interviewed on CNBC, Southwest CEO Gary Kelly described JetBlue’s moves as an opportunity to highlight his company’s generally fee-free policies. “Now we have this incredible distinction which is a gift from our competitors to be different by not nickel and dimeing our customers.”
Does Southwest stand to benefit from JetBlue’s move?
“History would suggest that we will definitely gain some customers there.” He cited a “significant market share shift” in 2009, when airlines first began imposing nuisance fees.
And to the question of “leaving money on the table” by ignoring the revenue potential of extra fees for bags and other services—a Wall Street preoccupation that ultimately pushed JetBlue to add bag fees and reduce legroom—Kelly expressed confidence that the fee-free strategy was not only customer-friendly, but investor-friendly as well.
“All the research we’ve done shows that charging bag fees would make our revenue go down because we would lose more customers than we would gain in bag fees.”
That’s a provocative claim, that flies in the face of the common presumption that consumers will endure all manner of insults so long as the price is right. If he’s right, it means that most other U.S. carriers have it wrong, and their aggressive ancillary revenue strategies are actually depressing their bottom lines, rather than boosting them.
That research Mr. Kelly alludes to? If only he would share it with JetBlue. And American. And Delta. And United. And so on.
Reader Reality Check
How will JetBlue’s new policies affect your future air travel?
This article originally appeared on FrequentFlier.com.
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