JetBlue Airways is readying its three-tiered bundled fare structure, which excludes free checked bags at its lowest level, for launch in the second quarter of this year, executives said during the carrier's fourth-quarter earnings call on Thursday.
JetBlue's IT team, along with technology partners Datalex, IBM and Sabre, already have been testing the platforms to manage the new fare structure, JetBlue president Robin Hayes said. Frontline employees also will begin training on the new structure this quarter, he added.
First announced in November, JetBlue's three-tier structure will include no free checked bags at the lowest level, one free checked bag at the middle level and two free checked bags with the most expensive fare. The higher-tier fares also will carry more flexibility and TrueBlue frequency-program bonuses.
Hayes, who succeeds outgoing CEO David Barger next month, said the tiered structure would add "at least $65 million in incremental operating income in 2015 and more than $200 million annually by year-end 2017."
During the fourth quarter, JetBlue reported net income of $88 million, up from $47 million in the fourth quarter of 2013. Passenger revenues during the quarter increased 6.9 percent to $1.3 billion. For the full year, net income was $401 million, compared with $168 million in 2013.
Traffic during the quarter increased 8.5 percent as capacity increased 7 percent year over year, leading to a load factor increase of 1.2 percentage points to 82.1 percent. JetBlue's average fare during the quarter declined 1.6 percent year over year to $166.17, and passenger revenue per available seat mile remained about flat.
Hayes noted JetBlue's premium-class Mint product, which will expand this year, continued to perform well during the fourth quarter. Operating margins on routes with the Mint product improved twice as much as those on other transcontinental routes, which already were among JetBlue's best-performing routes, he said.
As other major U.S. airlines have similarly indicated, Hayes said the carrier has no plans to bump up capacity in response to lower fuel costs. While JetBlue expects capacity during the first quarter will be up 11 percent to 13 percent year over year, that largely is a factor of severe weather forcing cancellation of about 4,100 flights in the first quarter of 2014.