JetBlue Airlines 2003 Annual Report Download - page 19

‘‘walkup’’ fare generally at approximately twice the amount of our lowest 14-day advance purchase fare.
Most major U.S. airlines have numerous fares carrying multiple, complex restrictions in any given
market, many of which require a non-refundable advance purchase and a Saturday night stay in order
to get lower fares. In contrast, we have only six basic fares. All of our fares are one-way and never
require a Saturday night stay. However, our competitors have generally changed their restrictions to
match ours in markets in which they compete with us. Our fares must be purchased at the time of
reservation and are non-refundable, but any booking can be changed or cancelled prior to departure
for only a $25 change fee. Based on published fares at our time of entry, our advance purchase fares
have been 30%-40% below those existing in markets prior to our entry, while our ‘‘walk-up’’ fares have
been generally 60%-70% below major U.S. airlines’ unrestricted ‘‘full coach’’ fares.
Yield Management
Yield management is an integrated set of business processes that provides us with the ability to
understand markets, anticipate customer behavior and respond quickly to opportunities. We use yield
management in an effort to maximize passenger revenues by flight, by market and across our entire
system while maintaining high load factors.
The number of seats offered at each fare is established through a continual process of forecasting,
optimization and competitive analysis. Generally, past booking history and seasonal trends are used to
forecast anticipated demand. These historical forecasts are combined with current bookings, upcoming
events, competitive pressures and other factors to establish a mix of fares that is designed to maximize
revenue. Like the major U.S. airlines, we employ a yield management system with sophisticated
forecasting and optimization models to rapidly perform the economic tradeoffs required to determine
the allocation of the number of seats available at different fares. This ability to accurately adjust seat
allocations based on fluctuating demand patterns allows us to balance loads and capture more revenue
from existing capacity.
While our yields were lower than all of the major U.S. airlines due to our low fares and longer
average passenger trip length, our load factor of 84.5% for the year ended December 31, 2003 was
higher than that of any major U.S. airline even though we have a policy of not overbooking our flights.
We believe effective yield management has contributed to our strong financial performance and is a key
to our continued success.
People
We believe that one of the factors differentiating us from our competitors is the high-quality
service provided to our customers by our employees, whom we refer to as crewmembers. Experience
indicates that our customers return not only because we offer low fares, but also because we provide
them with a more enjoyable air travel experience. Hiring the best people and treating them as we
expect our customers to be treated are essential to achieving this goal.
Full-time equivalent employees at December 31, 2003 consisted of 684 pilots, 1,002 flight
attendants, 1,486 customer service and ramp operations personnel, 282 technicians, whom others refer
to as mechanics, 467 reservation agents, and 1,091 management and other personnel. At December 31,
2003, we employed 4,704 full-time and 849 part-time employees. Our employees are not unionized.
We enter into an individual employment agreement with each of our FAA-licensed employees,
which include pilots, dispatchers and technicians. Each employment agreement is for a term of five
years and automatically renews for an additional five-year term unless either the employee or we elect
not to renew it by giving notice at least 90 days before the end of the initial term. Pursuant to these
agreements, these employees can only be terminated for cause. In the event of a downturn in our
business, we are obligated to pay these employees a guaranteed level of income and to continue their
benefits if they do not obtain other aviation employment. In addition, in the event we are sold to or
consolidate with another company, we must request that the successor company place these employees
on a preferential hiring list. If such employees are not hired by the successor company, in some cases
they will be entitled to a severance payment of up to one year’s salary.
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