JetBlue Airlines 2004 Annual Report Download - page 10

competitive strengths. Our growth has occurred, and we believe it will continue to occur, by adding
additional frequencies on existing routes, connecting new city pairs among the destinations we already
serve and entering new markets often served by higher-cost, higher-fare airlines. The key elements of
our strategy are:
Stimulate Demand with Low Fares. Our widely available low fares and product offering are
designed to stimulate demand, particularly from fare-conscious leisure and business travelers who might
otherwise have used alternative forms of transportation or would not have traveled at all. We have seen
this ‘‘JetBlue Effect’’ in several of our markets. For example, according to the Department of
Transportation, or DOT, before we introduced our service in the second quarter of 2003, the average
number of daily passengers flying between San Diego and all three New York City metropolitan
airports was 683. One year after our entry, the average number of daily passengers flying in that market
increased 55% to 1,059, of whom 307, or 29%, flew JetBlue. Over the same time period, the average
one-way fare for these flights also decreased 28%.
Emphasize Low Operating Costs. We are committed to keeping our unit costs low. We have
achieved our low unit costs primarily by maintaining high aircraft utilization, operating a single aircraft
type with a single class of service, using advanced technologies and employing an incentivized and
productive workforce. We are focused on using technology to improve efficiency, and we believe that
the high percentage of bookings on our website, fully ticketless reservation system, and other initiatives
will help us continue to keep our costs low. We plan to grow from our current fleet of 70 aircraft to
283 aircraft by the end of 2011 and we believe the addition of a second type of aircraft, the Embraer
E190, in late 2005 will not significantly impact our ability to continue to contain our operating costs. As
we grow, we expect some benefit from economies of scale by leveraging our current infrastructure over
an expanded operation.
Offer Point-to-Point Flights to Underserved and/or Overpriced Large Markets. In considering new
markets, we focus on point-to-point service to markets that are underserved or large metropolitan areas
with high average fares. In determining which markets to select, we analyze publicly available data from
the DOT showing the historical number of passengers, capacity and average fares over time in all
North American city-pair markets. Using this data, combined with our knowledge and experience about
how the same or comparable markets have behaved in the past when prices increased or decreased, we
forecast the level of demand in a particular market that will result from the introduction of our service
and lower prices, as well as the anticipated reaction of existing airlines in that market. Consistent with
these criteria, we chose New York City as our principal base of operations, which prior to our entry
lacked significant low-fare domestic service, despite being the nation’s largest travel market.
Our West Coast base of operations, Long Beach Municipal Airport, shares many of the same
characteristics as New York City. Los Angeles is the second-largest metropolitan area in the U.S. with
more than 16 million inhabitants, of which over six million live within 20 miles of Long Beach. Average
airfares from the Los Angeles area have been generally high, other than fares to markets served by
Southwest Airlines, which are primarily short-haul or long-haul connecting flights.
In 2004, we launched service from nine new destinations, including Boston, the seventh largest
metropolitan area in the U.S., which we believe had lacked sufficient low-fare domestic service prior to
our entry. We currently serve seven cities from Boston with a total of 20 daily departures.
We intend to further penetrate our key markets by increasing the number of flights per day as
demand warrants. We believe that this is important to customers who choose airlines based on low
fares and convenient schedules. We intend to continue to emphasize point-to-point travel while also
offering our customers convenient connections where we have the opportunity to do so. An emphasis
on point-to-point travel allows us to utilize both our employees and facilities more efficiently. It also
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