JetBlue Airlines 2008 Annual Report Download - page 3

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markets were not sustainable amid the challenging industry environment. While it is difficult to close markets,
we believe these decisions will ultimately strengthen our airline, resulting in greater value for our
crewmembers and shareholders in the long run. Most of our 2008 capacity growth was in Latin American and
Caribbean markets where we launched service to two new destinations – St. Maarten and Puerto Plata, in the
Dominican Republic.
We also continued to leverage our market presence in New York, Boston, Florida, and on the West Coast
with new service between existing city pairs, which helped improve our efficiency and asset utilization. For
example, we added new service into White Plains, where we are now the largest carrier. This service, coupled
with our service to JFK, LaGuardia, Newark and Stewart, further bolsters our position as New York’s true
hometown airline.
During 2008, we commenced our marketing partnership with Aer Lingus, which enables customers to
book a single reservation on the Aer Lingus website between Ireland and more than 40 JetBlue destinations.
Lufthansa Airlines completed its $300 million investment in our company in 2008, further strengthening our
financial position, and we look forward to finalizing a commercial agreement with Lufthansa later this year.
We also continued to benefit from our marketing partnership with Cape Air, and we will continue to explore
opportunities to link our network with other airlines.
Revenue Maximization
Leisure demand for air travel was remarkably resilient throughout most of 2008. We benefitted from our
more disciplined growth strategy as new markets became a smaller percentage of our overall network. In
addition to slowing our growth through fleet adjustments, we managed capacity through aircraft utilization and
gauge adjustments. The EMBRAER 190 aircraft, configured with 100 seats, is a valuable tool that allows us to
more effectively match capacity with demand by replacing Airbus A320s with the smaller EMBRAER 190s
on certain flights.
These capacity adjustments helped us gain more pricing traction. Our average fare increased about 13%
to $139 in 2008, driving industry-leading passenger revenue per available seat mile (PRASM) growth of 14%
year over year. The reallocation of our capacity from east-west markets to shorter-haul markets and to the
Caribbean had a positive impact on our PRASM as well.
We also continued to diversify our product to attract higher yielding travelers and generate new revenue
streams such as our Even More Legroom product. Customer response to Even More Legroom has exceeded
our expectations, driving more than $40 million of incremental revenue during the last three quarters of 2008.
In addition, we began selling premium beverages onboard our aircraft and expanded the selection of
pay-per-view movies available onboard.
We believe our value proposition differentiates us within the industry. Our goal is to preserve the award-
winning core JetBlue Experience and enhance it with optional product offerings our customers value and are
willing to pay for. In doing so, we strive to strike a balance between preserving the integrity of our brand and
remaining competitively aligned with our peers. As a result of our efforts, our 2008 ancillary revenues
increased significantly compared to 2007. At the same time, we remain focused on building customer loyalty,
and we are very pleased with the growth of our TrueBlue loyalty program, which now totals seven million
members.
We continued to focus on making our product easy for our customers to purchase while keeping costs
low. In 2008, we introduced a cash payment option for customers booking JetBlue travel reservations via
800-JETBLUE or through our website www.jetblue.com. Approximately 77% of our 2008 revenues were
booked through jetblue.com, which continues to be our lowest cost distribution channel.
Cost Control and Productivity
Fuel continues to be our largest operating cost. Our average fuel price per gallon increased more than
40% in 2008 compared to 2007. We remain focused, however, on maximizing our fuel efficiency. With an
average age of approximately three and a half years, JetBlue operates one of the youngest, most fuel-efficient
and environmentally friendly fleets in the industry. We also continue to focus on fuel conservation techniques
to help reduce aircraft fuel burn, including single-engine taxi and rapid deployment of ground power units at
our airport gates.