JetBlue Airlines 2015 Annual Report Download - page 13

JETBLUE AIRWAYS CORPORATION-2015Annual Report
PART I
ITEM 1Business
09
partnerships. We plan to do this by expanding code-share relationships
and other areas of cooperation such as frequent flyer programs. We
believe these commercial partnerships allow us to better leverage our
strong network and drive incremental traffic and revenue while improving
off-peak travel.
Marketing
JetBlue is a widely recognized and respected global brand. JetBlue
created a new category in air travel and our brand stands for high
service quality at a reasonable cost. This brand has evolved into an
important and valuable asset which identifies us as a safe, reliable, high
value airline. Similarly, we believe customer awareness of our brand
has contributed to the success of our marketing efforts. It enables us
to promote ourselves as a preferred marketing partner with companies
across many different industries.
We market our services through advertising and promotions in various
media forms including popular social media outlets. We engage in
large multi-market programs, local events and sponsorships across
our route network as well as mobile marketing programs. Our targeted
public and community relations efforts reflect our commitment to the
communities we serve, as well as promoting brand awareness and
complementing our strong reputation.
Distribution
Our participation in global distribution systems, or GDS, supports our
profitable growth, particularly in the business market. We find business
customers are more likely to book through a travel agency or a booking
product which relies on a GDS platform. Although the cost of sales
through this channel is higher than through our website, the average fare
purchased through GDS is generally higher and often covers the increased
distribution costs. We currently participate in several major GDS and online
travel agents, or OTA. Due to the majority of our customers booking travel
on our website, we maintain relatively low distribution costs despite our
increased participation in GDS and OTA in recent years.
Our primary and preferred distribution channel to customers is through our
website, www.jetblue.com, our lowest cost channel. In the first half of 2015,
we introduced a new merchandising platform for www.jetbluecom with
our business partner Datalex in addition to merchandising capabilities on
our kiosks and in our self-service channels with our business partner IBM.
Customer Loyalty Program
TrueBlue® is our customer loyalty program designed to reward and recognize
loyal customers. Members earn points based upon the amount paid for
JetBlue flights and services from certain commercial partners. Our points
do not expire, the program has no black-out dates or seat restrictions,
and any JetBlue destination can be booked if the TrueBlue
®
member has
enough points to exchange for the value of an open seat. Mosaic® is an
additional level for our most loyal customers who either (1) fly a minimum
of 30 times with JetBlue and acquire at least 12,000 base flight points
within a calendar year or (2) accumulate 15,000 base flight points within
a calendar year. Over 1.4 million TrueBlue® one-way redemption awards
were flown during 2015, representing approximately 4% of our total
revenue passenger miles.
We currently have co-branded loyalty credit cards available to eligible U.S.
residents, as well as co-brand agreements in Puerto Rico and the Dominican
Republic to allow cardholders to earn TrueBlue
®
points. Beginning in the
first quarter of 2016, we anticipate launching a new co-branded credit card
partnership with Barclaycard
®
on the MasterCard
®
network. We believe
our marketing campaign announcing the launch of the new co-branded
card will have promising conversion rates from existing cardholders of our
co-branded American Express® credit cards as well as drive a significant
number of new member enrollments. We also have co-branded loyalty
credit cards issued by Banco Santander Puerto Rico and MasterCard
®
in Puerto Rico as well as Banco Popular Dominicano and MasterCard
®
in the Dominican Republic. These credit cards allow customers in Puerto
Rico and the Dominican Republic to take full advantage of our TrueBlue
®
loyalty program.
We have a separate agreement with American Express® that allows any
American Express
®
cardholder to convert Membership Rewards
®
points into
TrueBlue
®
points. We have various agreements with other loyalty partners,
including hotels and car rental companies, that allow their customers to
earn TrueBlue
®
points through participation in our partners’ programs.
We intend to continue to develop the footprint of our co-branded credit
cards and pursue other loyalty partnerships in the future.
Operations and Cost Structure
Historically, our cost structure has allowed us to price fares lower than
many of our competitors and is a principal reason for our profitable growth.
Our current cost advantage relative to some of our competitors is due
to, among other factors, high aircraft utilization, new and efficient aircraft,
relatively low distribution costs, and a productive workforce. Because our
network initiatives and growth plans necessitate a low cost platform, we
are continually focused on our competitive costs, operational excellence,
efficiency improvements which also contribute to lower costs and enhancing
critical elements of the JetBlue Experience.
Route Structure
Our point-to-point system is the foundation of our operational structure, with
the majority of our routes touching at least one of our six focus cities. This
structure allows us to optimize costs as well as accommodate customers’
preference for non-stop itineraries. A vast majority of our operations are
centered in and around the heavily populated northeast corridor of the U.S.,
which includes the New York and Boston metropolitan areas. This airspace is
some of the world’s most congested and drives certain operational constraints.
Our peak levels of traffic over the course of the year vary by route; the
East Coast to Florida/Caribbean peak from October through April and the
West Coast peak in the summer months. Many of our areas of operations
in the Northeast experience poor winter weather conditions, resulting in
increased costs associated with de-icing aircraft, canceled flights and
accommodating displaced customers. Many of our Florida and Caribbean
routes experience bad weather conditions in the summer and fall due to
thunderstorms and hurricanes. As we enter new markets we could be
subject to additional seasonal variations along with competitive responses
by other airlines.
•
New York metropolitan area – We are New York’s Hometown Airline™.
The majority of our flights originate in the New York metropolitan area,
the nation’s largest travel market. John F. Kennedy International Airport,
or JFK, is New York’s largest airport, and we are the largest airline at JFK
as measured by domestic seats and our 2015 operations accounted
for more than 37% of seats offered on domestic routes from JFK. As
JFK is a slot controlled airport we have been able to continue to grow
our operations by adding more seats per departure with the delivery of
25 Airbus A321 aircraft in total as of December 31, 2015, as well as
continuing to optimize routes based upon load factor and costs. We
operate from Terminal 5, or T5, and in November 2014 we opened T5i,
an international arrivals facility that expands our current T5 footprint. We
believe T5i will enable us to increase operational efficiencies, provide
savings, streamline our operations and improve the overall travel experience
for our customers arriving from international destinations. We also serve