After embarking on a comprehensive restructuring program last month, marked by layoffs, JetBlue (JBLU) has been exploring other options to rein in the surging operating costs, owing mainly to high gasoline prices. After much deliberation, the management recently hinted at a pricing review to revive revenues and profitability.
In a move that could set a new precedent for the industry, which is grappling with continuing squeeze on margins from stagnant fares and high oil prices, the New York-based aviation company has decided to start charging passengers $30 for the first checked bag. The revised fee, which is higher than the industry standard of $25, will be applicable to tickets booked from Monday onwards.
The revised fee, which is higher than the industry standard of $25, will be applicable to tickets booked from Monday onwards
The company justified the hike by listing out the additional facilities it offers, such as extra legroom, free WiFi, free snacks and live television. “As a matter of good business, we constantly review and adjust our ancillary pricing to ensure a healthy business so we can continue offering the best customer experience of any U.S. airline,” said an official statement.
The fee revision is not limited to the first bag. The charges for the second and third checked bags have been raised by $5 and $50 to $40 and $150, respectively. Among the other leading airlines, Southwest (LUV) currently allows two free checked bags, while Delta Air Lines (DAL), American Airlines (AAL) and United Continental (UAL) charge $25 and $35 for the first and second checked bags, respectively.
Meanwhile, some market watchers believe the fee hike is bad news for passengers, considering the usual trend among airlines to follow suit whenever one of their peers tweak the fares and fees.
After slipping into a net loss in the second quarter, hurt by charges related to asset impairment despite a 5% growth in operating revenues, JetBlue chalked out a long-term plan to keep a check on the rising costs. As per the plan, the company placed orders for about 60 Airbus A220-300s, to be added to the fleet over a five-year period starting 2020, to replace the Embraer-built E190s.