Last year, JetBlue Airways (NASDAQ: JBLU) made a long-awaited announcement that it would enter the transatlantic market with flights to London in 2021. JetBlue converted 13 of its Airbus A321neo orders to the new long-range A321LR models to support its transatlantic expansion plans.
Less than a year later, the COVID-19 pandemic crushed air travel demand -- particularly on international routes. Nevertheless, JetBlue CEO Robin Hayes recently confirmed that the New York-based airline still expects to launch its first flights to London in 2021.
London plans mostly intact
Last month, American Airlines and JetBlue announced a new proposed partnership to enable seamless connections from JetBlue flights to American's international routes in New York and Boston. At the time, JetBlue reiterated that it still planned to launch its own transatlantic service to London in 2021.
Despite that recent statement, a Bloomberg host asked Hayes during an interview earlier this month whether JetBlue still expected to start service to London in 2021. Hayes responded that the airline's transatlantic launch remains on track for next year, although he cautioned that flights were likely to begin later in the year than originally planned. When pressed for more detail, he indicated that flights would most likely start in the third quarter, or about a year from now.
JetBlue is still keeping key parts of its plan close to the vest. For one thing, it hasn't revealed the configuration for the A321LR. In the past, Hayes has said that JetBlue would have more "Mint" premium seats on transatlantic flights than the 16 Mint seats on the jets it uses for premium transcontinental flights today.
Other missing details are which London airport (or airports) JetBlue will serve and whether the airline will launch London flights from both New York and Boston or just one of its Northeast cities next year.
Bad timing -- or really good timing?
At first glance, entering the transatlantic market right now seems like a bizarre idea. After all, long-haul travel demand has been virtually nonexistent. Aviation consultant Robert Mann recently argued that JetBlue should play for time, delaying the start of its London flights for a couple of years. However, 2021 could actually be a great time for JetBlue to launch transatlantic service.
First, other airlines' recent schedule cutbacks may enable JetBlue to obtain (and keep) better airport slots in the crowded London market. A year ago, JetBlue appeared to have very little chance of getting slots at Heathrow, the preferred airport for most people traveling to and from London. Even getting into the No. 2 airport (Gatwick) was not guaranteed. Now, there are lots of open slots. Airlines that hold those slots will fight to keep them even though they're not being used right now because of the pandemic. But if JetBlue is willing to add London flights in 2021, the relevant authorities may revert to the usual "use-it-or-lose-it" rules.
Second, JetBlue's Mint service primarily appeals to wealthy leisure travelers, whereas most airlines' premium passengers are flying for business. If a coronavirus vaccine or more effective therapeutics become available by this time next year, JetBlue could benefit from quite a bit of pent-up leisure travel demand -- even if businesses are still keeping travel to a minimum.
Third, JetBlue has one of the stronger balance sheets in the airline industry. (It ended the second quarter with $3.4 billion of cash and investments, offset by a fairly manageable $5.6 billion of debt and lease liabilities.) Under normal circumstances, incumbents might react to JetBlue's entry on a lucrative route by increasing capacity and dramatically cutting fares in a bid to retain market share. In the current environment, JetBlue rivals with weaker balance sheets may not be able to afford an aggressive competitive response.
Nothing's set in stone
Of course, there's no guarantee that JetBlue will go through with its current plans to begin flying to London in Q3 2021. The airline still needs to get certification from the Federal Aviation Administration to operate long over-water routes before launching service to London. The COVID-19 pandemic could potentially slow the regulatory process, forcing JetBlue to delay the first flights to London.
If the pandemic remains in full swing a year from now and there are restrictive quarantines in effect for transatlantic travelers, that could also convince JetBlue to delay its first London flights.
However, the most likely outcome is that JetBlue will land in London before the end of 2021. That will position it to build up a successful transatlantic franchise as the airline industry recovers from the COVID-19 pandemic over the next several years.
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