The latest Air Show podcast drops later today. Tune in to hear us discuss the messy Pratt & Whitney situation. It’s a good one. But then again, I think they’re all good ones, so what do I know?
Listen on Spotify Listen on Apple Podcasts Listen on Amazon Listen on Pocket CastsThe first quarter was a terrible one for JetBlue. On the one hand, it looks like the airline was using this as a “kitchen sink” kind of quarter where it just threw all kinds of special items in to try and start Q2 with a clean slate. That includes the last of the failed Spirit merger charges. On the other hand, there is some real weakness in the business, and Latin America is causing a lot of trouble.
Newly-returned President Marty St George laid it out from a high level by saying “if you exclude our Latin flying, our system-level unit revenue growth would be positive for the first quarter versus actual unit revenue growth, which was down 2.5 percent.”
The problem is, however, that Latin America (which includes Caribbean) is an enormous part of the JetBlue network. It’s not going anywhere, so it just has to get better. But Latin America is not a monolithic unit. There are a lot of different types of Latin markets.
Dave Clark — who was running revenue and planning until a recent shift — explained this in more detail.
I think the easiest way to think about it is the breakdown between Caribbean beach destinations and Caribbean VFR destinations. The VFR is holding up relatively well. Industry capacity there has been relatively less. So that is still under some pressure, but not as much as the beach destinations where we see increased capacity, really high increased capacity, which is driving even higher pressure on the yields.
VFR stands for “visiting friends and relatives.” These are trips where people are going to see family and friends, which as we all know is very different from a true vacation. The latter would fall under the “leisure” bucket. It’s not easy to break these down completely, because there is overlap. But there are some markets that are very clearly just beach and others that are very clearly primarily VFR. Here’s how I broke down the JetBlue route map.
JetBlue Latin/Caribbean Map generated by the Great Circle Mapper – copyright © Karl L. Swartz.Brown dots are leisure, green dots are mixed, blue dots are VFR, and San Juan stands alone in yellow
JetBlue has already started to clean these markets up by pulling out of several of them in June 2024 (except where noted):
Bogotá Havana (ended September 2023) Lima Puerto Vallarta QuitoWhat’s interesting about this move is that all of these exited markets are VFR except for Puerto Vallarta. Didn’t Dave say VFR is doing better right now? To be fair, several of these are really stretching the legs of those JetBlue aircraft. That’s an issue because it eats up a lot of aircraft time when JetBlue is paring back on deliveries. Presumably the fares are bad enough that JetBlue would rather use those airplanes more wisely closer to home.
Except for Puerto Vallarta. That must have just been terrible all around.
If we exclude those markets that are gone or going soon, then let’s take a look at how capacity breaks down by market type.
Q1 Departing Seats by Market Type to the Continental US (All Carriers)
Data via Cirium2019 to 2024 from left to right, % shows 2024 increase over 2019
First, we can see that the leisure markets are just that much bigger in terms of size. But just take a look at that growth. The percentage you see is the increase in seats in Q1 2024 versus Q1 2019. Technically, San Juan has the biggest percent increase, and we’ll get to that later. But from a sheer aggregate number perspective, just look at how much leisure has jumped.
Q1 2024 had 40 percent more seats in those leisure markets. FORTY PERCENT. But wait, there’s more. If you compare just to Q1 2023, seats are up a staggering 23 percent. In one year, nearly a quarter more seats were added. Of course these markets are strained.
As JetBlue suggested, the VFR markets look much more stable. There has been some growth, but some growth is to be expected. We’ll just put VFR aside and focus on leisure and San Juan.
Starting with leisure, who is adding all this capacity? It’s pretty much everybody. At least, everybody but Southwest. Just look at this piling on.
Departing Seats by Airline from Leisure Latin/Caribbean Markets to Continental US
Data via Cirium
It may not have the highest percent increase, but just look at how many seats American put into this part of the world. And remember, these are only the leisure markets where JetBlue flies. American has a ton of other markets in this region beyond those.
Certainly JetBlue is responsible for some of this excessive growth, but you can’t really point to a single airline. There’s just too much capacity and something is going to have to shake out.
Then there’s San Juan. I broke San Juan out into its own for a couple reasons. First, nearly a quarter of JetBlue’s seats departing Latin/Caribbean are out of San Juan. It is a focus city for the airline, and it stands alone. It’s also a mix of leisure and VFR, though I would assume it tilts toward VFR pretty heavily.
Oh, and there’s one more reason: Frontier.
Just take a look at the growth in seats by airline from San Juan. Note that I changed this a little and instead of just looking at Continental US flying, I also included intra-Caribbean flying as well since that is a part of what JetBlue does from San Juan.
Departing Seats by Airline from San Juan to Other US/Caribbean Markets
Data via Cirium
In this market, JetBlue hasn’t grown much, but oh Frontier. It has zoomed from seventh place on this chart all the way to first. The airline has dumped capacity into San Juan, because it saw opportunity. Meanwhile, Spirit was the leading ultra low cost carrier in the market back in 2019, and it did not like Frontier’s moves. So it poured on capacity of its own.
Remember how Florida and Las Vegas were overly-stuffed with capacity and the ultra low cost operators fled? San Juan was one of those places that looked appealing. Even if JetBlue has a different model, an extra seat in a market is an extra seat, and JetBlue feels the pain.
It is completely understandable that JetBlue’s quarter went to crap based on what happened in Caribbean/Latin America. These trends show the problem very clearly. It’s not entirely clear, however, how JetBlue fixes this unless other airlines pull back as well.
