The airline recently outlined plans to pull its fares from certain lower-yielding OTAs after determining the distribution cost structure creates challenges in offering a full range of fares.
"In order to minimise distribution costs, we have been proactively reducing the number of online travel agencies that sell our tickets," stated jetBlue EVP commercial and planning Martin St George. "This is the first phase of a broader strategy to drive our most price-sensitive customers toward direct distribution, our lowest costs and best merchandise channel."
In late 2016, jetBlue outlined its costs savings programme and stated it would realise an annual USD20 million cost benefit in distribution expense by 2020. The bulk of the savings - USD120 million to USD125 million - stem from its maintenance and technical operations. The airline is targeting roughly USD75 million to USD90 million in corporate savings, and USD55 million to USD65 million from airport operations.
Those lower yielding online travel sites are an easy cut for jetBlue, who can successfully steer lower yielding, pricing conscious travellers to its website to ensure those customers have access to all sales and promotions, which aren't always available on third party sites.
jetBlue is stressing that is supports aggregator sites that allow customers to comparison shop, and then redirect customers to airlines' own booking channels to complete reservations.
Perhaps the tougher negotiations have happened with global distribution system (GDS) providers. jetBlue's relationships with the large GDS firms Sabre, Amadeus and Travelport has been up and down over the years, but the airline's push to bolster its corporate travel base requires the sometimes tough negotiations that occur with those distribution companies. Roughly 20% of jetBlue's passenger base are business travellers. The airline transported 38.3 million passengers in 2016, which was 9% growth year-on-year.
CHART - jetBlue recorded passenger growth of over 9% in 2015 and 2016 but that has fallen to 5.3% during the year to date
Source: CAPA - Centre for Aviation and jetBlue Airways reports
jetBlue CFO Steve Priest recently explained the airline has made great progress in setting the foundation for more cost efficient distribution and new agreements with its passenger sales and servicing business partners, GDS and online travel agencies. "We have reduced rates and lowered distribution costs while maintaining flexibility."
The airline has forged full content agreements with its GDS partners; but is declining to offer details about those partnerships other than declaring its was very happy with the progress it has made.
jetBlue's efforts to cut distribution costs are part of an ambitious programme to limit unit costs growth excluding fuel flat performance to 1% growth from 2018 to 2020. Its unit costs excluding fuel for 2017 are projected to grow 4% to 5% year-on-year. The company's capacity growth during that time period is forecasted to grow in the mid to high single digits; however, jetBlue has stated its growth in 2018 should hit the lower end of that target range.