Because it doesn’t overbook, JetBlue enjoys the lowest rate of involuntary denied boardings in the industry: only 18 people out of 21.3 million passengers through the first three quarters of 2013, the latest period for which data are available. Virgin America, with a bump rating close to JetBlue’s, oversells only on certain flights and usually limits the number of seats directly to the number of no-shows it expects in coach, spokeswoman Jennifer Thomas said in an e-mail. On the other end of the spectrum, Southwest subsidiary AirTran Airways had the highest rate among U.S. non-regional airlines required to report oversales, with 1.28 passengers bumped for every 10,000 travelers (or 1,800 customers in total during the period).
Several analysts expressed puzzlement over why JetBlue has avoided a common industry practice that can tip a particular flight’s financial performance from loss to profit. The airline also doesn’t advertise its practice, so most people are unaware that it doesn’t overbook—including at least one Wall Street analyst who covers the company. “It’s a bit of a head-scratcher,” says Seth Kaplan, managing partner of Airline Weekly, an industry journal. “It’s all about the extra few hundred dollars that can turn a flight profitable, especially when it’s relatively free money.”
JetBlue’s point-to-point network has few connecting flights, and “therefore we don’t have the issue of misconnects driving no-shows,” Dennis Corrigan, JetBlue’s vice president of sales and revenue management, said in an e-mail. Still, that calculus could change as JetBlue prepares to launch its first premium cabin product, called Mint, on New York-to-California flights marketed heavily toward lucrative corporate travelers. That group often purchases refundable tickets to gain flexibility around tightly packed business schedules.
Adding to the pressure for additional revenue, JetBlue has fallen short the past two years on its goal for return on capital and is facing higher costs from pilot raises and more Airbus deliveries. JetBlue’s independent streak has also defied the industry custom of adding more seats to airplanes—boosting revenue, crushing knees—and charging a fee for a first checked bag. Both of those decisions could also lead the airline to reassess its overbooking policy.
Like most airlines, Southwest (LUV) oversells nearly every flight. It carries the most passengers domestically, and in September the airline began enforcing a new rule for no-show customers: The value of the ticket is lost if the passenger does not change or cancel before departure. That change is expected to further reduce the airline’s no-show rate and refine its techniques for oversales.
JetBlue could try to monetize its no-overbooking policy by advertising its benevolence to travelers, but even that may have limited appeal for airline shoppers; in an industry where overbooking is the norm, there doesn’t seem to be large numbers of angry flyers resentful over lost seats. “I’ve just never seen any evidence that people choose an airline because they don’t overbook flights,” says Kaplan.
Article Appeared @http://www.businessweek.com/articles/2014-02-05/jetblue-almost-never-bumps-passengers-and-thats-bad-for-business#r=hp-ls