Revenue and Data Management

JetBlue Airways’ total ancillary revenue for the fourth quarter was about $20 per passenger. During 2009, airline’s ancillary revenues grew $60 million or 17 percent as compared to 2008.

Published: 02 Feb 2010

JetBlue Airways’ total ancillary revenue for the fourth quarter was about $20 per passenger. During 2009, airline’s ancillary revenues grew $60 million or 17 percent as compared to 2008.

Speaking during JetBlue’s Q4 2009 Earnings Call (posted on Seeking Alpha), its CFO and executive vice president, Edward A. Barnes, said, “While the positive pricing traction during peak travel periods has been encouraging, the off peak periods remain a challenge as aggressive pricing across the airline industry has had a significant impact on yields. We continue to be encouraged by the success of our ancillary revenue initiatives. When we combine all of our ancillary revenue reported in the passenger revenue line with those in the other revenue line, total ancillary revenue for the fourth quarter was about $20 per passenger.”

David Barger, CEO and president, shared that airline’s long term success depends in large part on having the appropriate technology platform to support airline’s future growth and revenue initiatives.

The airline has been working on the implementation of a new customer service system, Sabre, over the past year.

“All of the system and process changes that are critical for a transition to the Sabre platform are in play as a comprehensive testing programme have been completed. We plan to cut over to the new system this weekend (last week),” Barger said.

“Transitioning to this new platform offers us the flexibility and robust tools to expand the products and services we offer our customers. As a result, we believe the system will help improve the overall customer experience and further enhance the JetBlue brand. When fully implemented, the Sabre system will provide pricing flexibility that will enable us to attract more business customers, broaden ancillary revenue opportunities, and facilitate airline partnerships, all core initiatives for JetBlue,” Barger said.

He added, “With the transition to Sabre, we will make significant improvements to our website and implement a new revenue management system which we believe will strengthen our revenue generating capabilities.”

The airline expects to begin to see the revenue benefits of the additional functionality that will be enabled through Sabre later this year.

“In 2010, we expect our ancillary revenues to increase approximately 10% year-over-year. While it is difficult to make full year revenue projections given the uncertain economic environment, we currently expect full year RASM to be between 5% and 8% year-over-year,” said Barnes.

Capital expenditure

The airline spent approximately $45 million in non-aircraft Cap Ex during the fourth quarter, of which $9 million was related to the implementation of Sabre. The company estimates capital expenditures of about $395 million in 2010 of which $250 million relates to aircraft and $145 million to non-aircraft related expenditures.

Non-aircraft Cap Ex includes $95 million related to live TV and approximately $15 million related to the implementation of Sabre and future enhancements.

Fuel remains airline’s most significant cost, representing approximately 30 percent of its total operating expenses in the fourth quarter of 2009.