JetBlue's growth strategy: Low prices and high loyalty

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JetBlue Airways Corp., the fledgling New York-based carrier, plans to launch a frequent-flier program early next year in a move to attract more business travelers.

The frequent-flier launch gives JetBlue another marketing angle aside from low prices as it tries to compete against more established carriers. The airline already claims a unique product that includes new planes, live in-flight TV and leather seats.

The program, still in development, is expected to echo the loyalty program of another low-fare carrier, Southwest Airlines, in which rewards are based on number of round-trips taken, not miles traveled.

FREE ROUND TRIP

JetBlue plans to offer travelers a free round-trip ticket after 10 round-trips to any of its 12 destinations, which include four Florida and two California cities. Southwest's Rapid Rewards program offers a free flight after eight round-trips.

The program will be retroactive to February, when JetBlue began flying. That means thousands of travelers may already qualify for a free flight, perhaps up to 20,000.

JetBlue plans to entice its frequent fliers with special options in cyberspace, such as access to new proprietary areas on its Web site (jetblue.com) or the chance to receive e-mail alerts of reduced prices to favored destinations.

Jet Blue hopes its marketing tack will set it apart, ultimately allowing it to survive as established carriers match JetBlue's prices on some routes. Airline industry history is littered with tales of start-up low-fare carriers such as People's Express and Kiwi, which were forced to fold after established carriers undercut their prices.

But JetBlue maintains it isn't out to poach market share as much as grow the market.

STIMULATING TRAFFIC

"We go into markets to stimulate traffic, not necessarily to steal market share," said VP-Marketing Amy Curtis McIntyre. "We don't care if they match us as long as we're filling 50% or more of our aircraft."

JetBlue also has the advantage of new planes, which allow it to save money on maintenance.

The airline's business model appears to be working -- so well that an initial public stock offering could come as early as next year. JetBlue said August was its first profitable month.

"We've set up a structure where the costs are as low as we had hoped," Ms. McIntyre said, "and the demand is there."

OTHER HURDLES

But besides competition from established carriers, JetBlue has other hurdles. The airline flies out of New York's JFK Airport, further from Manhattan and viewed mostly as an international airport. It also flies to less central locations in markets such as Los Angeles (Ontario, Calif.) and San Francisco (Oakland). And it does not offer as many daily flights to top business destinations as larger competitors.

Even the frequent-flier program has some disadvantages since the airline may not serve enough desirable routes to make a free flight a huge enticement for a business traveler.

"If they're competing on frequent-flier miles, JetBlue can't compete," said Goldman Sachs analyst Glenn Engel. "If they're competing on cost and service, the answer is yes."

But when the issue is leisure travelers, JetBlue may score an advantage by having its base as New York, a city that tends to inspire as many getaways as visits.

"New York is a very different market from a Chicago, for example," said Tad Hutcheson, director of marketing for low-cost AirTran Airways and a former Kiwi executive. "Chicago people tend to plan their escapes, if you will. New York people seem to get some sort of concrete fever, where they just have to get out of the city."

SUBWAY SERIES SPOTS

JetBlue may also gain a tailwind from its first TV campaign, a $1 million-plus effort launched in early October from Arnold Worldwide, Boston. That will no doubt be helped this week by the fact the ads will run during the local broadcast of the all-New York World Series. The airline bought the time before the two New York teams qualified, meaning it will get a lucky break with the expected high ratings in New York.

"We all sort of hoped at least one of them would make it, but we didn't know," Ms. McIntyre said. "We could be a couple of jerks sitting here with Mariners-Cardinals."

Contributing: Hillary Chura

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