JetBlue introduces checked-baggage fees

A JetBlue plane takes off from Seattle-Tacoma International Airport in Seattle in this file photo. The company on Tuesday began charging passengers for checked luggage.
A JetBlue plane takes off from Seattle-Tacoma International Airport in Seattle in this file photo. The company on Tuesday began charging passengers for checked luggage.

JetBlue Airways Corp., in the first major makeover of its fare system, has ended a free checked-bag perk but is offering passengers more ticket choices.

The move, introduced Tuesday as part of JetBlue's three-tiered "Fare Options," leaves Southwest Airlines Co. as the only major U.S. carrier not charging for an initial piece of checked luggage. Passengers have had to get used to paying for amenities including food and extra legroom as airlines force them to pick between the lowest price or other conveniences.

"JetBlue is very mindful of the perception of this being a good value for the money," said Savanthi Syth, an analyst with Raymond James Financial Inc. "My guess is there isn't going to be a big consumer backlash."

The bag charge is $20 if paid during booking and $25 at the airport. If half of JetBlue passengers pay the fee, it may add 50 cents a share to annual earnings, according to Helane Becker, a Cowen & Co. analyst.

JetBlue is ending the complimentary luggage policy after investors pressured it to improve returns. The company expects the new system to provide at least $200 million in annual operating income by 2017.

The new scale offers fare levels dubbed "Blue," "Blue Plus" and "Blue Flex." Frugal travelers who select Blue, the lowest price, must pay to check a bag, while Blue Plus provides one checked bag at no cost and Blue Flex allows for two bags. Fees for changing or canceling a reservation differ by category.

While pricing will vary, Blue Plus fares will be about $15 higher than Blue, and Blue Flex about $85 higher than Blue Plus, the airline said.

"We're only doing this after an immense amount of research," Marty St. George, executive vice president of commercial and planning, said in an interview. "We are not taking this lightly. I think once customers experience it, we'll be in great shape."

The new pricing system doesn't affect passengers who already have booked tickets. The airline also offers a Mint premium product available on a limited number of cross-country routes.

JetBlue also plans to increase revenue by packing planes fuller. Starting later this year, as many as 130 of its Airbus Group SE A320 jets will be retrofitted with so-called slimline seats, letting the airline accommodate as many as 15 more people on planes that now carry 150.

Online travel agencies such as Orbitz, Priceline and Expedia will for the foreseeable future only sell the cheapest fares, those that don't include a checked bag. Passengers will still have to pay at the airport for their checked bags. About 75 percent of passengers book directly with JetBlue.

Some fees are being cut. JetBlue used to charge $75 to $150 to make changes to a reservation, based on the price of a ticket. That fee is dropping to $70 to $135 for the cheapest tickets and $60 to $120 for the Blue Plus fares.

Information for this article was contributed by Scott Mayerowitz of The Associated Press.

Business on 07/01/2015

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