JetBlue Airways recently created a new Travel Products subsidiary to grow its vacation packages business, and it seems its there are natural partnership opportunities with its JetBlue Technology Ventures arm.
JetBlue has created a new subsidiary – JetBlue Travel Products – to help drive EPS growth. Its travel products arm includes its JetBlue Vacations brand, and other parnters including rental car companies, tour company viator.com and ride sharing firm Lyft.
JetBlue Travel Products joins the company’s other airline subsidiary JetBlue Technology Ventures, which specialises in investing in early stage technology startups that largely focus on the travel and hospitality sectors. There is little doubt some of the investments from JetBlue Technology Ventures could filter into JetBlue Travel Products. For example, one company in the Technology Ventures portfolio, Redeam, which aims to digitise the customer experience for tours and activities businesses.
The airline has estimated that JetBlue Travel Products along with JetBlue Technology Venture could generate USD100 million in incremental operating income in 2020. JetBlue ha also calculated that Travel Products along with changes to its loyalty programme and enhanced customer segmentation should add USD35 cents to USD55 cents to its 2020 EPS. Organic growth, network maturity and network changes will drive an additional USD30 cents to USD40 cents for a total EPS gains of USD65 cents to USD90 cents in 2020.
One of the key metrics for JetBlue in its new Travel Products business is growing the “attach rate”, which is the percentage of JetBlue customers purchasing travel products on direct JetBlue channels. Recently, JetBlue executives stated its average attach rate was roughly 1.5%, “and certainly the focus of the team [at Travel Products] in the first year or two its to increase those attach rates”, company CEO Robin Hayes recently explained. He added the attach rates in certain Caribbean markets is higher than the company’s average.
“It’s very low hanging fruit,” Mr Hayes concluded. “We have the customers, they’re buying this product today. We just have to do a better job of converting them over to the JetBlue product other than the flight.”