November 20, 2014 / 1:02 AM / 3 years ago

JetBlue to charge for checked bags in new airfare class

A JetBlue Airways logo is seen at the check-in counter at LaGuardia Airport in New York April 5, 2012. REUTERS/Lucas Jackson

(Reuters) - JetBlue Airways Corp announced new checked baggage fees on Wednesday and plans to stuff more seats into its aircraft, prompting praise from Wall Street, but a chorus of criticism from consumers.

Analysts said the change was long overdue, as carriers across the industry generate an increasing amount of revenue from fees on top of the ticket price. They had widely expected changes at JetBlue once it was announced two months ago that president Robin Hayes would take over as chief executive in February.

Customers reacted negatively on Facebook and Twitter, with some commenting they no longer would fly on the airline. JetBlue said it is shrinking its average seat pitch, or the space between seats in subsequent aisles, to about 33 inches from more than 34 inches.

“The march of the lemmings continues,” said airline industry consultant George Hamlin, criticizing JetBlue for following other airlines that have adopted new ways to boost revenue.

At a presentation to investors on Wednesday, JetBlue discussed its three new fare categories, including a discount class that does not come with a free checked bag. The airline estimates this will earn it about $65 million in 2015 and about $200 million total within several years.

“This was something that the carrier needed to do in order to be more competitive and to close the financial gap with its peers,” S&P Capital IQ analyst Jim Corridore said. “It (had placed) them at a serious competitive disadvantage in an industry where profit margins are very, very low.”

JetBlue posted a net income of $79 million last quarter, compared with $357 million at Delta Air Lines Inc and $924 million at United Airlines, which were buoyed in small part by baggage fees.

JPMorgan analyst Jamie Baker welcomed the changes in a note on Wednesday, but said the airline forecast lower earnings from the initiatives than he had expected.

The company also said it will add 15 seats to each of its Airbus A320 aircraft over about two years, beginning in mid-2016. The seats will also save JetBlue on fuel costs by making the planes more than 1,000 pounds lighter.

“We think it gives customers a much better experience than they have right now ... while still offering the most leg room of any airline in North America,” Senior Vice President of Commercial Marty St. George said during the presentation.

JetBlue said revamping its cabin will earn the company about $100 million.

Among other initiatives, JetBlue said it will defer the first deliveries of 18 Airbus aircraft to 2022 from 2016. This will reduce costs by $900 million through 2017 and help the carrier manage capacity.

JetBlue’s stock rose 4.1 percent to close at $13.25.

Reporting By Jeffrey Dastin; Editing by Meredith Mazzilli and Andre Grenon

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