JetBlue CEO Defends Bag Fee Hike as Cost of Doing Business

Higher bag fees might just be the price passengers need to pay for free Wi-Fi and generous legroom.

That was the message Tuesday night from JetBlue CEO Robin Hayes, who defended the airline’s U.S. industry-leading move to raise checked bag fees earlier this year. He argued that the carrier needed to improve its margins while focusing on the areas that it considers a priority: service, legroom, and in-flight entertainment.

“We’re a very capital-intensive industry, margins are tight,” Hayes said as part of the  Cornell Tech @ Bloomberg speaker series in New York City. “And so we want to deliver a great experience for our customers, but we have to be focused where we deliver that.”

He added: “We just simply can’t afford to offer the best in every area.”

Hayes and JetBlue Technology Ventures President Bonny Simi spoke at Bloomberg headquarters in a discussion that touched on disruption, startups, fuel prices, the headache of getting to and from John F. Kennedy International Airport, and, yes, fees.

“Are there more innovative ways to increase revenue other than simply to jack up the price every couple months it seems like?” asked moderator Scarlet Fu, a Bloomberg Television anchor.

“We look at a thing like bag fees and say, ‘Look, we need to be competitive in that area, but if we were to say we’re not going to charge for any bags, we simply couldn’t offer some of the other things,” Hayes said. “I’m happy with what we have.”

One thing the airline’s technology investment arm isn’t happy with yet: blockchain. Simi, who is also a pilot for JetBlue, said she is a huge believer in the potential of blockchain but hasn’t found the right use yet.

“We’ve met lots of startups but haven’t found the right one that is building a true application use of blockchain that will be viable and useful for us, whether it’s customer-facing or behind the scenes,” she said. “And so 2019, [we are] bound and determined to find a blockchain startup that we can actually work with.”

Hayes and Simi both said they expect to see the biggest disruption in the airline industry come to regional aviation, in the form of electric aircraft and private charter jets. Both are, not surprisingly, areas the venture fund has invested in.

“There’s a huge history of startup airlines coming into the industry and then not lasting 10 years … I wouldn’t necessarily call that innovation, per se,” Simi said. “There’s some new startups coming out — former JetBlue CEO [David Neeleman] is planning to launch a company, so we’re obviously watching that as well. But I don’t think that is where we’re seeing trends, if you will.”