In order to better compete with ultra low-cost carriers in the US market, JetBlue Airways plans to implement a new fare strategy.

On February 16, 2021, JetBlue (JBLU) announced plans to lower the prices of its basic economy fares. However, there is a catch in return for the cheaper tickets. Beginning July 20, 2021, when buying JetBlue’s (JBLU) “Blue Basic” tickets, the carry-on bags will no longer be allowed. Passengers will only be allowed to bring a small bag that fits underneath the seat while other bags will have to be checked for a fee.

“We're really excited to be offering this first-of its-kind in the United States carry-on bag guarantee,'” said Dave Clark, JetBlue (JBLU)'s vice president of sales and revenue management. “We think that makes our (standard economy) Blue Fare really strong.'”

One of the reasons for the new fare strategy is ensuring that passengers will have free space for their carry-on bags in the overhead bins. The guarantee of room for one carry-on in overhead bins applies to passengers buying any ticket but the basic economy ticket for flights within the US. If the airline runs out of space and a passenger's bag has to be checked at the gate, the airline said it will issue a $25 travel credit for one year.

“As customers return, we want to hold on to a little of this zen during the boarding process and make overhead bin space an expectation, not a gamble,” read JetBlue’s (JBLU) memo to employees.

JetBlue (JBLU)'s new strategy aligns with other US carriers, such as United Airlines, Spirit, Frontier, and Allegiant (ALGT) which do not include a carry-on bag feature on their basic fares. 

“We recognize that we’re competing in a very fragmented marketplace,” JetBlue President Joanna Geraghty told Reuters. “When you look at certain customers who purchase almost entirely on price, we want to make sure that we are squarely in their decision set.”

The New York-based airline earned $2.9 billion of revenue in 2020, compared to the $8.09 billion it earned in 2019. In 2020, JetBlue (JBLU) losses mounted to $1.4 billion.

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While JetBlue posted a massive net loss for the full year of 2020, the airline provided some positive news as well.