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JetBlue investor day sets the scene for young airline's third decade as shares struggle

Key Points
  • The company's stock is down some 13 percent so far this year, lagging the S&P 500 and a key industry index.
  • JetBlue's first flight first took off in February 2000.
  • The carrier recently increased checked baggage and cancellation fees to combat higher costs.
A Jet Blue aircraft takes off from Long Beach Airport in Long Beach, CA.
Tim Rue | Bloomberg | Getty Images

JetBlue Airways will have another chance to win over skeptical investors this week as it lays out its plans in an investor day meeting Tuesday that will set the stage for the young airline's third decade as it adopts some of the same strategies as more established competitors.

JetBlue, the sixth largest U.S. airline by passengers, is scrambling to keep a lid on costs, including a profit-denting rise in fuel prices over the past year that's impacted the broader industry. The New York-based carrier's stock has suffered more than most. The shares are down more than 13 percent so far this year while industry benchmark, the NYSE Arca Airline index, has fallen more than 8 percent. The S&P 500 is up 9 percent.

Here are some things executives will likely discuss:

Costs and labor

The airline, which is expanding service more than some of its larger traditional airline rivals, will have to convince investors it can still expand, control costs and stand out from the pack.

The carrier's executives have said they plan to reduce annual operational costs by $300 million by 2020 and over the summer laid off some workers at its headquarters in New York and offered buyouts to others.

JetBlue's pilots approved their and the airline's first union contract over the summer and JetBlue executives could detail how they expect that to impact costs. The airline's flight attendants voted to unionize in August but "an agreement won't be forthcoming before 2020 at the earliest, and expect management is unlikely to discuss it in the short term," said Cowen and Co. in a note. "Investors may question management about it, but given the time between when the union was authorized and investor day, we doubt there is anything meaningful to report."

Fees and other revenue tricks of the trade

JetBlue made waves after it first took off as a low-cost upstart in February 2000. Its one-class Airbus cabins featured leather seats and seatback monitors offering two-dozen television channels, perks to steal travelers away from rivals.

Lately, however, the carrier is taking some cues from older and larger rivals to increase revenue. It's chasing high-paying travelers with the expansion of its successful Mint premium class, which features lie-flat beds, suites with doors and amenity kits.

"I think what they've realized is they can attract high-value leisure or entry-level elite, providing a product akin to first class," said Savanthi Syth airline analyst at Raymond James.

At the same time, JetBlue is gearing up to offer low, no-frills fares next year that could charge travelers for advanced seat assignments and put them in the last boarding group. JetBlue, which didn't charge a fee to check a first bag until 2015, in August raised its fee to check a first bag by $5 to $30, a move that United Airlines, Delta Air Lines and American Airlines followed. It also increased ticket-change fees.

Modern cabins, less legroom

Executives are likely to provide an update on revamped cabins of its Airbus A320 fleet, which feature both larger overhead bins, bigger seatback touch screens but 32 inches of legroom, two inches less than what it offers in its older cabins as it puts more seats on board. The airline has said its cabin remodel will generate $100 million in financial benefit.

Where to, A220s?

JetBlue leadership could provide more detail about how it plans to deploy its new Airbus A220-300 planes. JetBlue announced in July that it had ordered at least 60 of the jets, known for their large windows, aisles and overhead bins.

How about those Europe flights?

JetBlue has been mulling flights across the Atlantic for more than two years, and according to Chief Operating Officer Joanna Geraghty, it is still on the table. She said the U.S.-Europe market is ripe for disruption with a less-expensive business class than traditional rivals. JetBlue in July said it converted an order for 25 Airbus A320s for larger A321s. A long-range type of the A321 could fit the bill for Europe flights.