JetBlue rolls out cheap fares that come with fewer perks

Key Points
  • JetBlue's "Blue Basic" fares don't come with a seat assignment until 24 hours before the flight.
  • Blue Basic travelers will also board last.
  • Airline executives say they created these basic economy fares so passengers pay extra to avoid them.
JetBlue's new Airbus A321neo at New York's Kennedy Airport.
Leslie Josephs | CNBC

JetBlue Airways on Tuesday joined other airlines in offering a basic economy fare: the cheapest tickets that lack perks like advance seat selection.

The new fare, called Blue Basic, follows similar efforts by major airlines to offer fewer perks that used to be free in exchange for the lowest fares on a flight and is defensive play against fast-growing, low-cost airlines like Spirit and Frontier.

Passengers who purchase the New York-based airline's basic economy fares will only be able to pick a seat 24 hours before the flight and also will board the plane last. Changes are not permitted.

"This fare option is designed for a growing segment of travelers who value low fares above all," president and COO Joanna Geraghty said in a note to employees on Tuesday.

When the airline announced its plan to offer the stripped-down fares last year, Geraghty vowed that customers opting for these fares "will agree to some limits." She also vowed not to make passengers feel like "second-class citizens" and has noted that JetBlue offers more economy-cash legroom than low-cost airlines and even some full-service airlines.

The basic economy passengers will still have access to free Wi-Fi and be able to bring a full-size carry-on bag, depending on how much bin space is left by the time they board. United prohibits its basic economy travelers from bringing full-size carry-on luggage that fits in over head bins, a restriction American dropped last year for its bare-bone fares.

The changes are part of a revamped line of fares at JetBlue, the low-cost carrier's first since 2015. The New York-based airline is also replacing its Blue Flex fares with a fare called Blue Extra, which bundles a faster trip to security lanes, earlier boarding and more ticket flexibility.

Geraghty said on an earnings call last month that the airline expects the new fares to bring in $150 million in revenue next year.

"We're pretty conservative in the assumptions around the upsell and take rate," she said.

Executives at other carriers have said their basic economy fares work because passengers are willing to pay a higher fare to avoid them.

JetBlue shares were down 1.7% in morning trading.

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