Why Is JetBlue Offering $52 Fares?

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JetBlue Airways Corp. (NASDAQ: JBLU) has fares from New York’s JFK to Boston for as little as $52 one way. The deal is extraordinary, because ticket prices for shuttles between the two cities can be in the hundreds of dollars. JetBlue has some method to what appears to be madness.

One cost that can be added to the fare, in most cases, is for extras, particularly luggage. For some fares, travelers need to add $30 for the first piece of luggage and up to $100 for three. Airlines make huge sums on increased fees, which they did not do over a decade ago, before they discovered what a huge bonanza the fees can be.

Second, the low fare comes with potentially high cancellation fees. For fares under $100, changes in a flight cost $70 plus the difference for the new fare.

The low fare also draws thrifty flyers from the shuttles that run out of New York City’s La Guardia Airport. One of JetBlue’s large hubs is JFK, which is further from much of the city than La Guardia.

As always, low fares are a prime way to sell seats. Presumably, the JetBlue flights between JFK and Boston are not full most days. One of the most important rules of the airline industry is that an unsold seat on single flight at a single hour on a single day is the loss of a sale that will never be made in the future.