Thread by @David_Slotnick

It’s day 4 of the JetBlue-Spirit trial. I’ll be reporting from court later in the morning — I have a meeting to stop by beforehand.

Hello from court. I walked in during the defense questioning of this witness — I missed the introduction, but I think it's Matt Klein, Spirit Airlines EVP and CCO.

We're talking about revenue management and fares right now.

I ran into JetBlue CEO Robin Hayes in the hallway. He tells me he's next in line to testify.

How price-conscious air travel market has changed:
Lot more capacity flying to leisure destinations today then there used to be. Leisure customers going to leisure destinations have more options. Less corporate travel + move towards bigger aircraft means more capacity open.

Now establishing that Spirit has entered some markets where they weren't able to stimulate demand, and have entered markets, stimulated demand, but not turned a profit.

Spirit hasn't run an analysis to determine the "Spirit effect" since 2019, witness says, because there hasn't been a good "base period" to compare to since the pandemic.

Legacy airlines shifting capacity to leisure destinations (Florida, LAS, PHX and Hawaii used as examples) between 2019 and 2021 was the equivalent of adding another Spirit and Frontier to the market, according to , according to a 2021 presentation Spirit made.

We're now discussing seat brands and cabin retrofits.

Regular seats; not big front.

They're establishing that Klein has, indeed, sat in several demo airplane seats in the WeWork the airline has set up nearby here...not sure where we're going with this.

We're talking about the Acro Series 6 seat, for the #PaxEx #AvGeeks following along

28 inches of pitch, 17-18 inches of width (18 for the middle seats, 17 for aisle and window).

Moving on to talk about JetBlue. I'm guessing the seat thing has to do with something the plaintiffs asked, which I missed.

And the defense is finished, only asked a clarifying question about Spirit's overlap with JetBlue. A brief redirect is coming from DOJ.

...DOJ is asking whether bulkead seats are more narrow to accommodate tray tables in the arms. Technically row 3, behind the Big Front Seats.

Judge: "And you charge for those big front seats, yes?"

Klein: "Oh yes. As much as we can." (the rest of the court laughs)

An old Spirit presentation argues that Seat Pitch, which measures seatback-to-seatback, doesn't consider curved seatbacks that allow up to two extra inches of usable legroom.

"There are people who choose not to pay for larger or more expensive seats than Spirit's, right," DOJ asks. Establishing that some people choose to pay lowest fare, meaning just standard seat.

Spirit's current load factors are as low as the 60s on some flights, Klein testifies, noting that it's currently an off-peak period ahead of the holidays.

Other airlines' basic economy products have been challenging Spirit, Klein testifies. Basic economy predates the pandemic, but Spirit was profitable in those years, DOJ clarifies.

JetBlue CEO Robin Hayes is about to testify.

JetBlue is one of the two biggest airlines by passengers carried at BOS (other is Delta) and FLL (other is Spirit).

Questions about FLL overlap between JetBlue and Spirit

Looking at an email Robin sent Joanna Geraghty and Scott Laurence in Nov 2019; Robin said "NK now controls the ball in FLL"

Spirit was earning better margins. Hayes says he was surprised at how well Spirit was doing; challenged his team to do better at FLL.

Hayes said in the email "I think we need to ask ourselves if we have the right cost structure to compete if this is the new normal."

Questioned whether JetBlue could effectively compete against ULCCs.

In every quarter since then (Q4 2019), JetBlue has been recovering from the pandemic and/or in a merger agreement.

JetBlue CEO Hayes confirms that he has, in fact, personally flown on Spirit Airlines.

In 2021 email to Geraghty and others, Hayes shared a flight report on New York to FLL flight. Reported he was impressed. Efficient boarding, aircraft was spotless, nice crew, full flight. Hayes says he often does these reports when he flies a competitor.

Noted limited service "as Spirit fans would know."

Establishing that he enjoyed the Spirit flight (he had the Big Front Seat)

Hayes sounds slightly incredulous as the questioning continues to establish that he did, indeed, fly Spirit and was, indeed, impressed.

DOJ asking if the Big Front Seat is similar to a legacy domestic first class seat, in terms of physical space and legroom. Uncertain. But establishing it has more width than the average JetBlue seat.

Hayes testifies that he's "6 foot 2 and a little bit" and...found the seat comfortable.

DOJ is asking if he had the option to pay for a checked bag. He says no, because he was flying nonrev.

It seems that we're establishing the difference between the two airlines' products. And that some passengers choose to pay more for add ons, others pay less.

Judge tells DOJ to move on. No need to "test his knowledge" since he's the CEO.

Says JetBlue attracts a wide range of passengers. Testifies they have some business travelers, some corporate contracts.

Part of JetBlue's appeal to biz travelers is having multiple frequencies per day. Something evolving post-Covid is that it's less of a thing, with there being fewer day trips.

An email from Geraghty, which Hayes responded to an hour later, noted that one last-minute pax paying a higher fare can make the difference on a flight's financial performance.

More business travelers will improve the revenue mix of the plane

Question on whether JetBlue entered NEA to appeal to business travelers. Defense objects to the question, judge overruled. Hayes confirms.

In a past email, a self-evaluation, notes revenue challenges because legacy airlines lowered fares in response to Spirit.

JetBlue introduced unbundled "Blue Basic" fare in response to legacy airlines' responses to ULCC competitors (so, Blue Basic was because of Basic Economy which was because of ULCCs)

It's virtually impossible to purchase an aircraft directly from Airbus until 2029, Hayes testifies, unless there's a firm order in place. "It would be very challenging."

Hard to get a new lease until 2027, DOJ posits, but Hayes says he does not have personal knowledge of that. "We don't tend to do operating leases."

And that's it for the day and week. Hayes will continue on Monday.