Jet Blue : A Strategic Management Case Study

Prepared by Roll Number 10735 FawadHussain, 2014

Case Study No 18Page : 635Strategic Management by Michael A Hitt

INTRODUCTION

INTRODUCTION• Incorporated in Delaware in August 1998.• David Neeleman 1st founder ,February 1999, under the name

"NewAir.• JetBlue followed other domestic airlines approach of offering

low-cost travel, but sought to distinguish itself by its services, such as in-flight entertainment, TV on every seat and Satellite radio.

• CEO’s vision “To bring humanity back to air travel.“• JetBlue's founders had set out to call the airline "Taxi“ The

idea was dropped later.

INTRODUCTION• The company is headquartered at the Long Island New York.• Its main base is John F. Kennedy International Airport• The airline mainly serves destinations in the United States,

along with flights to the Caribbean, The Bahamas, Bermuda, Barbados , Colombia, Costa Rica, the Dominican Republic, Jamaica, Mexico and Puerto Rico.

Slogan :“To bring humanity back to air travel and to make fl ying more

enjoyable”

VISION

At JetBlue our goal is to provide the best, most affordable flight experience

of any air carrier while providing superior service.

Mission Statement

Jet Blue’s mission is to be the leading low-fare, low-cost passenger airline offering high quality customer service to underserved markets and customer who are looking for the best value in their flight. We have the newest most advanced planes that are reliable, fuel efficient, utilizes paperless cockpit technology, live in-flight satellite TV and security cameras. Our philosophy is to give customers the best price value for their ticket, offering things our competitors don’t offer. At JetBlue we feel that hiring educated employees that are highly motivated and well trained will provide a better experience to the customers. We feel that our high-value, high quality service philosophy will lead the way to our becoming the number one in the industry.

CORE Values

Safety First & always in

the business

Relations with Customer &

Crew

Exhibit a Sense of Humor

Achievement Orientation &

Striving

Organizational Commitment,

& honesty

Core ValuesSAFETY: Airline

commits to "Safety First“; Set and

Maintain Consistently High Standards; Ensure

the Security of Crewmembers and Customers; Never

Compromise Safety

CARING: Maintain Respectful

Relationships with Crewmembers and

Customers; Strive to be a Role model; Healthy Balance

Between Work and Family; Responsibility

for Personal and Company Growth

INTEGRITY: Demonstrate Honesty,

Trust and Mutual Respect; Never Compromise the

Values for Short-Term Results; Possess and Demonstrate Broad

Business Knowledge; Commit to Self Improvement.

FUN: Exhibit a Sense of Humor ; Add

Personality to the Customer xperience;

Demonstrate Enthusiasm for the

Job; Seek to Convert a Negative Situation

into a Positive Create a Friendly

Environment.PASSION: Strive to Meet the Needs of Crewmembers and

Customers; Team Spirit; Deliver Superior Performance;; Look for Innovative Solutions to Business

Issues

Innovative Strategies

•No meals during flights• Providing personal television• Leather seats instead of cloth seats•Use of new aircrafts• Use of more fuel-efficient and less maintenance cost Airbus• Initially less routes•Point-to-point flight

Innovative Strategies•Use of secondary airports which did not handle too much traffic • Reduction in the Turnaround time by efficient ground staff• Use of electronic ticketing• Paperless cockpit and use of e-manuals by crew• Customer-oriented approach• Picking the right people• Created fun

Growth Era 2000-04

Rapid growth 18 consecutive quarters of profit Expansion continued Airlines lost millions in revenue

after 9 / 11 but Jetblue made profit and increased network by adding 6 more destinations

More spending on providing quality services

Won 2002 Air Transport World Market Development Award

Also won best airline award in 2002

In April 2002 JetBlue announced its IPO of 5.86 million shares of CS at price US$27 per shareAnnual operating revenues increased in 2003 and 2004 Annual profit of US$ 55, 103 & 46 million in 2002 -2004 respectively

Slow GrowthOperating revenue continued to increase in 2005 and 2006 but airline suffered lossesAirline suffered loss of US$ 42 million in CS tooLoss suffered due to• Rapid increase in

fuel price• Political situation

and war • Heavy Interest

expense & repayment of debt

By end 2006 JetBlue slowed down growth by delaying deliveries of aircrafts, eliminating low profit routes and cutoff destinations from 75 to 47

Cutting of destinations was done to preserve cash & remain stableJetblue came under strong criticism due to delay of flights in February 2007JetBlue Strategy in Slow Growth• Airline created

Jetblue Customer Bill of Rights

• Cross training of crew members

• Waived change fee• Waived fare

differences• Improved

reservation system• Streamlined costs

Competitive AdvantageJetBlue has a competitive advantage over its competitors. It entered into the market offering prices that were low. In addition, it offered luxuries such as leather seats and satellite televisions on the back of all the seats on the plane. These luxuries were not offered by competitors at the low prices that JetBlue was offering, not even Southwest, and offered value for consumers that were rare. While these services can be imitated, it would be very costly to do so. Airlines would not only have to purchase planes that were comparable to JetBlue’s and with the low airfare cost JetBlue was offering, competitors were already having difficulty competing without additional costs. JetBlue, in order to continue growth, decided to enter into the new market of short-haul flights that it did not currently offer. To do this it purchased the E190 which operated at a consumption 34 % less than the typical jet. This put competitors at an even greater disadvantage.

Other Competitors

Spirit Airlines Virgin America America West

Southwest Airlines Frontier Airlines Sun Country Airline

Delta

United Airlines

SWOT Analysis Strength

Low Operating cost

Strong brand

Efficient employees

Two types of aircrafts in the fleet

Consumer satisfaction

Effective use of technology

Advertisement

• Weakness Relative new

company

Two types of aircrafts

Concentration on middle class

Shifting customer’s need

Fleet now aging

High maintenance costs

SWOT Analysis

• Opportunity Industry

expansion

Route & fleet expansion

Creation of Airlines Alliances

Technological

Deregulation of international air travel

• Threat

Security issues

Increase in fuel price

Strong Competition

Global crisis

Incidents like 9/11

Pay / Benefit packages increasing

Market Positioning

Price

Low

High

QualityLow

Southwest

American Airlines

United Airlines

Delta

Frontier

AirTran

JetBlue

Position Map

NEW VISION – 2007 Onwards

“HIGH end customer services at LOW end prices”

Additional Strategies Past 2007Work on improving image of airline as superior customer service providerOffered pre flight and during flight free snacks and optional lunch / dinner on paymentCustomers benefited from simple to use reservation systemBooking agents could work from homePre assigned seating and ticketless travel was made possible

Develop a new terminal at JFK airport – to improve its on-time departure and arrival averages at airports. US$80 million invested Sold a stake of its shares to Germen carrier Lufthansa – to increase revenue & allow the customers to book code share flights Customer advisory council was established

Comfort in Flight Additional 2 inches of leg room 100% non-fat selection of

complementary and unlimited snacks

All passengers provided with comfort kit for a healthy sleep

Crew wakes up the customer from sleep

Single class travel for all passengers

Double points for true blue members

Gains By JetBlue99.6% operations completion rateFirst among American Carriers for least number of lost or mishandled baggage. JetBlue's maximum liability for lost or damaged baggage is $2,800 per passengerReservations from home using VOIP technology

Increased efficiency of ground staff to decrease turn around time for aircraftSingle class travel helped to reduce operation and maintenance costs Changed atmosphere of airline to build reputation as a great place to work by giving incentives to staff and confidence building measures

Competitive AdvantagesJetBlue has one of the finest features in the airline industry. It also stands out from its competitor by providing other facilities as follows:

Double points for true blue members. Free same-day standby travel. If there’s an empty seat on an

earlier flight, it’s yours. Cancellation credits are transferable and valid for one year. Installed bullet-proof cockpit doors across its fleet. Installed security cameras in passenger cabin for customer

and crew safety. Promotions such as sale on some of the selected destinations. Cell booking application launched & hourly update on our

flight schedule. It gives travel managers comprehensive online reporting tools

to track employee spending, itineraries and flight credits. JetBlue offers 5 choices of meal boxes for a price of $6 a box  Allows animals in flight if they are trained. JetBlue's maximum liability for lost or damaged baggage is

$2,800 per passenger.

New Slogan

JetBlue Valued Services

New Challenges AheadTwo types of aircrafts having different characteristicsMajor maintenance issuesUnique training & integration required by the crew

Increased maintenance expensesA,C &D type maintenance requiredEngine Overhaul costs US$1.5 millionExpansion in the fleet = More costsPayroll costs will increase with

agingStaff growth will increase payroll expensesSeniority attained by staff and crew

QUESTIONS ?