Case Study No 18
Page : 635
Strategic Management by Michael A Hitt
Prepared by Roll Number 10735 FawadHussain, 2014
INTRODUCTIO
N
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.
VISION
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 Relations with Exhibit a Achievement Organizational
& always in Customer & Sense of Orientation & Commitment,
the business Crew Humor Striving & honesty
FUN: Exhibit a Sense
SAFETY: Airline of Humor ; Add
commits to "Safety Personality to the
First“; Set and
Maintain
Core Values Customer xperience;
Demonstrate
Consistently High Enthusiasm for the
Standards; Ensure Job; Seek to Convert a
the Security of Negative Situation
Crewmembers and into a Positive Create
Customers; Never a Friendly
Compromise Safety PASSION: Strive to Meet the Environment.
Needs of Crewmembers and
Customers; Team Spirit; Deliver
Superior Performance;; Look for
CARING: Maintain Innovative Solutions to Business INTEGRITY:
Respectful Issues Demonstrate Honesty,
Relationships with Trust and Mutual
Crewmembers and Respect; Never
Customers; Strive to Compromise the
be a Role model; Values for Short-Term
Healthy Balance Results; Possess and
Between Work and Demonstrate Broad
Family; Responsibility Business Knowledge;
for Personal and Commit to Self
Company Growth Improvement.
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 In April 2002 JetBlue announced its
after 9 / 11 but Jetblue made profit IPO of 5.86 million shares of CS at price
and increased network by adding 6 US$27 per share
more destinations Annual operating revenues increased
More spending on providing in 2003 and 2004
quality services Annual profit of US$ 55, 103 & 46
Won 2002 Air Transport World million in 2002 -2004 respectively
Market Development Award
Also won best airline award in
2002
Slow Growth
Operating revenue continued
Cutting of destinations was
to increase in 2005 and 2006
done to preserve cash &
but airline suffered losses
remain stable
Airline suffered loss of US$
Jetblue came under strong
42 million in CS too
criticism due to delay of
Loss suffered due to
flights in February 2007
•Rapid increase in fuel
JetBlue Strategy in Slow
price
Growth
•Political situation and
•Airline created Jetblue
war
Customer Bill of Rights
•Heavy Interest expense
•Cross training of crew
& repayment of debt
members
By end 2006 JetBlue slowed
•Waived change fee
down growth by delaying
•Waived fare differences
deliveries of
•Improved reservation
aircrafts, eliminating low
system
profit routes and cutoff
•Streamlined costs
destinations from 75 to 47
Competitive Advantage
JetBlue 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 Delta
United Airlines Southwest Airlines Frontier Airlines Sun Country Airline
SWOT Analysis
Strength
• Weakness
Low Operating cost
Relative new company
Strong brand
Two types of aircrafts
Efficient employees
Concentration on middle
Two types of aircrafts in the class
fleet
Shifting customer’s need
Consumer satisfaction
Fleet now aging
Effective use of technology
High maintenance costs
Advertisement
SWOT Analysis
• Threat
• Opportunity
Security issues
Industry expansion
Increase in fuel price
Route & fleet expansion
Strong Competition
Creation of Airlines
Alliances Global crisis
Technological Incidents like 9/11
Deregulation of Pay / Benefit packages
international air travel increasing
Market Positioning
Price
High
United Airlines
American Airlines
Low Quality
Delta
JetBlue
Southwest
AirTran
Frontier
Low
Position Map
NEW VISION – 2007 Onwards
“HIGH end customer services at LOW end
prices”
Additional Strategies Past 2007
Work on improving image of airline
as superior customer service provider
Develop a new terminalComfortatin Flight
JFK
Offered pre flight and during flight
airport – to improve itsAdditional
on-time 2 inches of leg room
free snacks and optional lunch /
departure and arrival averages
100% atnon-fat selection of
dinner on payment
airports. US$80 million invested
complementary and unlimited
Customers benefited from simple to
Sold a stake of its sharessnacks to
use reservation system
Germen carrier Lufthansa All –passengers
to provided with
Booking agents could work from
increase revenue & allow comfortthe
kit for a healthy sleep
home
customers to book code share flights
Crew wakes up the customer
Pre assigned seating and ticketless
Customer advisory council was
from sleep
travel was made possible
established Single class travel for all
passengers
Double points for true blue
members
Gains By JetBlue
99.6% operations completion rate
First among American Carriers for least number of
lost or mishandled baggage. JetBlue's maximum
liability for lost or damaged baggage is $2,800 per
passenger
Reservations from home using VOIP technology
Increased efficiency of ground staff to decrease
turn around time for aircraft
Single 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 Advantages
JetBlue 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 Ahead
Two types of aircrafts having
different characteristics
Major maintenance issues
Unique training & integration
required by the crew
Increased maintenance expenses
A,C &D type maintenance required
Engine Overhaul costs US$1.5
million
Expansion in the fleet Payroll costs will increase with
= More costs
aging
Staff growth will increase payroll
expenses
Seniority attained by staff and
crew
QUESTIONS ?
