Jet Blue Airways 1

Running head: CRAFTING AND EXECUTING STRATEGY – Jet Blue Airways

Jet Blue Airways

LaKessica B. Carter

Dr. Akpan

BUS599 - Strategic Management

April 17, 2011

With the constant changes with the airline industries and the chaotic state each have

represented for a number of years constant strategic planning and trends are the focus today. A

trend can shape a company or cause it to head back to the drawing board. An airline, such as Jet

Blue Airways has to change strategically and adapt to the economic state and conditions.

JetBlue Airways specializes in cheap point-to-point flights with high levels of customer service.

Due to the dramatic changes in industry structure have occurred against the backdrop of strongly

growing airline activity. This part of a trend involves veering into a new direction. Airline

industries are no stranger to trends. The paper will focus will be on JetBlue Airlines and the

trends and directions in which it is headed.

Discuss the trends in the U.S. airline industry and how these trends might impact a

company’s strategy. In 2010, things were looking better for the airline industry but things

changed severely with the recessions in 2008-2009. In order to cope with the downfall several

airlines have been forced to respond by cutting back on flights, rescheduling existing routes and

searching for new revenue streams such as charging for aisle seats and baggage. According to

the text, JetBlue began several new strategies in order to adjust by reevaluating the ways it was

using its assets, reduction of capacity and cutting costs, raising fares and growing in select

markets, offering improved services to corporations and business travelers, strategic partnerships

and increase ancillary revenues in order to remain competitive. JetBlue new strategy involved

implementing new ways by reevaluating two of their airline’s key assets, JFK terminal and

LiveTV subsidiary in order to raise cash. Other reductions involved reducing capacity and

cutting cost by agreeing to sell nine used Airbus A320s resulting in profitable gains of $100

million. JetBlue also reduced its aircraft utilization rates from 13 hours to 12.5 and suspended
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services in several cities. It also cancelled planned additional services as additional ways of

reducing costs. These are some of strategies thought of by most US Airlines in the strategic

management and planning phase.

Discuss JetBlue’s strategic intent. Jet Blue strategic intent was to bring humanity back

to airline travel and desired for people to save money on their travel. It had the intention of

ensuring that customers experience a phenomenal quality of service and feel at home. “The goal

was to be a low discount airline carrier that offered comfort and service to its customers. For

example, the company’s philosophy was to delay flights rather than to cancel them. In addition,

JetBlue was the first airline to publish a Passenger’s Bill of Rights; a document disclosed its

policies to passengers. JetBlue was the first to offer electronic ticketing which was convenient

for customers. The company also offered extras like in-seat television and PayPal ticket

payments.”

Discuss JetBlue’s financial objectives and whether or not the company has been

successful in achieving this objective. According to an article on Wikinvest website, JetBlue

has “provided service to 63 destinations in 21 states, Puerto Rico, and eleven countries in the

Caribbean and Latin America. JetBlue is the 6th largest airline in the United States by revenue

passenger miles, operating 650 flights daily.” This has allowed its ability to maintain the

industry-low CASM of 9.92 cents through aircraft efficiency and distribution costs. JetBlue

remains as the youngest aircraft fleet in the industry “with an average age of 5.4 years in 2011,”

which has allowed them ability to reduce maintenance expenses, and it “operates its aircraft for

11.6 hours a day, which is the highest in the industry.” JetBlue has been able to capture the

majority of its sales through its website bookings reducing operating costs. JetBlue flights

originate from five main airports, including Boston, Fort Lauderdale, Long Beach (CA), New
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York City, and Washington D.C, with New York City's JFK airport as its primary operating

airport. As of 2010, JetBlue represented the largest domestic airline operating at JFK airport by

passengers enplaned, “commanding 40% of all domestic passenger traffic. JetBlue average fare

in 2010 was $140.69 compared to its close competitor Southwest's average of $130.27.”

Discuss JetBlue’s strategic elements of cost; organizational culture, and human

resource practices and evaluate whether each elements provide the organization with a

competitive advantage. Having a competitive advantage is essential in the operations of any

organization especially with an Airline. It allows the ability to generate greater sales and

retention of customers. JetBlue focus on cost provided them with a stronger competitive

advantage over the other airlines. JFK was the crucial point for them. While other airlines focus

was on other markets; capturing JFK International Airport allowed its ability to become stronger.

This was a strategic element. JetBlue strategic planning on offering low cost fares to fly point-

to-point destinations was another advantage. They offered the better deals to its customers. They

also gained access to business traveler.

JetBlue saved money by choosing the type of aircraft used which had additional seating

and was more fuel efficient than the Boeing 737 used by other airlines. JetBlue offers an

organizational culture of a family setting attracting more customers. Its focus was on upholding

their values and being that family organization.

Discuss JetBlue’s strategies for 2008 and beyond and evaluate whether or not

JetBlue will be successful implementing these strategies. JetBlue adapted new strategies in

order to evaluate the way its assets were being used. The alliance formed with Lufthansa enables

the company to use their terminals at JFK and signed a contract with Continental to provide

LiveTV (Thompson et al., 2010). JetBlue reduced its capacity by selling nine aircrafts and
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reduced costs by delaying the delivery of 21 new aircrafts (Thompson et al., 2010). They reduced

aircraft utilization rates, suspended service in some cities, and cancelled plan service in order to

cut costs. “After choosing Orlando to become a target market, they then raised prices – but to

lower fares than competitors. Furthermore, they provided incentives to corporate travelers,

entered into agreements with Expedia for leisure travelers and Travelocity for business

customers, and with Aer Lingus to expand their reach internationally. To generate revenue,

JetBlue created new fees, including a fee for a second bag and for select seats. Even with these

strategies, the airline’s financial performance shows that they are falling short of expectations

during the first six months of 2008 (Thompson et al., 2010).”

By 2009 JetBlue showed themselves to be very successful with the strategic moves

previously implemented. “The company was one of only a few to report four consecutive

quarters of profitability in this year (JetBlue, 2010). A net income of $58 million was generated

with an operating margin of 8.5% – which was an improvement of more than $140 million

compared to 2008. They continued to have one of the strongest liquidity positions in the U.S.

airline industry relative to our revenues. In addition, JetBlue generated positive free cash flow for

the first time in its history. According to JetBlue’s 2009 annual report, these results demonstrated

the benefits of JetBlue’s disciplined growth strategy, its focus on managing capital expenditures,

rationalizing capacity, maximizing revenue, and controlling costs. Given that the company is

prosperous in challenging times, it is likely that the company’s sound strategies and cash-rich

positions will give the company longevity over the long term.

In conclusion, JetBlue has the potential to be successful in implementing these strategies.

Things will not or did not change overnight; however, the strategic moves proved successful.

JetBlue has become successful and continuously are working on ways to maintain this success.
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The strategies implemented by JetBlue will keep the company ahead of their competitors. With

these strategies it will provide the organization with the ability to survive in this economy. The

airline industry is always changing and JetBlue strategies for 2008 and beyond will prepare the

company for any obstacles the company may face.

References

Thompson, A. A., Strickland, A. J., & Gamble, J. E. (2010). Crafting and executing strategy:

The quest for competitive advantage: Concepts and cases: 2009 custom edition

(17th Ed.). New York: McGraw-Hill-Irwin.

JetBlue Airways. (2011). Retrieved April 16, 2011, from Wikinvest:

[Link] (JBLU)