JetBlue Airways: Challenges Ahead

STRATEGIC MANAGEMENT INPUTS

1. Summarize the external environment, including conditions in the general, industry, and
competitor environments.

The general environment is centered around the future and can be examined by thinking
about six natural portions; analysis of the business condition is centered around the
components and conditions which impact an organization's benefit inside its industry; and
examination of competitors is centered around anticipating the elements of competitor's
activities, reactions, and goals. In mix, the aftereffects of these three investigations are
utilized to comprehend the organization's outer condition and impact its vision, mission, and
vital activities.

A. The General Environment

Demographic:

 Routes include New York City and Fort Lauderdale, FL – distinct populations are
found in each of these cities, including (but not limited to) corporate, retiree, and
student/spring break travelers.

 Expanding destinations to include airports in California, Florida, New York, Utah

and Vermont.

 Significant decrease in corporate customers since 2001, but trend reversing by

2006.

Economic:

 1978 Airline Deregulation Act created intense rivalry between airlines.

 Downturn in U.S. after 2001 terrorist attacks - most airlines struggled, but JetBlue
reported eighteen consecutive quarterly profits.

 IT spending continued, despite 2001 terrorist attacks (and industry losses).

 Spiraling fuel prices, aggressive competition and increasing operating costs - led to
JetBlue's first net loss ($20 mil USD) in 2005.

 Legacy airlines exiting bankruptcy and streamlining operations to benefit

economies of scale.

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 Strategic alliances (such as Star and OneWorld) - may lead to increased overhead.

 Fair pricing is an important competitive factor in the industry.

 JFK expansion subsidized ($80 million USD) in 2005.

Political/legal:

 1978 Airline Deregulation Act eliminated government control over fares and routes.

 Government monitors airline industry more scrupulously than any other industry
doing business internationally.

 Airport and FAA density regulations.

 Sixty percent of airline industry employees are unionized.

 Heightened sense of consumer information privacy.

 Airport slot/gate allocations.

 Security considerations since 2001 terrorist attacks.

 See global, below.

Sociocultural:

 2001 terrorist attacks in U.S. negatively impact airline industry.

 Anxiety about safety threats and airport security.

 Travel has become inconvenient due to safety measures.

 Internal culture at JetBlue:

 Management are hands-on people who like to interact with employees - atmosphere
is a “great place to work.”

 May be difficult to maintain culture due to change in personnel (aging workforce

being replaced by new hires) and decreased accessibility to CEO Neeleman.

Technological:

 Aging planes.

 Diffusion of technology.
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  Digital revolution.

Global:

 War, political turmoil, and natural disasters drove fuel price increase from
$30/barrel in 2003 to $60/barrel in 2005.

 Airport slot/gate allocations.

 Security conditions build barriers to ease of travel - impact customs regulations,

travel patterns, conveniences, etc.

NOTES:

 Natural disasters and annual weather patterns also affect airline performance.

 Media coverage and negative press impacts industry, especially when reports are
negative.

 The inability to attract and retain qualified personnel or the failure could be harmful
to the business.

B. The Industry Environment

An industry is a gathering of firms delivering items that are close substitutes. Over the
span of rivalry, these organizations impact each other. Ordinarily, ventures incorporate a
rich blend of focused techniques that organizations use to seek after better than expected
returns. To some degree, these methodologies are picked due to the impact of an
industry's attributes. Contrasted and the general condition, the industry condition
frequently has a more straightforward impact on the association's key intensity or more
normal returns.
The business condition is the arrangement of components that straightforwardly impacts
a firm and its aggressive activities and focused reactions. Porter’s 5 Forces Model is an
integral asset for understanding the elements among the five key factors that decide an
industry's dimension of contention and benefit potential. [Outlined below, High=H;
Medium=M; Low=L]

Threat of new entrants (or barriers to entry):

 L(H): Cost prohibitive.
 NOTE: Mergers of existing airlines, if considered ‘new entrants’ must be
addressed, especially if routes/hubs are also served by JetBlue. For example,
JetBlue is currently competing directly with United in the Denver hub and US

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 Airways on routes out of Philadelphia; if a merger occurs with either of these
airlines and the gate percentage shifts, JetBlue could be faced with an additional
competitive threat.
Power of suppliers:
 H/L: Aircraft manufacturers (i.e. Boeing & Airbus); high switching costs for
JetBlue.
 H/M: Airports/gate location - vulnerable to delays which lower utilization rate
and increase costs.
 H: Fuel is second highest expense for airline (after labor); hedging helps to manage
unpredictable fuel costs. Business is highly dependent on the price and availability of fuel.
 H: limited suppliers for aircraft, engines, and in-flight entertainment system components.
Power of buyers:
 L/M: Can easily switch; low switch costs.
Threat of product substitutes:
 M: Within the airline industry, there are few product substitutes, although private
jets might be an available alternative. Within transportation industry, a number
of possibilities exist, including auto, boat, train and bus.
Intensity of rivalry among competitors:
 Extremely high.
 1978 Airline Deregulation Act created intense rivalry between airlines.
 Currently: 43 mainline carriers and 79 regional carriers.
 Three classifications:
o Major - Revenues > $1 billion USD,
o National - Revenues between $100 million and $1 billion, and
o Regional/commuter - Revenues < $100 million.
 Major competitors are larger than JetBlue. Most direct competitor is SWA.

C. The Competitor Environment

The contender condition is the last subject of examination required to pick up a full
comprehension of the organization's outside condition. A contender examination centers
around each organization against which a firm straightforwardly contends and includes
social event and deciphering data about JetBlue's rivals. The serious contention of the
carrier business makes a solid need to get contenders, which can be practiced by
assessing every rival in the accompanying zones:

 Future destinations - incorporate monetary wellbeing, development, prime airplane

terminal spaces/entryways, areas of administration, piece of the overall industry,
client base, carrier of decision, maintainability, vitality protection, social duty.
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  Current system - JetBlue is a littler significant transporter and contends
fundamentally on point-to-point courses. Significant contenders incorporate
Southwest Airlines, conventional bearers, (for example, American Airlines, United,
US Airways, Continental and Delta Air.) International economic situations are
alluring in light of the fact that fuel extra charges can be fused into the ticket cost and
a portion of the expenses related with extravagant fuel. Worker good is "distinct
advantage." Bundled travel bundles, evaluating, showcasing, number of flights, and
administration levels are altogether used to verify business.
 Assumptions - The business may merge. Fuel costs are required to increment and
keep on being flimsy. Planes and individuals will keep on maturing. Fear mongering
is a progressing danger to voyager security. Expanded safety efforts bother and baffle
travelers. Travelers will search for an offer. Monetary conditions will drive choice to
traverse market fragments. Airplane terminal clog is probably going to increment.
JetBlue will stay nonunion in a vigorously unionized industry.

The present carriers offer booked flights to most enormous urban areas inside the U.S. what's
more, abroad, and they additionally serve various littler urban areas. The seven biggest major
U.S. aircrafts, other than Southwest, utilize a conventional center point and talked system
course framework, which concentrates activities to a set number of centers point urban
communities and serves most of different goals with one-stop or associating administration
through the center point.
Provincial carriers work littler air ship on lower-volume courses. Rather than ease carriers,
provincial aircrafts by and large don't endeavor to set up an autonomous course framework
yet go into associations with at least one conventional system aircrafts. In these courses of
action, the territorial carrier consents to utilize its littler airplane to convey travelers booked
and ticketed by the conventional system aircraft between their centers and a littler remote
city. There are at present five territorial major U.S. carriers.

Southwest Airlines spearheaded the minimal effort model, which empowered them to offer
admissions that were fundamentally lower than those charged by conventional system
aircrafts. Counting JetBlue, there are right now four ease major U.S. carriers. After the 2001
psychological oppressor assaults, minimal effort aircrafts had the option to fill a critical limit
void left by customary system carrier limit decreases. Lower admissions and expanded ease
aircraft limit wound up making an unfruitful working condition for the customary system
carriers, and since 2001, most of them have experienced critical monetary rebuilding.
Insolvencies, mergers and unions have enabled these huge contenders to diminish work costs,
rebuild obligation, end annuity plans and for the most part lessen their cost structures,
increment workforce adaptability and give creative contributions like those of the ease
aircrafts, while as yet keeping up their far-reaching course systems, coalitions and successive
flier projects. Even though JetBlue's expenses remain lower than the biggest contenders, the
hole between minimal effort aircrafts and conventional system carriers has reduced, and this
raises a possibly undermining aggressive condition for the organization.

2. Outline the company's internal capabilities and weaknesses.

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Abilities exist when assets have been incorporated to accomplish a arrangement of
undertakings and are as often as possible created inside a particular practical territory.
Notwithstanding recognizing the organization's chances and dangers from the outer
condition, another significant target of the circumstance investigation is to assess qualities
and shortcomings as contribution for building up the organization's methodologies. JetBlue's
are plot in the table on the following page.

JetBlue's present capacities have put the aircraft in a solid money related position. Its
shortcomings be that as it may, in mix with poor press inclusion, have negatively affected the
organization. The executives and its hands-on style with representatives have made an
extraordinary workplace, however as the organization develops and the business turns out to
be progressively focused, another system must be defined.

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 Function Capabilities Weaknesses (Strength)
Human Personnel Aging population
Resources (Employee moral is “secret weapon”)
(Productive workforce)
(Diverse and experienced leadership team)
Promotions (Rapid advancement)
Service Feb. 2007 incident - left passengers on tarmac for
6 hours
Does not participate in an alliance
Benefits (Company profit sharing)
Training (Neeleman active participant; intangible way to
‘teach’ corporate culture)
Finance Fiscal Performance After 2005, financial losses, with unstable
earnings in 2006 (strong until that point)
Fuel hedging needed manage unpredictable costs
IPO Additional funds to subsidize JFK expansion
Operations Procurement Delayed delivery of additional planes
Adding model types will decrease cost
efficiencies
Equipment Increasing maintenance costs as fleet ages
(High productivity of planes - high utilization rate
of planes keeps costs low)
(Low operating costs)
Service (High quality customer service)
(Service-oriented and reliable performance for
customers)
(Safe and secure)
Leadership Strategy (Best overall airline in 2002)
Mgmt styles (Participatory and inclusive)
Culture (Strong)
Marketing/ Publicity Media coverage and negative press over
Advertising mechanical failure of California Flight 292 and
customer delay (6 hours on tarmac)
(Brand image)
Strategy Low-cost/ Stuck in the middle
Differentiated
Alliance None
Routes Domestic only
(Well-positioned in NYC metro area, world's
largest travel market - access to millions of
potential markets and additional expansion)

3. Determine if JetBlue's competitive advantage is sustainable.

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JetBlue's upper hands depend on the quality of its image and its crewmembers. The organization
has made a broadly perceived brand that recognizes it from its rivals and distinguishes it as a
protected, dependable, low-toll aircraft concentrated on client administration and giving a great
travel involvement. Client familiarity with the JetBlue brand has added to the organization's
capacity to use brand inclination in advertising endeavors and positions the organization to be a
favored promoting accomplice with organizations crosswise over a wide range of ventures.
What's more, the organization has built up a solid and lively administration arranged
organization culture worked around five key qualities: security, mindful, uprightness, fun and
energy. Proceeded with progress relies upon the capacity to contract and hold individuals who
are benevolent, useful, group arranged and focused on conveying the JetBlue Experience to
clients. The way of life is strengthened through direction program for new workers that underline
the significance of client administration, efficiency and cost control. Extra representative
preparing incorporates authority programs and accentuates the significance of wellbeing.

For an upper hand to be practical, it must fulfill four criteria - it must be profitable, extraordinary
(uncommon), expensive to mirror, and no substitutable. The table beneath surveys JetBlue's
competitive advantage thusly:

Valuable Unique/ Costly to Nonsubstitutable Competitive Performance

Rare Imitate Consequences Implications
Yes No Yes a No/Yes Temporary Average returns
Competitive to Above average
Advantage returns
a
JetBlue imitated Southwest Airlines! Superior service, features (such as leather seats), etc. can
be imitated.
For JetBlue's upper hand to be maintainable, the organization should come back to the nuts and
bolts of its pre-2005 methodology and additionally alter its key heading to enhance the
uniqueness and substitutability of its recommendation. The rest of the examination will add to
figuring out what adjustments may be fitting.

4. Conduct a Value Chain analysis to identify value-creating activities.

By exploiting its center abilities, a focused firm makes an incentive for its clients. Esteem is
estimated by an item's presentation qualities and by its properties for which clients are eager to
pay. Organizations with an upper hand offer an incentive to clients that is better than the esteem
contenders can give. Esteem is made by imaginatively packaging and utilizing assets and
capacities.
An esteem chain investigation gives data in respect to essential (inbound/outbound
coordination’s, tasks, showcasing and deals, and administration) and optional (firm framework,
HR management, mechanical improvements and acquisition) exercises. An esteem chain
portrayal of JetBlue's essential and bolster exercises is displayed in the outline underneath. This
data can be utilized to set up a business procedure which targets select exercises to make a
manageable upper hand.

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 Margin Margin

Marketing and Sales

Human Resources Management

Technology Development Pre-Flight Operations

Financial and Legal

Procurement
Flight Operations

Post-Flight Operations

Customer Service

Support Activities Primary Activities

Primary Activities
1. Marketing and Sales  Omniture software increases efficiency of internet
searches, decreasing advertising expenses
 Word of mouth, direct marketing
 Interactive video, JetBlue Story Booth, Blue Days
2. Pre-Flight  Fleet management
Operations  Airport slot/gate locations
 Check-in - VoIP technology reduces need for costly call
center
 Loading - pre-assigned seating, selection of first-run
movies
 Take-off - debacle with passengers on tarmac for six
hours

3. Flight Operations  Few aircraft types - low-cost airlines typically operate

with reduced maintenance, scheduling and training

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 costs, but JetBlue is thinking about adding new fleets of
two additional models, which will lower cost
efficiencies.
 One travel class
 Top management team flies and educates/trains
employees
 Flight performance
 Complementary and unlimited snacks/beverages

4. Post-Flight  BlueTurn ground operations

Operations  Top mgmt participates in cabin clean-up
 Airport slot/gate locations

5. Customer service  Completion rate

 Problem resolution
 Alliances to increase market share (JB is not a
participant in an alliance)

Support Activities
1. Financial and Legal  1978 Deregulation Act eliminated government control
over fares and routes
 Government monitors airline industry more
scrupulously than any other industry doing business
internationally
 Airport and FAA density regulations
 Strong financially results until 2005
 New profitable routes harder to obtain
 Over time, increase service cities

2. Human resources  Aging workforce (becoming more senior)

management  Sixty percent of airline industry employees unionized
(JetBlue is a non-union shop)
 Employee moral is a “secret weapon”
 JetBlue reservation agents work from homes in Salt
Lake City, UT
 Training
 Selection process - CrewBlue for college students
 Participatory leadership/management

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 3. Technology  Aging planes
Development  Innovative IT programs including Internet booking
system, paperless cockpit
 Fleet increased over time (could also include in inbound
logistics)
 VoIP technology reduces need for costly call center
 Omniture software increases efficiency of internet
searches, decreasing advertising expenses

4. Procurement  2005 added nine new Ebraer E190’s to fleet, departing

from the Airbus A-320
 gradually increased fleet size

STRATEGY FORMULATION

5. Summarize JetBlue's current strategy.

JetBlue's strategic objectives are to restore the company's financial health, to continue to grow
the business, while maintaining its effective organizational culture. The company is a relatively
small regional carrier competing primarily on point-to-point routes. It has espoused two
different strategies, low cost and differentiation. The tables below identify some of the elements
of these strategies and reveal that the conflicting goals of each strategy has placed JetBlue in an
ineffective, "stuck in the middle" position between the two strategies.

Uses of Low-cost Strategic Elements

Low cost position
Main competitor is SWA whose strategy emphasizes low costs
Single fleet of Airbus 320 planes creates cost efficiencies by reducing maintenance,
scheduling & training costs
Cost management throughout operations, including electronic tickets, paperless cockpits,
on-line check-in, etc.
VoIP technology reduces need for costly call center
Word of mouth advertising and use of Omniture software increases efficiency of internet
searches
BlueTurn ground operations focused on efficiencies
Only two aircraft types and a single travel class
Participatory leadership/management increases efficiency and creates workforce buy-in
Quick turn-around (leaders even help clean planes) maximizes utilization

Uses of Differentiation Strategic Elements

Superior customer service

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 Differentiation goal to achieve an image of far superior customer service than competitors
Tangible items include easy-to-use reservation system, ticket-less travel, pre-assigned
seating, new airplanes, cabin features (leather seat, personal satellite TV service,
complementary and unlimited snacks/beverages, selection of first-run movies), “shut eye”
flights, baggage arrival, etc.
Further differentiating features include 36 channels of free DIRECTTV programming
Airbus A-320 is more spacious than Boeing’s 737's in the industry
Completion rate
Employee morale

Ineffectiveness of Positioning Between Two Strategies

High-end customer service at low-end prices
Plans to add two new fleet models will confuse low-cost strategy efforts

6. Define customer relationships.

Key aggressiveness results just when JetBlue can fulfill a gathering of clients by utilizing its
upper hands as the reason for contending. Returns earned through client connections are the
establishment of accomplishment for the organization. To stay focused, it needs to persistently
discover better approaches to fulfill current clients as well as to address the issues of new clients.

Choosing which client fragment, the organization needs to focus with its business-level
technique (considering contrasts in client needs) is a significant choice. Is it the individual
willing to pay a top notch cost for solace, snacks and in-flight stimulation (separation procedure)
or the ease voyager who will renounce these conveniences at an absolute bottom cost? Is it the
recreation senior or the rushed official? In view of the case content, JetBlue is by all accounts
neglecting to obviously recognize its objective market fragment, swaying between all gatherings,
and rising with no reasonable vital personality, which gives upper hand to its adversaries.

When its objective market is characterized, Jet Blue can start the way toward fortifying client
connections by structure access and association with its clients (reach), improving the profundity
and detail of a two-route stream of data between the organization and its clients (extravagance),
and encouraging valuable communications with clients (alliance).

JetBlue's endeavors to construct client connections are through the unrivaled client
administration it offers and through showcasing activities, for example, the JetBlue Story Booth
and Blue Betty program. Although the organization's astounding fruition rates and things landing
execution are imperative, representative confidence and the organization's authoritative culture
are the organization's genuine unmistakable advantages. As indicated by Neeleman, treating
workers well prompts them treating clients well. The organization dedicates a lot of time and
regard for enlisting representatives who will treat clients in an agreeable and conscious way, and
the significance of giving minding client administration is underscored in preparing. JetBlue's
strategies and methods are intended to be client benevolent and incorporate pre-doled out
seating, electronic ticketing, no overbooking, single direction admissions, no medium-term travel
limitations, and insignificant change expenses.

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After the terrible press that came about because of the client administration 'blip' of leaving
clients on the landing area for an all-inclusive time during awful climate, Neeleman stated that
administration was debilitated by a correspondence framework that leaves pilots and airline
stewards clueless and by an immature reservation framework. With an end goal to recover brand
picture, the organization made a Customer Bill of Rights, shaped a client warning committee,
created plans for crewmember broadly educating, and actualized another correspondence
procedure. Eventually, Neeleman moved to one side for new account for new initiative.

The predominant administration rate conveyed by JetBlue crewmembers results in an abnormal

state of client faithfulness. At the point when the organization neglects to meet client desires,
particularly through conceivably avoidable administration passes, a significant reaction is basic.

DISCUSSION AND RECOMMENDATIONS

I. Financial Indicators

JetBlue's gross profit percentages are comparable to the results achieved by other U.S. airlines.
However, total revenues are significantly lower than the sales of its counterparts. Key lines from
the company's income statement and a comparison of the change over the past year are detailed
in the table below.

Income Statement
2006 2005 Difference Rate
Operating Revenue
Passenger 2223 1620 603 37.22%
Other 140 81 59 72.84%
Total 2363 1701 662 38.92%
Operating Expenses
Salaries, Wages, and Benefits 553 428 125 29.21%
Aircraft Fuel 752 488 264 54.10%
Landing Fees and Other Rents 158 112 46 41.07%
Depreciation and Amortization 151 115 36 31.30%
Aircraft Rent 103 74 29 39.19%
Sales and Marketing 104 81 23 28.40%
Maintenance Materials and Repairs 87 64 23 35.94%
Other 328 291 37 12.71%
Total 2236 1653 583 35.27%

Operating Income 127 48 79 164.58%

5.68% 2.90% 13.55%
Other Income (Expenses)
Interest Expense -173 -107 -66 61.68% **
Capitalized Interest 27 16 11 68.75%

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 Interest Income and Other Gov't Comp 28 19 9 47.37%
Total -118 -72 -46 63.89%

Income (Loss) Before Taxes 9 -24 33 -137.50%

Income tax expense (benefit) 10 -4 14 -350.00%

Net Income (Loss) -1 -20 19 -95.00%

This analysis highlights that fuel prices have increased dramatically in the past year, relative to
revenue growth rate. On the other hand, JetBlue has maintained good control over its other
costs, and was able to increase operating income by 164%.
Interest expense has grown significantly over 2003 levels, and plays a direct role in reducing a
positive operating income to a net income below zero.
These are critical financial indicators that need to be taken into account as JetBlue determines its
strategic direction for the future.
Key lines from the company's balance sheet and a comparison of the change over the past year
are detailed in the table below.

Balance Sheet
2006 2005 Difference Rate
Assets
Cash and Short-Term Investments 699 484 215 44.42%
Total Receivables, Net 77 94 -17 -18.09%
Total Inventory 27 21 6 28.57%
Prepaid Expenses 124 36 88 244.44%
Other Current Assets, Total 0 0 0
Total Current Assets 927 635 292 45.98%

Property/Plant/Equipment, Total 3438 2978 460 15.45%

Goodwill, Net 0 0 0
Intangibles, Net 32 43 -11 -25.58%
Long-Term Investments 0 0 0
Notes Receivable Long-Term 0 0 0
Other Long-Term Assets, Total 446 236 210 88.98%
Other Assets, Total 0 0 0
Total Assets 4843 3892 951 24.43%

Liabilities and Shareholder's Equity

Accounts Payable 136 99 37 37.37%
Payable/Accrued 0 0 0
Accrued Expenses 164 111 53 47.75%
Notes Payable/Short-Term Debt 39 64 -25 -39.06%
Current Portfolio - LT Debt/Capital Leases 175 158 17 10.76%
Other Current Liabilities, Total 340 243 97 39.92%
Total Current Liabilities 854 676 178 26.33%

Long-Term Debt and Leases 2626 2103 523 24.87%

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 Deferred Income Tax 136 116 20 17.24%
Minority Interest 0 0 0
Other Liabilities, Total 275 86 189 219.77%
Total Liabilities 3891 2981 910 30.53%

Redeemable Preferred Stock 0 0 0

Preferred Stock-Non 0 0 0
Common Stock 2 2 0 0.00%
Additional Paid-In Capital 813 764 49 6.41%
Retained Earnings 144 145 -1 -0.69%
Other Equity, Total -7 0 -7
Total Equity 952 911 41 4.50%
Total Liabilities & Shareholders Equity 4843 3892 951 24.43%

This analysis confirms that increases to the company's liabilities have had an impact on the
company's balance sheet, compromising shareholder's equity in addition to net income. In
addition to long-term debt, JetBlue has a significant amount of other fixed obligations under
leases related to aircraft, airport terminal space, other airport facilities and office space. Again,
these factors need to be taken into consideration as the company addresses competitive
conditions and builds a strategy for the future.

II. Integrated Cost Leadership/Differentiation Strategy

In spite of the fact that JetBlue declares the utilization of a separation methodology, its
methodology likewise depends on parts of a minimal effort system. The perplexity between
clashing vital messages has restricted the viability of the organization's key activities. To keep
the upsides of both system types would require a superior figured coordinated cost
administration/separation procedure that underlines the effectiveness of the aircraft while
separating it from contenders. In spite of the danger of making a key personality that is neither
obviously separated nor plainly minimal effort, for this situation, JetBlue is altogether defended
in the choice to change to an incorporated cost initiative/separation system.
While understudy's proposals about how this can be practiced will shift, they should fuse
suggestions for both cost the executives (particularly along the lines of obligation financing), the
upkeep of an administration situated culture (drawing some material from Chapter 12 of the
content on Strategic Leadership), and approaches to improve the nature of the locally available
client experience.

Table: - Factors which can contribute to low unit cost

1. high aircraft utilization to spread fixed costs over a greater number of flights with seat
availability.
2. electronic ticketing processes to lower distribution costs.
3. productive workforce.
4. maximize workforce productivity by minimization of unproductive labor rules.
5. use of part-time and at-home employees.

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 6. use of labor-saving technology.
7. minimizing the use of old and high maintenance aircrafts.
8. use of fuel effective newer aircrafts.

It is the devotion and soul of its crewmembers, showing the organization's basic beliefs, that
recognize JetBlue from its rivals and fortifies its image. The organization needs to select and
hold the best individuals in the business. Tuning in to crewmembers and cooperating will help
manufacture and keep up a safe future. JetBlue's upper hand is its way of life, and the
organization should keep on doing such is conceivable to secure, protect and further improve its
way of life all through the business. As the organization develops, it will keep on being tested to
keep a sentiment of diminutiveness while scaling the way of life to the genuine size of the
organization.
The organization should likewise constantly look for creative approaches to improve its item. A
key component of JetBlue's present and long-haul achievement is that, notwithstanding offering
low admissions, the organization offers clients a superior option for air travel. Overseeing and
overhauling the lodge experience is one key territory for separating itself from others in the
business. Locally available JetBlue, clients appreciate an unmistakable flying background.
Alluded to as the "JetBlue Experience," it incorporates agreeable, client administration arranged
representatives, new flying machine, spacious cowhide situates, an assortment of free
programming for LiveTV and XM satellite radio, motion picture station contributions, liberal
brand name snacks, premium drinks and uniquely planned items for medium-term flights.

III. Competitive Rivalry and Dynamics

Competitive rivalry - Focused contention is the continuous arrangement of aggressive activities

and reactions that happen among firms as they move for a beneficial market position.
Particularly in exceedingly aggressive ventures, organizations always racer for favorable position
as they dispatch key activities and react or respond to opponents' moves. It is critical to
comprehend aggressive contention since it impacts an association's capacity to pick up and
support upper hands.
The local carrier industry is portrayed by low net revenues, high fixed expenses and critical value
rivalry. It is very aggressive, and aircraft benefits are delicate to try and slight changes in fuel
costs, normal toll levels, and traveler request. Traveler request and admission levels are
fundamentally impacted by the general condition of the economy, universal occasions, industry
limit and strategic estimating moves made by contenders.
Since deregulation of the carrier business in 1978, there has been union in the domestic airline
industry and recently (in 2005 and 2006), the U.S. aircraft industry has encountered much further
combination, with the likelihood of more restructurings. This could result in contenders having
increasingly alluring course structures and lower working costs, empowering them to contend all
the more forcefully. Given these conditions, the very focused nature of the carrier business could
obstruct JetBlue's development system.
The foremost focused practices in the carrier business incorporate admission evaluating, client
administration, courses served, flight plans, kinds of aircraft, security record and notoriety, code-

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sharing connections, limit the board, in-flight amusement frameworks, and regular customer
programs. The movement of charge cognizant voyagers from customary system aircrafts and
their falling apart piece of the pie has constrained some to take wide cost-cutting measures and
modify their essential plans of action. JetBlue's rivals incorporate customary system aircrafts,
minimal effort carriers, provincial carriers and new participant carriers. Seven of the other major
U.S. aircrafts are commonly bigger, have more noteworthy money related assets, more name
acknowledgment, and serve a greater number of courses than JetBlue. What's more, they utilize a
portion of indistinguishable cutting-edge innovations from JetBlue, (for example, ticketless
travel, smart phones the cockpit and site appointments).

Cost rivalry - which happens through cost limiting, charge coordinating, expanded limit, directed
deal advancements, and regular customer travel activities - is typically immediately coordinated
by different carriers to keep up a lot of traveler traffic. Moderately little changes in estimating or
in traveler traffic can have an unbalanced effect on working and monetary outcomes. Following
the organization's entrance into new markets or the development of existing markets, a portion of
JetBlue's rivals will add administration or to participate in broad value rivalry. An unforeseen
shortage in anticipated income or in the quantity of travelers that outcomes from value rivalry
negatively affects execution and damages business. Moreover, if a customary system carrier
were to completely build up an ease structure, JetBlue's capacity to contend could be seriously
bargained. JetBlue's capacity to meet value rivalry relies upon its capacity to work at costs
equivalent to or lower than contenders. Every other factor being equivalent, the organization
relies upon client inclination for the JetBlue Experience and client acknowledgment of the
unrivaled nature of their complete involvement with the organization.
During 2006, most conventional system carriers expanded limit on their worldwide courses and
diminished household limit. Some ended low-charge tasks and moved household limit out of
business sectors where they had contended straightforwardly with JetBlue. These improvements,
related to the organization's day of work of limit from cross-country flights to short-and medium-
pull courses, brought about higher yields on flights. In spite of the fact that the organization
experienced improved yields in 2006, it envisions a continuation of the very focused nature of
the carrier business.

IV. Strategic Options

Competitive Evaluation and recommendations

If history is any indication of future events, JetBlue will be facing many internal and external
strategic issues to overcome in order to maintain its competitive advantage. A good lesson to any
airline start-up even the highly capitalized JetBlue – is the sparkle and fade fate met by the 1983
airline people express. Twenty years before JetBlue a short-haul carrier under Donald C. Burr set
out to reap a profit on cheap, reliable service offered to underserved cities such as buffalo,
Columbus and Sarasota. Like JetBlue, people express soared quickly, netting $10 million on
revenue on revenue of $287 million in 1983.
Employees were initially enthralled by the company’s profit-sharing plan and Burr’s habit of
calling even a lowest employee a “manager”, but the idealistic corporate came under fire when
two years later the company reported only $20 million in profits on $928 million in revenue. The
more the airline grew and expanded its routes, the more it watched its profits grow anemic.

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People Express disappeared after only four years of business when it was bought by Texas air for
$301 million stocks and cash.
Most analysts predict that JetBlue will experience growing pains in the future, as did people
express. JetBlue CEO David Neelman’s successful strategies will be put to test in the coming
years as company seeks to expand its routs and business.
JetBlue’s low cost have been a key component to the airline’s ability to secure customers. In
order to maintain the profit margin, they have enjoyed it will be critical for them to keep their
cost low. Analysts and shareholders are watching closely and wearily for any increases in
JetBlue’s cost of structure. In November 7, 2002 articles discussing JetBlue, fox news reported,
‘’…shares of JetBlue dropped than 7% on Thursday as investors worried about a spike in
operating costs.” David Neelman was quick to downplay the increase in the third quarter costs
and promised that cost would return to second quarter levels in fourth quarter. With aging planes,
possible worker unions, and possible expanding customer service costs and JetBlue grows, it will
be essential that they be extremely proactive in keeping costs down. The struggling airline
industry, post 9/11, has shown that those with lower costs are more successful in weathering
unforeseen difficulties that can and will arise.
Another key factor to JetBlue’s success in the future will be its maintenance of customer service.
Customers have responded very positively to some of JetBlue’s unique benefits: individual Tv
screens with satellite channel access, for example. A recent Forbes article showed the company
to have a far higher online booking percentage than other airlines. Also, customers are pleasantly
surprised when JetBlue CEO David Neelman hops on airplane and ask customers to provide
feedback on JetBlue’s service. JetBlue’s unique approach to customer service has been a key
component to its success. It will prove difficult for JetBlue to maintain this unique appeal to its
customers as it grows and expand its business amidst more heated competition from other
airlines.

Future growth recommendation:

 The key component to jet blue being successful in the long run is to remain the low-cost
leader. It has been pointed out that the new fleet of airplane’s, the lesser traveled airports
as hubs and the no frills commutes themselves are the major reasons for the company’s
success. In order to ensure that these strengths do not become weaknesses, some serious
planning will be required.
 A strong recommendation for JetBlue would be to make sure that they pursue and
relationship with IAE so that they can keep the number of in-house maintenance
employees to a minimum. If they are able to leverage the knowledge and expertise of the
manufacture’s own employees, it can be much cheaper for JetBlue to contract these
employees on an as needed basis rather than keeping a large number of employees on
their own staff to keep up with all of the maintenance requirements of the fleets. As the
IEA employees will only be contractors they could negotiate a contract with IEA that
would be a huge cost saving for jetBlue,
 Another way that jetblue can able to gain a competitive advantage is through the targeting
of smaller airports as they continue to grow and will be a valuable source of revenue that
these smaller airports didn’t had in the past.
 In-flight, the airlines should charge for their offered benefits. The airlines should offer
food-for-purchase and other amenities and should also charge for extra luggage and for

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 more legroom. It may lead to risk of extra expenses and wastages (food). But the
outcome of these offered benefits will gain additional revenue to the airline.
 JetBlue has to reduce fuel expenditures. JetBlue should adopt the fuel hedging strategy to
mitigate the potential risk of rising crude oil prices. To improve fuel efficiency, airlines
could also reduce the aircraft weight or by including winglet devices/blended wing body
system. The hedging program may lead to mistakes, if not planned and managed
properly. It is to reduce fuel consumption, since fuel costs represent one of the largest
operating expense. A proper hedging program can protect against rising fuel prices.
 JetBlue should defer the delivery of the Embraer E190s’ as it is risk being the launch
customer of the product. Meanwhile, JetBlue should invest in Airbus jets. JetBlue’s
limited cash source for investment and high level of debt may affect the growth strategy.
But in long run these investments support’s the expansion plans.
 JetBlue‘s management should implement a monthly incentive performance-based
program for the employees by setting targets and goals so as to increase the workforce
efficiency and productivity. These monthly bonuses and rewards will increase the costs.
But it will increase the workforce efficiency and productivity, and thereby improve on-
time performance.
 JetBlue should also reconsider its passenger boarding plan. JetBlue currently utilizes a
random assigned seating pattern. JetBlue has to adopt a back-front or a self-organizing
approach boarding plan in order to achieve a fast flight turnaround. It may create a
negative feedback from a section of customers who prefer assigned seats. It is to decrease
the average time to takeoff and improve the efficiency, since the back-from and
unassigned random system are more efficient methods of passenger loading.
 An alliance strategy could offer JetBlue a new way to gain market power, gain access to
complementary resources, meet competitive challenges, and learn new business
techniques. Among other benefits, strategic alliances allow partners to create value that
they couldn’t develop by acting independently and to enter markets more quickly and
with greater market penetration possibilities.
 JetBlue has to expand its route network to the underserved Caribbean and Latin
American countries. JetBlue should also cancel services of unprofitable routes that show
less demand for future. This competition may affect the efficiency and productivity of the
operations. These route network will be well established and will earn the growth.
 Growth opportunities exist overseas in all industries today, and the airline industry is no
different. Before entering an alliance to expand internationally, JetBlue should closely
analyze historical numbers of passengers, capacity, and fares over time between foreign
destination points to identify markets with strong forecasted demand and strategic fit with
the company's goals. Strategy of expansion should be done step by step, not rushing into
big scale at a time but slowly and wisely by considering profitable growth continuity and
improving operational and financial health and further strengthen their competitive
position in international market.

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