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Case Study No 18

Page : 635
Strategic Management by
Michael A Hitt

Prepared by Roll Number 10735 FawadHussain, 2014

INTRODUCTION

INTRODUCTION
Incorporated in Delaware in August 1998.
David Neeleman1st 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 asin-flight
entertainment, TV on every seat and Satellite
radio.
CEOs 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 theLong Island
New York.
Its main base isJohn F. Kennedy International
Airport
The airline mainly serves destinations in the
United
States,
along
with
flights
to
theCaribbean,The Bahamas,Bermuda,Barbados
,
Colombia,Costa
Rica,
theDominican
Republic,Jamaica,MexicoandPuerto 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 Blues mission is to be the leading low-fare, lowcost 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 dont 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

Achieveme
nt
Orientatio
n&
Striving

Organizati
onal
Commitme
nt, &
honesty

SAFETY: 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

Core Values
PASSION: Strive to Meet
the Needs of
Crewmembers and
Customers; Team Spirit;
Deliver Superior
Performance;; Look for
Innovative Solutions to
Business Issues

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.
INTEGRITY:
Demonstrate
Honesty, Trust
and Mutual
Respect; Never
Compromise the
Values for ShortTerm Results;
Possess and
Demonstrate
Broad Business
Knowledge;

Innovative Strategies
No meals during
flights
Providing personal
television
Leather seats instead
of cloth seats
Use of new aircrafts
Use of more fuelefficient 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

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$27 per share
Annual operating revenues
increased in 2003 and 2004
Annual profit of US$ 55, 103 &
46 million in 2002 -2004
respectively

Slow Growth

Operating revenue
continued to increase in
2005 and 2006 but
airline suffered losses
Airline suffered loss of
US$ 42 million in CS too
Loss 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

Cutting of destinations
was done to preserve
cash & remain stable
Jetblue came under
strong criticism due to
delay of flights in
February 2007
JetBlue 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

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 JetBlues 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

United
Airlines

Virgin
America

Southwest
Airlines

America West

Frontier Airlines

Delta

Sun Country
Airline

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
customers 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
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


Work on improving image of
2007
airline as superior customer

terminal in
at Flight
service provider Develop a new Comfort
Offered pre flightJFK
airport
its on- 2 inches of leg
and
during to improve
Additional
departure androom
arrival
flight free snacks time
and optional
US$80
lunch / dinner on averages
payment at airports.
100%
non-fat selection of
Customers benefited
million
invested
from
complementary
and
Sold a stake of its shares
to snacks
simple to use reservation
unlimited
Germen carrier Lufthansa
to
system
All passengers
provided
Booking agents could
increase
workrevenue & allow
with the
comfort kit for a
customers to book code
sharesleep
from home
healthy
Pre assigned seating
flights
and
Crew
wakes
up
the
Customer
advisory customer
council from sleep
ticketless travel was
made
was established
possible
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 theres an empty seat on an
earlier flight, its 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
Payroll costs will increase
Expansion in the fleet =
with aging
More costs
Staff growth will increase
payroll expenses
Seniority attained by staff
and crew

QUESTIONS ?