Strategic Analysis of Jet Blue Airlines Executive Summary JetBlue is a company built on a focus stra
tegy of low-priced, no-hassle ticketing and refreshingly efficient customer service. The company be
gan with the goal to eliminate many of the complexities and asininities of commercial air travel and
set a new standard for customer service. Thus far the company has flown beyond these goals and eve
ryone's expectations while returning a handsome profit to whomever chooses to invest in this airline
industry success. From his humble beginnings as a University of Utah drop-out, CEO David Neelman sh
orlty became a self-taught airline industry guru - gaining a comprehensive understanding of the inne
r workings of the industry as the co-founder of WestJet, CEO of Open Skies and President of Morris A
ir. His experiences gave him a first hand knowledge of what worked and what needed improvement in t
he airline business - knowledge that he believed would help him to create an innovative new airline
able to revolutionize the market. In 1999, Neelman announced his plans to start a new airline called
"New Air". What New Air's name lacked in originality was later made up for in Neelman's innovative
strategies. Within a year Neelman's airline, by then dubbed "JetBlue", successfully completed the
airline application process, and its inaugural flight took place on February 11, 2000. By JetBlue'
s first birthday, it had already flown its one millionth passenger and reported $100 million in flyi
ng revenue. Soon after JetBlue's second anniversary, JetBlue's IPO was announced. Demand for the I
PO was so high that the original offering price had to be raised - one of select few 'IPO Darlings'
during the bear market economy. As the other airlines were suffering from the aftermath of the 9/11
terrorist attacks, JetBlue's revenues were on a continual rise. In September 2002, JetBlue had alr
eady flown its eight millionth customer. Why are people flocking to JetBlue? One answer is the luxu
ry treatment at an economy cost. All seats are leather and outfitted with an individual screen with
access to 24 satellite stations from DirectTV. There are even cards in each seat pocket with instr
uctions in flight yoga. All this and more at a low cost due to Neelman's mantra of service. He als
o cuts costs by having reservation agents work from home and directing customers to buy tickets over
the Internet, with plans to soon have computer kiosks take the place of ticket agents at the airpor
t. The corporate lore at JetBlue has Neelman loading luggage in sub-zero temperatures to help a flig
ht get off the runway on time - and whether fact or fiction, it's apparent that his work ethic has t
rickled down to all JetBlue employees "We set out with the goal of bringing humanity back to airline
travel and making flying more enjoyable. Our consistent profitability in the face of a challenging
industry environment demonstrates that we can do so in a way that offers long-term shareholder value
. Our focus remains on driving top-line growth by providing exceptional customer service, while cont
inuing to maximize operating efficiencies as we grow." -David Neelman But for how long can JetBlue m
aintain the market edge that low-cost fares and no-hassle ticketing ? How will JetBlue counter the
threat of unionizing workers, an aging airplane fleet and employees who begin placing more value on
tenure and benefits packages than kind socially responsible management and company stock options? T
hese questions are more than hypothetical, for how they are answered will determine the future of th
e IPO darling, JetBlue.
What if Airlines Sold paint Customer: Hi, How much is your paint? Clerk: We
ll, sir, that all depends. Customer: On what? Clerk: Actually, a lot of things. Customer: How about
giving me an average price? Clerk: Wow, that's too hard a question. The lowest price is $9 a gallon,
and we have 150 different prices up to $200 a gallon. Customer: What's the difference in the paint?
Clerk: Oh, there's no difference; it's all the same paint. Customer: Well, then, I'd like some of t
hat $9 paint. Clerk: Well, first I need to ask you a few questions. When do you intend to use it? Cu
stomer: I want to paint tomorrow on my day off. Clerk: Sir, the paint for tomorrow is $200 per gallo
n. Customer: What? When would I have to paint in order to get $9 paint? Clerk: That would be in thre
e weeks, but you will also have to agree to start painting before Friday of that week and continue p
ainting until at least Sunday. Customer: You've got to be kidding! Clerk: Sir, we don't kid around h
ere. Of course, I'll have to check to see if we have any of that paint available before I can sell i
t to you. Customer: What do you mean check to see if you can sell it to me? You have shelves full of
that stuff; I can see it right there. Clerk: Just because you can see it doesn't mean that we have
it. It may be the same paint, but we sell only a certain number of gallons on any given weekend. Oh,
and by the way, the price just went up to $12. Customer: You mean the price went up while we were t
alking? Clerk: Yes sir. You see, we change prices and rules thousands of times a day, and since you
haven't actually walked out of the store with your paint yet, we just decided to change. Unless you
want the same thing to happen again, I would suggest you get on with your purchase. How many gallons
do you want? Customer: I don't know exactly. Maybe five gallons. Maybe I should buy six gallons jus
t to make sure I have enough. Clerk: Oh, no sir, you can't do that. If you buy the paint and then do
n't use it, you will be liable for penalties and possible confiscation of the paint you already have
. Customer: What? Clerk: That's right. We can sell you enough paint to do your kitchen, bathroom, ha
ll, and north bedroom, but if you stop painting before you do the other bedroom, you will be in viol
ation of our tariffs. Customer: But what does it matter to you whether I use all of the paint? I alr
eady paid you for it! Clerk: Sir, there's no point in getting upset; that's just the way it is. We m
ake plans based upon the idea that you will use all of the paint, and when you don't, it just causes
us all sorts of problems. Customer: This is crazy! I suppose something terrible will happen if I do
n't keep painting until Sunday night? Clerk: Yes sir, it will. Customer: Well, that does it! I am go
ing somewhere else to buy paint! Clerk: That won't do you any good, sir. All paint companies observ
e the same rules. You might as well just buy it here, while the price is now $13.50. Thanks for flyi
ng--I mean painting--with our airline.
Though comical to the extreme, the preceding metaphor illust
rates the level of absurdity that airline ticket pricing has reached, and the frustration felt by th
ose consumers that have no choice but purchase tickets through an un-fair and arbitrarily expensive
system. In the real world a bucket of paint - analogous to a flight to NY, for example- costs no mo
re or less expensive depending on when it is purchased. Similarly, a red-eye round-trip flight with
several connections en route to its final destination costs the airline no less than a day-schedule
d one-way flight covering the same distance. In charging a price for a fare, almost without regard
to when it is purchased, JetBlue is answering the question that so many consumers have been asking:
What makes up this drastic discrepancy in pricing?
Financials On April 2002, JetBlue successfully
completed their Initial Public Offering. This translates into a mere seven months of public financia
l information. JetBlue is also a relatively new company, begun in 2000, and by all accounts is curr
ently experiencing a stage of growth. There have been rapid earnings reported with a 100% year over
year increase in revenue of $165.3 million in quarter three. Rueters states, "It booked its first m
onthly profit in August. Neeleman is cagey on specifics but says it recorded about an 8% margin." T
he question is can JetBlue maintain this rapid growth? JetBlue's stock has been on a roller coaster.
It is traded on the NASDAQ under the ticker JBLU. After JetBlue's IPO, stock prices rose to their
all time high of $55.15. Prices began to equalize and the stock stayed in the $30-$40 range. The d
ip seen in October is due to the share lock-up expiring six months after the IPO. JetBlue is making
headway in an industry that has seen the worst drop in its history and currently will lose more than
$7 billion in 2002 . Suffering from a slumping economy devastated by the tragic events of Septembe
r 11 the airline industry is receiving less business from both those who cannot afford to fly and th
ose who now are too afraid. In times where other airline companies are struggling to tighten their
belts and cut any corporate non-essentials, JetBlue has amazingly posted a 17.5% profit - more than
five times that of their nearest competitor, SouthWest - amidst nearly unprecedented growth. JetBlue
currently employees 3,563 workers: pilots, flight attendants, mechanics, ticket agents, reservation
specialists, etc. The staff is considered young for the industry and make anywhere between $8.25 a
n hour to $55,000 a year with generous stock options. Though several pilots have been reported as d
iscussing matters with the Union, the company remains un-unionized, which helps keep labor costs to
roughly a quarter of the revenues. To most, JetBlue's starting salaries seem on the lower end when
compared with similar positions, however employees are willing work for the company as they offer ex
cellent promotions and the added benefit of stock options and working from home. Both the age of th
e company and the size of the company contribute to its centralization: the company is only two and
a half years old employs three and half thousand. As a result, most of the major management decisio
ns are made at the top level of this relatively thin company hierarchical structure. David Neeleman
is at the center of the important decisions, however, as the company grows and becomes larger he re
cognizes the need for more decentralization - the need to branch out and allow others the freedom to
make important business decisions. To date, it has not yet been JetBlue's strategy to diversify the
company. The youth and small size of the company also contribute to this non-diversification. The
entirety of JetBlue's efforts are concentrated on creating a quality airline at a lower price. How
ever, as the company grows and accomplishes these original objectives, diversification both in relat
ed and unrelated areas are in the plans of the company. As previously mentioned, JetBlue is success
fully differentiating itself by providing an airline with superior customer service and low-price.
The company is combining two attributes that traditionally are thought of as trade-offs. While airl
ine customers often will choose Southwest for cheap flights and Delta when an on-time arrival and go
od customer service are preferable, JetBlue is becoming the airline known for both. Because JetBlue
is working on differentiating itself with low price and friendly, efficient customer service, a high
level of integration is key to their viability. On the one hand, the company is striving to be the
most inexpensive; on the other, they aim to offer superior quality. As they strive for a high leve
l of differentiation, they must also require a high level of integration in order to make the compan
y efficient. JetBlue understands that because they are striving to best the best in several value c
reation functions, integration plays a key role in the ultimate success of all value creation functi
ons. Several measures such as setting up teams and integrating roles have taken place in order to i
nsure the success of the integration. Ticket agents, for example, will play a key role in reserving
the cheapest possible ticket as well as assisting the customer in any way they may need. This is a
lso why JetBlue follows a functional structure where managers of all areas can meet together to disc
uss and resolve issues.
External and Industry Analysis The airline industry is an increasingly host
ile and competitive business environment. The immense strain placed on individual firms to secure c
ustomers and return a profit pressures them to maintain a high level of efficiency during both boomi
ng and down-turned markets. When the economy performs well and business thrives an airline must scr
amble to meet the demand for new flights with airplane acquisitions and the hiring of more pilots an
d flight attendants to staff them. On the other hand, when air travel sales slack these same compan
ies face the challenge of hastily down-sizing their workforce in order to minimize the impact of the
resulting shrinking revenues on their profit margins. Furthermore, the massive scale on which airl
ines compete with one another has established an exclusive and expensive playing field privy only to
industry high rollers willing to gamble in the millions of dollars. These huge required initial ou
tlays create a formidable barrier to the entry of new competitors. All of these factors combine to c
reate a large, complex, and difficult-to-define business environment where Airlines scramble to stay
in business. With the end of World War II domestic airlines improved their ability to develop fast
er and larger aircraft, and the commercial airline industry was born. Since this time, the airline
industry has unrelentingly faced unpredictable and sometimes devastating turbulence. In the mid-1980
's, consolidation of airlines occurred at a rapid pace and former industry giants Pan American, East
ern and Piedmont Airlines saw their routes gobbled up by Delta, American and United. This emerging
trio of industry giants dominated the market leading into the 1990's, when the industry began a near
ly five year financial freefall that resulted in a loss tallying an estimated $13 billion. But even
as the majors lost billions of dollars, a star emerged that would have a profound effect on the indu
stry structure: Southwest. Airlines, a low-fare, point-to-point carrier based in Dallas. Southwest'
s immediate and unequivocal success would change forever the way the public saw low-fare airlines an
d significantly altered the operations of major domestic airlines. CEO Herb Kelleher built SouthWes
t's business in secondary airports and midsize cities, initially focusing on the southwestern and we
stern United States, where the weather was usually warm and air traffic relatively un-congested. So
uthWest was able to lure away many travelers who were fed up with the complex, unintelligible and co
nfusing fare rules that typified the major carriers. With this strategy SouthWest quickly began to
steal market share away from the major carriers. As Southwest - followed by a small slew of other le
ss-notable, less capitalized carriers - began to bleed the profits of larger airlines, Continental w
as the first big player to respond by unveiling in November '93 a discounted airline called Continen
tal Lite. This unclearly and poorly differentiated spin-off offered discounted fares, bare-bones in
-flight service and fewer restrictions on purchasing tickets than its parent corporation. The resul
t: Continental lost hundreds of millions of dollars with Continental Lite and finally discontinued t
he airline and focused instead on reducing Continental's fare prices, a move that would further hurt
profits but allow it to better compete with SouthWest. Delta was the next major airline to respond
to the threat of SouthWest, as the 1990's signaled a massive restructuring program for the airline named Delta 7.5. Their goal was to transform the airline into the most cost-effective of the big
three carriers. Delta, which had never laid off a single employee in more than 50 years in the skie
s, fired thousands of workers, sold off non-core assets, reduced in-flight meal service and dropped
un-profitable and low-traffic routes. Following Delta's lead, the other major carriers fell in line
with their own version of cost-cutting - doing all possible to grow their margins and maintain prof
itability. Delta provides an example of what happens to a company that cuts too much from its core o
perations. Many of Delta's cost cuts directly hit customer service areas, from employee morale and
onboard meals to baggage handling and on-time arrivals. Delta eventually realized that cutting trav
el agent commissions could save tens of millions of dollars without directly hurting customer servic
e, and since their cost restructuring conveniently co-incided with the birth of e-commerce, Delta wa
s able to dove tail their independence from travel agents with the electronic ticket. As Delta cont
inues to receive poor reviews - a 3-star rating of a possible 5 on a popular internet customer servi
ce ranking site - it is difficult to gauge exactly how much damage this negative consumer feedback
has caused their bottom-line. A given is that JetBlue faces fierce competition in the airline indust
ry and will yet be presented with many obstacles that could thwart their success. One struggle they
are certain to face is that of staying on the cutting edge of technology in the aviation industry,
which has a history of eroding a company's competitive advantage through advances in technology. Fo
r example, in 1945 Pan Am ordered a fleet of Consolidated Value planes with a cruising speed of 342
miles per hour and capacity of 204 passengers - at that time the largest cargo for a civilian plane.
With the arrival of the 1950's and a booming U.S. economy, leisure travel had been born. The Inte
rnational Air Transport Association reported that scheduled airline service between Europe and North
America had increased 20% from the year previous. By the late 1950's the Jet age was looming. The
new aircraft were able to move larger numbers of passengers faster than ever across the continent a
nd oceans, and instilled a confidence in consumers about the safety and comfort of air travel. By 1
958 Pan Am had was using a jet aircraft that could cruise at 605 miles per hour . Why would one cho
ose to fly on a prop plane that was less-safe and half as fast as a newer jet model? In just over 1
0 years, the entire fleet purchased from Consolidated Value was obsolete. By the time Ronald Reagan
took office in January of 1981, the government was beginning to de-regulate the heavily regulated Ai
rline industry. Airlines were no longer required to file fare changes with the government and inter
national air treaties were opening the skies to increased competition. As a result, the rise of low
-fare competition was beginning to have a greater impact on the operations of the major carriers. R
ather than engage low-fare carriers in one-on-one attempts at competition, some carriers took extre
me measures to counter the effects of the discounters. In a landmark case, the Justice Department f
iled a lawsuit against American Airlines, charging that it tried to fix prices with Braniff Airlines
. The lawsuit alleged that then acting CEO, Bob Crandall, acting on behalf of the airline, attempt
ed to arrange a deal during a phone call with Braniff President, Howard Putnam, that would raise cer
tain Dallas fares 20%. COMPETITORS/SUBSTITUTES: The question with the complexity of all these factor
s taken into account is where does JetBlue fit in this industry and what threatens its livelihood?
We can safely assume that the commuter rail and bus lines do not pose any serious threat to the well
-being of JetBlue or any airline industry for that matter. Therefore, we will essentially consider
all airlines that service the same or alternate routes as JetBlue competitors: Delta, American Airli
nes, SouthWest, Continental, America West, NorthWest, United, and U.S. Airways. However, as JetBlue
has sought to provide a low-cost, high-service substitute to the lackluster high-priced airlines to
which Americans have become accustomed, their most direct competitor should be considered SouthWest
- which also provides efficient, "no-frills" carrier service. In addition to existing airlines, si
nce the "share of low-cost airlines has nearly doubled since 1986 to 15% in 1998." Small start-up c
arriers certainly pose less of a threat than established major carriers flying similar routes, and N
eeleman says "A lot of these small guys are the carrier of last resort... Big airlines put small one
s out of business when they put more planes in their market and the spillover to the last-resort air
line dries up." With the airline industry already struggling before the September 11, 2001 terrorist
attacks many airlines have asked congress and received "bailout" money simply to stay in business.
Despite this assistance, major airlines have been forced to make sweeping layoffs and drastic cuts
to the number of flights and cities serviced. It would appear, as illustrated by US Airways, that
highly leveraged airlines may be headed towards extinction. Amidst these economic woes, the airlin
e industry's giants are trying to keep pace with Southwest - whose profitability amid their losses h
as earned it a stock market value bigger than all its rivals' combined. As a benchmark for the indus
try, Southwest maintained a post 9/11 gross profit margin percentage of between 3 and 4 percent. In
contrast, United Airlines' post-9/11 gross profit margin is a -20 percent. IPO darling JetBlue has
been able to further raise this standard set by Southwest Airlines - posting a remarkable post-9/11
gross profit margin of 17.5 percent. However, this astounding success aside, the future promises to
present JetBlue with serious strategic issues - issues that have marked the collapse of other simil
ar airline start-ups. Primarily, the cost advantage enjoyed by JetBlue is certain to erode as the c
ompany's A-320 leases expire, the new planes age and purchases need to be made. Furthermore, in the
coming years the routine maintenance costs will begin to climb with the older fleet - just as they
did for SouthWest following their highly successful nascent years. Neeleman has also been able to k
eep the Unions at bay until now, but admits that their formation is foreseeable and would be "most d
isappointing" . The cost of both mechanic and pilot unions comprises much of the massive overhead f
or more mature airlines such as United and Delta. In its financial recovery plan, United hoped to t
rim its union-inflated expenses with "$5.8 billion in labor cutbacks with its flight attendants and
machinists." Also, with a low-cost initiative, it is questionable whether or not JetBlue will be abl
e to develop the economies of scale that allow other providers to offer low fares - and with the exp
ansion that could yield an economy of scale for the company, their focus on customer service would m
ost definitely suffer. In short, the question remains as to whether or not JetBlue's cost advantage
today will result in overall profitability for the long run, as other similarly structured airlines
- People Express, for example - have already crashed and burned. When questioned about the price th
reat, Neeleman has responded that his aim is to "get passengers to choose JetBlue more for the exper
ience than the fare." - a fair answer, but JetBlue has taken business away from other major airlin
es primarily by undercutting their fares, not offering frills. JetBlue has installed all leather on
their Airbus 320's, in-flight entertainment by way of personal monitors for every passenger and an
in-house 20 plus channel satellite television. In buying the satellite service provider, JetBlue ho
pes to have differentiated itself sufficiently to keep other from springing the required $40 million
to install a comparable system. Being still a small company by airline standards, JetBlue's 3,563 e
mployees benefit from a great deal of Neeleman's mentoring and oversight. But there is likely to be
turbulence ahead: unions, pension plans and retiree health care, rising capital costs, customer re
tention and expansion are all issues that will have their sway on JetBlue's future. IV. Internal st
rategic evaluation Mission Statement: "JetBlue has set out with a mission to, really treat customers
like customers, passengers like customers. I think people see passengers as an annoyance - 'Man, if
we just didn't have these people, my job would be a lot easier.' We realize that they pay our way e
very day," Owner, David Neeleman. (See attached Welcome Statement) Resources and Competencies The
fares for JetBlue are relatively low. But passengers get all-leather seats and live, 24-channel sat
ellite TV. David Neeleman bought the satellite company, which means other airlines will have to buy
the service from him. This is a tangible resource that has enhanced the company's long-run competiti
ve position. With the survival of the big airlines being severely tested on Wall Street, JetBlue st
ock went on the market in April. The stock soared, then dropped, but is holding its own. The Owner s
ay's "JetBlue is making money." On JetBlue, the headsets are free, but forget about getting a sand
wich, even on transcontinental flights. This helps keep expenses down. Another competency of JetBlu
e is flying just one kind of airplane - European Airbus A-320s. This reduces scheduling and preserva
tion problems, and it is more capable to keep up with the growing needs of an airline. Another way
that JetBlue keeps its costs down is their unique reservation system. Most tickets are purchased ov
er the Internet, with the airline offering e-tickets only. Also, JetBlue does not try to fly everywh
ere, concentrating its service in the Northeast, the West Coast and Florida. An additional intangibl
e resource that keeps costs down is there are no union members working for JetBlue. The employees, w
ho get fairly generous stock options and profit sharing, seem content not to have a union. JetBlue s
creens employees rigorously, trains them well and gives them the best tools. They are motivated and
service-oriented. Neelemean says, " He takes care of his employees, and they don't need a shop stewa
rd. That may sound paternalistic, but it helps keep his costs down." Distinctive competencies: JetBl
ue has a distinctive competency that has enabled them to achieve substantially lower costs than its
competitors. They have accomplished this by their unique and valuable resources, and the capability
to manage its resources as listed above. JetBlue has pursued its uniqueness in various ways. Rec
ently, David Neeleman showed up on one of his flights to talk to his passengers. "I hope you realize
we're trying a little harder than the other lines to treat our customers well," he told them. Je
tBlue believes that customer service is the only chance airlines have to survive. B: Organizational
Culture - Norms, assumptions and expectations JetBlue's goal is to make a personal connection with
its passengers. Neeleman does this himself by flying his airline once a week. He thinks most airline
s are more like freight trains or cattle cars and he wants JetBlue to be different. By offering the
customers the best experience JetBlue can deliver, they find most of them come back regularly and te
ll their friends and family about JetBlue. Their customers have given them incredible word-of-mouth
recommendations. Traditions, ways of doing things, personality Everyone pitches in. After they land
the plane, the pilots emerge from the cockpit to pick up the trash. After a flight to Buffalo, a Jet
Blue manager comes on board with her vacuum cleaner. Other airlines criticize JetBlue as a cheap sta
rt-up airline. Neeleman says JetBlue is different. "It's different with JetBlue. And people feel dif
ferent. They don't feel like they're flying on a start-up airline." Summary of strengths " weaknesse
s The strengths of JetBlue are various. They made a profit the first year! That is hardly ever hea
rd of. The owner has made some excellent marketing and non-traditional decisions that have worked w
ell for JetBlue. Costs are kept low by not offering traditional catering on the planes, using new p
lanes with no maintenance expense to services the customers, employees are not under a union system
and a large part of advertising is done by word of mouth. At the beginning, the experts simply waite
d for JetBlue to fold, as nearly every other start-up airline with aspirations of major success has
done since the U.S. airline industry was deregulated in 1978. There are still a lot of potential ob
stacles out there for JetBlue. The carrier is still small enough to care about customers and avoid t
he labor problems that hinder many large airlines, but its recent expansion throws up red flags: Gro
wth for an airline frequently spells trouble for its customers. JetBlue is also dealing with hardbal
l business tactics from other carriers, and the more the newcomer expands, the more opponents it wil
l attract. D: Current Strategies - Generic / Corporate Strategy How can JetBlue offer great service
with low fares and make a profit? The current and corporate strategy of JetBlue starts with an abu
ndance of liquid assets and reserves. JetBlue is noted as the best-capitalized airline start-up in h
istory. This means that JetBlue is able to empower themselves in the market by producing the best pr
oduct available. You will see them display it with their unique planes, free satellite TV, cozy leat
her seats and fast check-in technology. Second, they fly the newest innovative Airbus A-320. JetBl
ue has contracts for a fleet totaling 132 new A320 aircraft, with 123 ordered with Airbus. All JetB
lue aircraft are configured for 162 passengers and outfitted with leather seats with free satellite
television at every seat. Third, JetBlue embraces five values that represent the company and create
our unique culture: Safety, Caring, Integrity, Fun " Passion The five values that JetBlue has select
ed, not only differentiate JetBlue's product; they result in a superior customer and crew members. "
JetBlue is a different kind of airline... youthful, refreshing, more innovative then more mature air
lines. We're looking at creative ways to reduce the hassles of flying and simplify the travel experi
ence. So, we're looking for creative, dynamic people to work with us to help develop the airline tha
t brings humanity back to air travel." Fourth, JetBlue places focus on service. By offering customer
s the premium experience they can deliver, they find most of them come back regularly and tell their
friends and family. "It's not rocket science... our customers have given us incredible word-of-mou
th recommendations. (And for that, we will always be grateful.) At JetBlue, we're not perfect, but w
e do try to do things differently and work hard to be the best. But don't take our word for it. Ask
someone who's flown us." Current Functional Strategy As above you see that Neelman has outlined func
tional strategies directed at improving the effectiveness of basic operations with analyzing product
ion, smart marketing, materials management, research and development, and human resources. JetBlue
is aware of flexible manufacturing technology to increase the utilization of its aircraft. The JetBl
ue fleet of new Airbus A320s comes with a grouping of rewards. The new aircraft are more reliable, s
o they spend less time grounded where they won't enhance the capital for the company. They're more e
ffective, so they spend less on fuel than other carriers. In fact, JetBlue is the youngest fleet in
the sky. JetBlue also, looked to the Internet as another way to offer high-touch service at bargain
costs. Hip New York advertising agency Merkley Newman Harty translated the brand's clean, blue line
over to JetBlue.com. "We really wanted to make something that didn't look or feel like any other ai
rline's [website] and that [visitors would find] utterly simple and user-friendly," Curtis-McIntyre
says. The site has just a few navigational options, but the customers find it user friendly. While
the major carriers sell an average of 10 percent of their tickets online, JetBlue books fully half o
f its fares on the Web and saves about $5 in transaction costs for each ticket booked online. Curren
t Business-Level Strategy JetBlue's business-level strategy includes a plan of action that the manag
ers adopted using company resources and distinctive competencies to gain competitive advantage over
its rivals in the market industry. Neelman with his vast experience building airlines from scratch
was versed in his intentions for the foundation of the company. He knew what would gratify the cust
omer's needs: No outrageous promises of 'self- actualization' onboard, no unnecessary airfares, no c
attle-trained mentality, no hassles. In their place he added, simplicity, friendly people, technolog
y, design, and entertainment. Neelman detected what customers he was to provide for: Conservative c
ustomers expecting low-fares, with high superiority customer care. In the awake of September 11th,
JetBlue still maintains the low-cost leader. JetBlue ranked Best Domestic Airline in Condé Nast Trav
eler's 2002 Readers' Choice Awards and Best Domestic Airline (Coach) in Condé Nast Traveler's 2002 B
usiness Travel Awards. The airline also placed second in the Best Airline categories in Travel " Lei
sure magazine's 2002 World's Best Awards and Zagat's 2001 Airline Survey. (See attached awards for
customer service) He identified his distinctive competentices as a low-cost leader that has enabl
ed them to attain a position with fellow competitors. JetBlue shows valuable resources of capital,
cutting-edge airliners, self-reliant culture, pioneering leadership and this all presented by contem
porary marketing that grabs the attention of consumers and competitors. Current Global Strategy JetB
lue has been known primarily to have its focus on domestic travels at this early stage in their corp
oration. Though, they have stepped out of the domestic region and have announced plans to hold a dir
ect flight to Puerto Rico. JetBlue publicized flights to Puerto Rico in May 2002. Puerto Rico Gov
ernor Sila Maria Calderon said: "The presence of JetBlue Airways in Puerto Rico is especially import
ant as the airline has combined highly competitive fares with excellent service. Puerto Ricans who l
ive on the island and visit their families in New York now have a reasonable option for travel which
, without a doubt, will serve to reinforce the ties of family and friendship that exist between the
two cities. Puerto Rico gives its warmest welcome to JetBlue Airways and wishes the airline the very
best in its endeavors. JetBlue's success is our success." Evaluation of strategic fit with internal
organizations Rather than molding employees to an existing corporate structure, the airline is intr
oducing new twists to traditional jobs as a way of catering to the personal needs of employees. . In
stead of being in a room of 300 cubicles to answer phones all day, for example, JetBlue's staff of 3
50 reservationists work from their home. "We look at each work group and address what they want to
have happen, not what the company thinks should happen," says Ann Rhoades, executive vice president
of human resources. "Our style is accommodation." Content employees provide better service. So, in
order to keep employees, customers, and, ultimately, JetBlue happy, the airline has put a new spin o
n select job categories.
IV. Competitive Evaluation and Recommendations What do you recommend to a
company that turned a profit in every quarter since its inception and in an era of unprecedented in
dustry troubles has more than quadrupled the profit margin of the nearest competitor? How do you pr
ognosticate or even guess the problems that an airline will face when thstrategic analysis blue airl
ines executive summary jetblue company built focus strategy priced hassle ticketing refreshingly eff
icient customer service company began with goal eliminate many complexities asininities commercial t
ravel standard customer service thus company flown beyond these goals everyone expectations while re
turning handsome profit whomever chooses invest this airline industry success from humble beginnings
university utah drop david neelman shorlty became self taught airline industry guru gaining compreh
ensive understanding inner workings industry founder westjet open skies president morris experiences
gave first hand knowledge what worked what needed improvement airline business knowledge that belie
ved would help create innovative able revolutionize market neelman announced plans start called what
name lacked originality later made neelman innovative strategies within year then dubbed jetblue su
ccessfully completed application process inaugural flight took place february jetblue first birthday
already flown millionth passenger reported million flying revenue soon after second anniversary ann
ounced demand high that original offering price raised select darlings during bear market economy ot
her airlines were suffering from aftermath terrorist attacks revenues were continual rise september
already flown eight millionth customer people flocking answer luxury treatment economy cost seats le
ather outfitted with individual screen with access satellite stations from directtv there even cards
each seat pocket instructions flight yoga this more cost mantra service also cuts costs having rese
rvation agents work home directing customers tickets over internet plans soon have computer kiosks t
ake place ticket agents airport corporate lore loading luggage zero temperatures help flight runway
time whether fact fiction apparent that work ethic trickled down employees goal bringing humanity ba
ck travel making flying more enjoyable consistent profitability face challenging environment demonst
rates offers long term shareholder value focus remains driving line growth providing exceptional whi
le continuing maximize operating efficiencies grow david long maintain market edge cost fares hassle
ticketing will counter threat unionizing workers aging airplane fleet employees begin placing more
value tenure benefits packages than kind socially responsible management stock options these questio
ns than hypothetical they answered will determine future darling airlines sold paint much your paint
clerk well depends clerk actually things about giving average price clerk hard question lowest pric
e gallon have different prices gallon difference paint there difference same well then like some wel
l first need questions when intend want tomorrow tomorrow gallon when would have order would three w
eeks will also agree start painting before friday week continue painting until least sunday kidding
around here course check available before sell mean check sell shelves full stuff right there just b
ecause doesn mean same sell only certain number gallons given weekend just went mean went while were
talking change prices rules thousands times since haven actually walked store your just decided cha
nge unless want same thing happen again suggest your purchase many gallons want know exactly maybe f
ive gallons maybe should make sure enough then liable penalties possible confiscation already right
enough kitchen bathroom hall north bedroom stop painting before other bedroom violation tariffs does
matter whether paid point getting upset make plans based upon idea when causes sorts problems this
crazy suppose something terrible happen keep until sunday night does going somewhere else good compa
nies observe rules might here thanks flying though comical extreme preceding metaphor illustrates le
vel absurdity ticket pricing reached frustration felt those consumers choice purchase tickets throug
h fair arbitrarily expensive system real world bucket analogous example costs less expensive dependi
ng purchased similarly round trip several connections route final destination costs less than schedu
led covering distance charging fare almost without regard purchased answering question many consumer
s been asking makes drastic discrepancy pricing financials april successfully completed their initia
l public offering translates into mere seven months public financial information also relatively beg
un accounts currently experiencing stage growth been rapid earnings reported year over year increase
revenue million quarter three rueters states booked monthly profit august neeleman cagey specifics
says recorded about margin question maintain rapid growth stock been roller coaster traded nasdaq un
der ticker jblu after stock prices rose their time high began equalize stayed range seen october sha
re lock expiring months after making headway seen worst drop history currently lose billion sufferin
g slumping economy devastated tragic events september receiving less business both those cannot affo
rd those afraid times where other companies struggling tighten their belts corporate essentials amaz
ingly posted profit five times nearest competitor southwest amidst nearly unprecedented currently em
ployees workers pilots attendants mechanics ticket agents reservation specialists staff considered y
oung make anywhere between hour generous options though several pilots reported discussing matters u
nion remains unionized which helps keep labor roughly quarter revenues most starting salaries seem l
ower compared similar positions however willing work they offer excellent promotions added benefit o
ptions working home both size contribute centralization only half years employs three half thousand
result most major management decisions made level relatively thin hierarchical structure david neele
man center important decisions however grows becomes larger recognizes need decentralization need br
anch allow others freedom important business decisions date strategy diversify youth small size cont
ribute diversification entirety efforts concentrated creating quality lower however grows accomplish
es these original objectives diversification both related unrelated areas previously mentioned succe
ssfully differentiating itself providing superior combining attributes traditionally thought trade o
ffs customers often choose southwest cheap flights delta time arrival good preferable becoming known
because working differentiating itself friendly efficient high level integration viability hand str
iving most inexpensive they offer superior quality strive differentiation must require integration o
rder efficient understands because striving best best several value creation functions integration p
lays role ultimate success creation functions measures such setting teams integrating roles taken pl
ace order insure success example play role reserving cheapest possible assisting follows functional
structure where managers areas meet together discuss resolve issues external analysis increasingly h
ostile competitive environment immense strain placed individual firms secure customers return pressu
res them maintain efficiency during booming down turned markets performs thrives must scramble meet
demand flights airplane acquisitions hiring pilots attendants staff them hand travel sales slack com
panies face challenge hastily down sizing workforce minimize impact resulting shrinking revenues mar
gins furthermore massive scale which compete another established exclusive expensive playing field p
rivy only rollers willing gamble millions dollars huge required initial outlays create formidable ba
rrier entry competitors factors combine create large complex difficult define environment where scra
mble stay world domestic improved ability develop faster larger aircraft commercial born since unrel
entingly faced unpredictable sometimes devastating turbulence consolidation occurred rapid pace form
er giants american eastern piedmont routes gobbled delta american united emerging trio giants domina
ted leading into began nearly five financial freefall resulted loss tallying estimated billion even
majors lost billions dollars star emerged profound effect structure southwest fare point point carri
er based dallas immediate unequivocal change forever public fare significantly altered operations ma
jor domestic herb kelleher built secondary airports midsize cities initially focusing southwestern w
estern united states weather usually warm traffic relatively congested able lure away travelers comp
lex unintelligible confusing rules typified major carriers strategy quickly steal share away carrier
s followed small slew notable capitalized carriers bleed profits larger continental player respond u
nveiling november discounted called continental lite unclearly poorly differentiated spin offered di
scounted fares bare bones fewer restrictions purchasing tickets parent corporation result continenta
l lost hundreds millions dollars lite finally discontinued focused instead reducing move further hur
t profits allow better compete delta next respond threat signaled massive restructuring program name
d goal transform into effective which never laid single employee years skies fired thousands workers
sold core assets reduced meal dropped profitable traffic routes following lead fell line version cu
tting doing possible grow margins profitability provides example happens cuts much core operations c
uts directly areas employee morale onboard meals baggage handling arrivals eventually realized cutti
ng agent commissions could save tens millions without directly hurting since restructuring convenien
tly incided birth commerce able dove tail independence electronic continues receive poor reviews sta
r rating popular internet ranking site difficult gauge exactly much damage negative consumer feedbac
k caused bottom line given faces fierce competition presented obstacles could thwart struggle certai
n face staying cutting edge technology aviation history eroding competitive advantage through advanc
es technology ordered fleet consolidated planes cruising speed miles hour capacity passengers larges
t cargo civilian plane arrival booming leisure born international transport association scheduled be
tween europe north america increased previous late looming aircraft move numbers passengers faster e
ver across continent oceans instilled confidence consumers about safety comfort using aircraft could
cruise miles hour choose prop plane safe half fast newer model over years entire fleet purchased co
nsolidated obsolete ronald reagan took office january government beginning regulate heavily regulate
d longer required file changes government international treaties opening skies increased competition
result rise competition beginning greater impact operations rather engage attempts some took extrem
e measures counter effects discounters landmark case justice department filed lawsuit against americ
an charging tried braniff lawsuit alleged acting crandall acting behalf attempted arrange deal durin
g phone call braniff president howard putnam raise certain dallas fares competitors substitutes comp
lexity factors taken account does threatens livelihood safely assume commuter rail lines pose seriou
s threat being matter therefore essentially consider alternate routes competitors america west north
west united airways sought provide substitute lackluster priced americans become accustomed direct c
ompetitor should considered provides frills carrier addition existing share nearly doubled small sta
rt certainly pose established similar neeleman says guys carrier last resort ones planes spillover l
ast resort dries struggling september terrorist attacks asked congress received bailout money simply
stay despite assistance forced sweeping layoffs drastic number flights cities serviced appear illus
trated airways highly leveraged headed towards extinction amidst economic woes giants trying keep pa
ce whose profitability amid losses earned bigger rivals combined benchmark maintained post gross mar
gin percentage between percent contrast post gross margin percent darling further raise standard pos
ting remarkable post gross percent astounding aside future promises present serious strategic issues
issues marked collapse similar primarily advantage enjoyed erode leases expire planes purchases mad
e furthermore coming routine maintenance begin climb older following highly successful nascent union
s until admits formation foreseeable disappointing mechanic pilot unions comprises massive overhead
mature such financial recovery plan hoped trim union inflated expenses billion labor cutbacks attend
ants machinists initiative questionable whether develop economies scale allow providers offer expans
ion yield scale focus definitely suffer short remains advantage today overall long similarly structu
red people express crashed burned questioned responded passengers choose experience fair answer take
n away primarily undercutting offering frills installed leather airbus entertainment personal monito
rs every passenger house plus channel satellite television buying satellite provider hopes different
iated itself sufficiently springing required million install comparable system being still standards
benefit great deal mentoring oversight likely turbulence ahead unions pension retiree health care r
ising capital retention expansion sway future internal strategic evaluation mission statement missio
n really treat like like think people annoyance didn easier realize every owner attached welcome sta
tement resources competencies leather seats live channel bought means tangible resource enhanced com
petitive position survival being severely tested wall street went april soared dropped holding owner
making money headsets free forget getting sandwich even transcontinental helps expenses another com
petency kind airplane european airbus reduces scheduling preservation problems capable growing needs
another keeps unique reservation system internet everywhere concentrating northeast west coast flor
ida additional intangible resource keeps union members working fairly generous sharing seem content
screens rigorously trains them gives best tools motivated oriented neelemean says takes care shop st
eward sound paternalistic helps distinctive competencies distinctive competency enabled achieve subs
tantially lower accomplished unique valuable resources capability manage resources listed above purs
ued uniqueness various ways recently showed talk hope realize trying little harder lines treat told
believes chance survive organizational culture norms assumptions expectations personal connection hi
mself once week thinks freight trains cattle cars wants different experience deliver find come back
regularly tell friends family given incredible word mouth recommendations traditions ways doing thin
gs personality everyone pitches land plane emerge cockpit pick trash buffalo manager comes board vac
uum cleaner criticize cheap different feel feel summary strengths weaknesses strengths various hardl
y ever heard owner some excellent marketing traditional worked kept traditional catering using maint
enance expense services under large part advertising done word mouth beginning experts simply waited
fold every aspirations done deregulated still potential obstacles still enough care avoid labor pro
blems hinder large recent expansion throws flags frequently spells trouble dealing hardball tactics
newcomer expands opponents attract current strategies generic corporate great current starts abundan
ce liquid assets reserves noted capitalized history means empower themselves producing product avail
able display unique free cozy seats fast check technology second newest innovative airbus contracts
totaling ordered configured outfitted free television seat third embraces values represent culture s
afety caring integrity passion values selected differentiate product superior crew members kind yout
hful refreshing mature looking creative ways reduce hassles simplify experience looking creative dyn
amic help develop brings humanity back fourth places premium deliver find come regularly tell friend
s family rocket science incredible word mouth recommendations always grateful perfect things differe
ntly hard take someone current functional above outlined functional strategies directed improving ef
fectiveness basic analyzing production smart marketing materials management research development hum
an aware flexible manufacturing increase utilization comes grouping rewards reliable spend grounded
enhance capital effective spend fuel fact youngest looked touch bargain york advertising agency merk
ley newman harty translated brand clean blue really wanted something didn look feel website visitors
find utterly simple user friendly curtis mcintyre site navigational user friendly average online bo
oks fully saves transaction each booked online includes plan action managers adopted using distincti
ve competencies gain rivals vast building scratch versed intentions foundation knew gratify needs ou
trageous promises self actualization onboard unnecessary airfares cattle trained mentality hassles a
dded simplicity design entertainment detected provide conservative expecting superiority awake maint
ains leader ranked domestic cond nast traveler readers choice awards coach cond nast traveler awards
placed second categories leisure magazine world awards zagat survey attached identified competentic
es leader enabled attain position fellow shows valuable capital edge airliners self reliant culture
pioneering leadership presented contemporary marketing grabs attention global known primarily travel
s early stage corporation though stepped region announced hold direct puerto rico publicized puerto
rico puerto rico governor sila maria calderon said presence airways especially important combined hi
ghly excellent ricans live island visit families york reasonable option without doubt serve reinforc
e ties family friendship exist cities gives warmest welcome wishes very endeavors evaluation interna
l organizations rather molding existing introducing twists traditional jobs catering personal needs
instead room cubicles answer phones staff reservationists home look each group address happen thinks
should rhoades executive vice president human style accommodation content provide better ultimately
happy spin select categories evaluation recommendations recommend turned quarter inception unpreced
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