Case Analysis using Operation Strategy

1. JetBlue Airways: Managing Growth
Abhishek Mishra 15PGPWE 01
Santosh Pant 15PGPWE 09
Operation Strategy 2015-17
IIM R
Group 5

2. Fact Sheet: JetBlue
 First to launch with more than 100 million in capital.
 First to offer 24 channels of live satellite free at every
seat.
 First to broadcast the Olympics live at every seat.
 First to Paper less cockpit technology.
 First to have Security cameras.
Major Competitors
 Americans
 Southwest
 United

3. S O
Low
Operating
cost
Strong brand
Efficient
employee
Industry
Route & fleet
expansion
Creation of
Airlines
Alliances
Positive factors
SWOT ANALYSIS

4. S O
Single fleet
Consumer
satisfaction
Effective use
of technology
Technological
Improvements in
Airplane design,
operation and
maintenance
Deregulation
of
international
air travel
Positive factors
SWOT ANALYSIS

5. W T
Relative new
company
Single fleet
Concentration on
middle class
Global crisis
and Union
Security
Increase in
fuel price
Negative factors
SWOT ANALYSIS

6. Fact Sheet: JetBlue
 First to launch with more than 100 million in capital.
 First to offer 24 channels of live satellite free at every
seat.
 First to broadcast the Olympics live at every seat.
 First to Paper less cockpit technology.
 First to have Security cameras.
Major Competitors
 Americans
 Southwest
 United

7. • Political issue
 September11, terrorists attack
 Political stability
 Competitive Airline industry
 Regulatory factors
PEST ANALYSIS

8. PEST ANALYSIS
• Economic issue
 Improved purchasing power
 Rise in Inflation
 Rise in oil prices

9. • Social issue
 Greater customer awareness
 Increased entertainment level
 Security level of customers
 Bad services & lost baggage
PEST ANALYSIS

10. PEST ANALYSIS
• Technological issue
 Beginning of e-ticketing
 Automated systems (cockpits)
 Advertisements (newly introduced
animated)

11. a) How would you describe JetBlue's
operations strategy prior to the November
2005 adoption of the E190?

12.  low fares (65% lower than other competitor) and point-to-point model.
 Key operating principle was that flight cancellations should be avoided at all
cost.
 Single type of plane, its fleet consisted entirely of A320.
 Connecting Large, typically north-eastern, US cities and more long haul flights.
 Reservation policy – tickets to be purchased via company’s website or through
part-time employed reservation agents.
 Differentiation to other LCC: Comfort features such as assigned seats, leather
upholstery, and satellite TV on individual screens in every seat.

13. b) Compare the economics of the E190 and A320 for
JetBlue. What are the key drivers of profitability for
each type of plane?

14. CASM (Cost per Available Seat Mile) , E190 is
12% higher than A320, 34% less than typical RJ.
Revenue available seat mile (RASM), E190 is
higher than A320. From Exhibit 9, we could
calculate E190 RASM is about 30% higher than
A320.

15.  Owing to greater range and seating capacity relative to RJ’s E-190 could target wider
range of profitable destinations.
 Higher utilisation of 10 to 11 hours a day compared to an average of 8 hours per day
for RJs.
 Higher RASM, easy to get breakeven point because of the low capacity of passenger.
(break even load of 75% to 80% was much lower on E-190 than A320).
 Lower acquisition costs. ($30-40 Million).
 Increase the range of choices available to JetBlue passengers by feeding customers
to connecting A320 flights.
Key drivers of profitability of E190

16. Larger capacity. (150 against 100 of E-190).
High fuel efficiency.
Medium & Long-haul routes.
Standardized training & Servicing Processes: A320 was a proven
plane that had served as basis for JetBlue’s operations. The company
had developed a high level of comfort with it.
Key drivers of profitability of A-320

17. c) Do you agree with JetBlue's decision to add the
E190 to its fleet? Be prepared to state the rationale for
your
decision.
Yes we do agree to this..

18. Since E190 feed customers to connecting A320 flights, it resulted in higher
loads and improved economics for JetBlue.
Transfers at focus cities would also improve the utilization of existing airport
facilities, increasing productivity and reducing downtime for airport crew
members.
This synergy between the E190 and A320 resulted in utilization of E190s of 10
to 11 hours a day, significantly more than average of 8 hours per day for RJs.
Number of passengers required for a flight to meet the typical “breakeven”
load of 75% to 80% was much lower on the E190 than the A320, E190 made it
easier for JetBlue to introduce service in new markets.

19. c) How should JetBlue slow down the growth
of its fleet? Should it cut growth in A320
capacity, E190 capacity, or both ?

20. JetBlue should slow down the growth of its fleet.
This cut should be across both in A320 and E-190 planes.
Reasons:
E190 as a unique plane that could be used as an engine for future growth.
A320 is a proven aircraft around which JetBlue had standardized its training and
operating activities.
In addition, E190 and A320 could inter-activate utilization. So it is not fit to cut
growth in only A320 capacity or E190 capacity.

21. Thank you