A case study presentation on Strategic Management in JetBlue airways in book of Strategic Management by Michael A Hitt

1. Prepared by Roll Number 10735 FawadHussain, 2014
Case Study No 18
Page : 635
Strategic Management by Michael A Hitt

2. INTRODUCTIO
N

3. INTRODUCTION
• Incorporated in Delaware in August 1998.
• David Neeleman 1st 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 as in-flight entertainment, TV on every seat and Satellite
radio.
• CEO’s vision “To bring humanity back to air travel.“
• JetBlue's founders had set out to call the airline "Taxi“ The
idea was dropped later.

4. INTRODUCTION
• The company is headquartered at the Long Island New York.
• Its main base is John F. Kennedy International Airport
• The airline mainly serves destinations in the United
States, along with flights to the Caribbean, The
Bahamas, Bermuda, Barbados , Colombia, Costa
Rica, the Dominican Republic, Jamaica, Mexico and Puerto
Rico.

7. VISION

8. Mission Statement
Jet Blue’s mission is to be the leading low-fare, low-cost
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 don’t 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.

9. CORE Values
Safety First
& always in
the business
Relations with
Customer &
Crew
Exhibit a
Sense of
Humor
Achievement
Orientation &
Striving
Organizational
Commitment,
& honesty

10. Core Values
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 Personal and
Company Growth
INTEGRITY:
Demonstrate Honesty,
Trust and Mutual
Respect; Never
Compromise the
Values for Short-Term
Results; Possess and
Demonstrate Broad
Business Knowledge;
Commit to Self
Improvement.
FUN: Exhibit a 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.PASSION: Strive to Meet the
Needs of Crewmembers and
Customers; Team Spirit; Deliver
Superior Performance;; Look for
Innovative Solutions to Business
Issues

11. Innovative Strategies
•No meals during flights
• Providing personal
television
• Leather seats instead of
cloth seats
•Use of new aircrafts
• Use of more fuel-efficient
and less maintenance cost
Airbus
• Initially less routes
•Point-to-point flight

12. 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
• Created fun

13. 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

14. 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 75 to 47
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
•Streamlined costs

15. 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 JetBlue’s 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.

16. Other Competitors
Spirit Airlines Virgin America America West
Southwest Airlines Frontier Airlines Sun Country Airline
Delta
United Airlines

17. 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 customer’s need
 Fleet now aging
 High maintenance costs

18. 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

19. Market Positioning
Price
Low
High
QualityLow
Southwest
American Airlines
United Airlines
Delta
Frontier
AirTran
JetBlue
Position Map

20. NEW VISION – 2007 Onwards
“HIGH end customer services at LOW end
prices”

21. Additional Strategies Past 2007
Work on improving image of airline
as superior customer service provider
Offered pre flight and during flight
free snacks and optional lunch /
dinner on payment
Customers benefited from simple to
use reservation system
Booking agents could work from
home
Pre assigned seating and ticketless
travel was made possible
Develop a new terminal at JFK
airport – to improve its on-time
departure and arrival averages at
airports. US$80 million invested
 Sold a stake of its shares to
Germen carrier Lufthansa – to
increase revenue & allow the
customers to book code share flights
Customer advisory council was
established
Comfort in Flight
Additional 2 inches of leg room
100% non-fat selection of
complementary and unlimited
snacks
All passengers provided with
comfort kit for a healthy sleep
Crew wakes up the customer
from sleep
Single class travel for all
passengers
Double points for true blue
members

22. 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

23. 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 there’s an empty seat on an earlier flight, it’s
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.

24. New Slogan

25. JetBlue Valued Services

26. 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
Expansion in the fleet = More costsPayroll costs will increase with
aging
Staff growth will increase payroll
expenses
Seniority attained by staff and
crew

27. QUESTIONS ?