Jet Blue Airways Essay
Jet Blue Airways is a low cost airline that has revolutionized the American airline industry. This paper aims at analyzing the strengths, weaknesses, opportunities and threats of this company and presenting the information in a SWOT matrix. It also aims at analyzing the value chain, Porter’s five forces, organizational structure and the external environment of this airline.SWOT analysis of Jet Blue airways.
• Low CostJet Blue uses a strategy where it charges low cost fares, while at the same time offering high quality services. The airline has managed to provide high quality services at low prices due to several factors. These include operating aircraft of a similar type throughout its fleet and offering a service incorporating only a single class of air travel (Wynbrandt, 2004). Operating single fleets lowers maintenance costs thus increasing efficiency, while single class service saves service costs.
This strategy enables the company to maintain low costs and thus attract more passengers.• Differentiation.This airline provides product differentiation, a fact which makes it unique. While other airlines face problems such as limited leg room, poor quality of air, poor seat fabric and contours, identical overhead compartments and lack of nourishment, Jet Blue takes advantage of this (Cummings et.
al., 2003). This airline provides passengers with satellite TV and leather seats. It also offers convenience through pre-assigning seats, thereby reducing confusion present in other airlines over sitting arrangements.• Communication.Jet Blue faces an advantage over other airlines when it comes to communicating with passengers.
Its website is user friendly and allows passengers to choose different fares for each flight. In addition to this, it provides its passengers with an opportunity to view the prices for its competitors. The reservation system is ticket-less, which encourages more passengers to apply.• Size.
Jet Blue competes with some major airlines which have routes in almost all continents. Jet Blue has not yet take advantage of some of these major routes due to this weakness. Its relatively small size has prevented the airline from gaining significant influence over this industry. It does not have access to Chicago, Atlanta and other major cities, which limits the revenue earned by the airline.
Since the airline recently bought thirty new planes from Airbus, this means that they will be underutilized if it does not expand its routes. This loss of revenue and the demands for supporting the existing planes may make the airline financially unstable.• Poor policies.Jet Blue has some policies which are viewed by some customers as being unfair. For instance, its frequent flier miles program dictates that the points expire annually. This is seen by some passengers as being dishonest.
It also had a policy where instead of canceling delayed flights, it opted to complete them. This ended up making Jet Blue at the bottom of major airlines on-time performance rankings. This served to reduce some of the goodwill that it had earned over the years.• Expansion.
Jet Blue has many opportunities to venture into regional and undeserved markets. Emerging markets also provide an opportunity to venture into. Jet Blue has applied its model and it has successfully worked in the US. It is also a brand name and has goodwill from many customers. It should therefore find it relatively easy expanding into untapped markets, and this will increase its profits. However, it can achieve this goal more effectively if it enters into a strategic partnership with another profitable airline (Pearce and Robinson, 2005).
• Fuel cost.There has been an unprecedented increase in the global oil prices. This heavily affects the airline industry since it is one of the largest consumers of fuel. Jet Blue has built its reputation through offering low cost fares, and the increase in fuel prices threatens this strategy.
The airline cannot maintain fares at low prices for long, with high oil prices, and significant increase in fares may make customers move to its competitors.• Threat of new entrants.There are many entrants to the airline industry in these recent times. This creates competition between the present airlines which makes profitability difficult for the existing airlines. The increase in the number of airlines means that customers have a high number of choices to choose from, which forces airlines to reduce costs. This has a negative impact on profitability.
It requires a new airline to differentiate itself so that it can perform well in the market.• Global economic meltdownThe present economic recession which is facing many economies is a threat to the profitability of airlines. The meltdown is reducing the disposable incomes of the common man, which reduces the number of people willing to travel through air, as it is more expensive than other forms of transport (Felsenheimer and Gisdakis, 2008). The economic meltdown is also limiting the number of options which airlines can use to borrow capital to expand, especially in the wake of the mortgage crisis. This limits the growth of the airline industry.
The major strategy that Jet Blue is using is the cost leadership strategy. According to this strategy, a firm produces goods or services at lower costs and markets them to a large market. This strategy combines cost reduction in activities of a firm and extensive distribution channels (Peterson, 2004). Jet Blue uses single type aircraft and services to reduce costs, and provides ticket-less reservations and effective marketing as a means of increasing the market share.
This is a consistent with the cost leadership strategy.In the value system chain, Jet Blue can be said to add value to their products through providing satellite TV to passengers. It also achieves this through providing leather seats and more leg room to passengers. This makes customers opt to use this airline as opposed to other airlines.