JetBlue Airlines Case Analysis
JetBlue Airlines Case Analysis

JetBlue Airlines Case Analysis

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  • Pages: 13 (6363 words)
  • Published: October 20, 2017
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JetBlue Airlines Strategic Management Case Analysis Introduction to the Company History of the Firm JetBlue was established in 1999, and was the third airline start-up for founder and CEO David Neeleman. Neeleman managed to gather $130 million, the most ever raised for a start-up airline, from investors that included Chase Capital and financier George Soros. With the large start-up capital he purchased new Airbus A320 jets equipped with satellite TV, a first in the industry. In 2004 the company ordered an additional 30 new A320 aircrafts from Airbus.The airlines first flight was from New York to Fort Lauderdale in 2000. During the year, the airline added nine more destinations in California, Florida, New York, Utah, and Vermont.

By 2001 the airline was operating 20 new A320s with an ambitious 131 on order (JetBlue Airways Corporation, n. d. ). The terrorist attack of September 11, 2001 crippled the airline industry, however, JetBlue continued to expand its network, and it went public in 2002. JetBlue added nine new destinations in 2004, including Boston.

They further expanded in 2005 offering the company’s first non-stop coast-to-coast route from Burbank, California to JFK. In 2007, the company partnered with Yahoo, Research in Motion, and LiveTV to provide complementary in-flight email and instant messaging services. The same year, JetBlue and Lufthansa entered into an agreement by which Lufthansa purchased 19% of JetBlue. Mission Statement and Vision Statement JetBlue’s “mission of bringing humanity back to air travel” (Jetblue Airways 2006 Annual Report, n. d.

) is supported by their core values of safety, caring, integrity, fun, and passion.JetBlue’s vision is to

...

establish itself as the leading U. S. low-fare carrier.

Since their first official flight on February 11, 2000, their primary goal has been to grow enough to be successful, but to remain small enough to preserve their original strategic direction. Corporate Governance & Key Players Key information on the corporate governance of Jet Blue Airways is presented in Appendices 1-3. Appendix 1 provides an overview of the Board of Directors. Appendix 2 introduces the reader to the top management team.

Appendix 3 reviews the Standing Board Committee Composition for the audit, compensation, and corporate governance committees. Jet Blue Airways has painstakingly followed guidelines from the Sarbanes-Oxley Act to institute clear charters for each committee. Further, the company has implemented a code of business for the entire organization conduct and a code of ethics for its board members. A major director holder of Jet Blue Airways is Deutsche Lufthansa AG with 19% of equity or 42 million common shares (2007 Annual Report on 10K, 2008, February 19, p.

66).Major institutional investors include Manning and Napier Advisors, Thornburg Investment Management, Primecap Management, and Capital World Investors (Appendix 4; Jet Blue Airways Corporation Major Holders, n. d. ). Major goals and objectives JetBlue’s major goals and objectives are to offer a low fare, low cost passenger airline that provides high quality customer service, and to build an organization where the employees take pride in their company (JetBlue Airways 2006 Annual Report, n.

d. ). Present strategy/strategies Some of JetBlue’s most important strategies are: •Limiting operating costs •Flying with a new Airbu

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A30 Fleet Developing a quality brand •Hiring dedicated employees •Pursuing the latest technology Its overall strategy has been to identify routes with high average fares and beat the competition price, as well as to distinguish itself with service offerings such as TV and radio programming. Identification of the Industry The passenger airline industry in the U. S.

is comprised of three segments: major carriers, regional carriers, and low-cost airlines. Currently there are 16 major carriers, the largest of which are American, Continental, Delta, Northwest, Southwest, and United (JetBlue Airways 2006 Annual Report, n. . ). These airlines offer scheduled flights to most large cities, and except for Southwest, use the traditional hub and spoke network route system (Flint, 2005).

Regional airlines such as SkyWest and Mesa generally operate smaller aircraft on lower volume routes. These airlines generally form alliances with the major carriers and provide service from their hubs to smaller cities in the region. Low cost carriers such as Southwest developed after deregulation in 1978. Southwest pioneered the low cost airline model, which many other airlines have tried to copy.Although there are currently four low cost major U.

S. carriers (JetBlue Airways 2006 Annual Report, n. d. ), major competitors according to market share include (Figures 1 and 2; JetBlue Airways Corporation Overview, n. d.

): •AMR Corporation •Southwest Airlines, and •UAL Corporation. Industry Profitability Intensity of Rivalry The airline industry can be considered an imperfect oligopoly. There are several large carriers that dominate long distance flights, and many small carriers that compete for short distance flights. Competition is fierce, and the return for most carriers is very low.Some airlines are trying to differentiate themselves, like JetBlue for example, by offering superior services at low prices. Other low cost airlines, like Southwest, offer low costs with no frills.

Most airlines offer a frequent flyer programs in order to develop brand loyalty. In recent years there has also been several alliances formed between airlines. These alliances enable the airlines to share customer information, schedules, and distribution systems. Threat of New Entrants The airline industry is a highly capital intensive industry, which is a major barrier for new entrants.Along with the capital required for start-up, government regulations and licensing which can be difficult to obtain. A second reason the risk of new entrants at this point in time is low is the current cost of fuel, which is a major operating costs for all airlines.

Other deterrents are: the difficulty in establishing a strong brand identity, generating start-up capital, and obtaining the distribution channels required to compete. Threat of Substitutes There are several substitutes to air travel including automobiles, buses, and trains.Most potential customers make their travel decision based on time, money, personal preference and convenience. Air travel offers a good benefit/cost ratio, and offers time advantage over most other methods of travel.

Bargaining Power of Suppliers For aircraft, there are basically two major suppliers, Boeing and Airbus. Because of the limited options available, it is difficult for airlines to exert much power over these two suppliers. However, both Boeing and Airbus are very dependant on the airline industry as well,

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