Strategic Management of JetBlue

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I.

COMPANY PROFILE

JetBlue Airways Corporation commonly called JetBlue, is an American low-cost airline. The company is headquartered in the Long Island City neighborhood of the New York City borough of Queens, with its main base at John F. Kennedy International Airport. It also maintains a corporate office in Cottonwood Heights, Utah. JetBlue Airways Corporation (JetBlue), incorporated on August 24, 1998, provides air transportation services across the United States, the Caribbean and Latin America. JetBlue Airways took off on its first flight on February 11, 2000. At that time, the company only had two aircraft and provided service to one destination. In five years, on January 1, 2005, JetBlue become a major U.S. airline as categorized by the U.S. Department of Transportation. The airline achieved this status faster than any airline in aviation history. Currently, JetBlue Airways flies to 84 destinations in 12 countries and has a fleet of 151 aircrafts. The airline mainly serves destinations in the United States, along with flights to the Caribbean, Peru, The Bahamas, Bermuda, Barbados, Colombia, Costa Rika, Jamaica, the Dominican Republic, Mexico, and Puerto Rico. This is very a significant milestone due to the far-reaching effects on an industry wide shakedown of cost such as fuel and labor. In order to continue competing effectively in the marketplace, it is crucial for JetBlue to understand the dynamics of its industries and markets.

II. 

VISION AND MISSION

Vision Statement : To provide the best, most affordable flight experience of any air carrier while providing superior service.



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.

III.

COMPANY CULTURE

JetBlue’s Culture was founded and built on 5 simple company values, thus are: 

Safety : Number one of JetBlue value and it always comes first.



Caring : In the form of respect and understanding, is the hallmark of who they are. It brings the JetBlue experience to life.

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

Integrity : Doing the right thing; and they believe it’s the only way to do the business.



Fun : Translates to a friendly work environment where people like to be.

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Passion : What they do is what they product the best in industry. These five values not only differentiate JetBlue from the rest; they ensure a superior customers

and crewmember experience.

IV. 

COMPANY GOAL

The company’s goal has been to establish itself as a leading low-fare, low-cost passenger airline by offering customers high-quality customer service and differentiated products.



They focus on serving underserved markets and large metropolitan areas that have high average fares with a diversified geographical flight schedule that includes both short and long haul routes.

V.

SWOT ANALYSIS Strength

Weakness

1. Recipient of Highest in Customer

1. It has less international destinations. Does

Satisfaction Among Low Cost Carriers in

not have presence in Asia and other

North America Award for 8 consecutive

unsaturated market

years, thus has a very strong brand image in

2. Higher costs linked to airline's several

America

facilities are making the company less

2. New and efficient aircrafts (youngest fleet

competitive

amongst any major U.S. airline) 3. It was one of only few airlines which reported profit after the decline in airline industry post 9/11 attack 4. High customer satisfaction due to various facilities such as satellite radio, T.V set on each seat and all this at a low fare as compares to other players in the industry 5. Serves as a popular low-cost airline across 75 destinations

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Opportunity

Threat

1. America is the single largest market in the

1. Most of the major airlines have undergone

world

cost reformation to reduce the air fare

2. Introduction of new planes has created the

2. Rising fuel prices and problem of

opportunity for new routes

availability of fuel

3. Huge scope to expand in the Asian market

3. Fluctuation in the demand of air travel especially after terrorists attack

VI.

PORTER’S FIVE FORCES

1. Threat of new entrants - Low Potential and existing competitors influence average industry profitability. In JetBlue’s case, the threat is from existing competitors already in the market. This is mainly due to the current economic state we are in which greatly affects the market entry barriers. The cost of entry consists of extremely high fixed costs and massive capital requirements. In this economy, it would be nearly impossible to find funding with the excessive risk, low buyer confidence and debt to asset ratio of the airline industry. Major competitors of JetBlue are already decreasing flights and merging with one another in order to consolidate debt and stay in business since fixed costs are extremely high. However, it is difficult to differentiate between products and services in this industry since there is little protection of key technologies. Fortunately, since its inception, JetBlue has offered many innovative strategies. These include personal satellite TV (with programming from DIRECTV),

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satellite radio (from XM), roomy leather seats, snacks and beverages. The cabins would have only one class of seats which tied into everything eluded an overall first class experience. To close, the airline industry has a low threat to entry with little to no appeal.

2. Power of Suppliers - High The key inputs in the airline industry are the jet fuel and aircraft suppliers. The airplane manufacturing industry is dominated by Boeing and Airbus, supplying the majority of airplanes for medium to large airline companies. For this reason, the suppliers have most of the bargaining power in setting and increasing prices when costs rise. However, because of the hard economic times Airbus and Boeing are struggling with the airline companies since they are not experiencing any growth and have re-designed their strategies to discontinue purchasing aircrafts. As a direct result, JetBlue and its competitors have an increase in the bargaining power of this market. On the other side of the spectrum, there are plenty of jet fuel suppliers. However, the price of jet fuel has been on a constant rise and is the primary reason most airline companies are not making any profits. On the bright side, since JetBlue's fleet consists of only two types of aircrafts it keeps the cost of the airplanes lower than if they had a fleet of all different types of airplanes. Nevertheless, most airline companies have very little bargaining power given that there is a market price for jet fuel and most airline companies pay exactly or close to that price. In addition, the volume of fuel supplied to the airlines is extremely important because JetBlue has prescheduled flights that require a certain amount of fuel. To close, the bargaining power of suppliers is high.

3. Power of Buyers - High There are several options available to customers with what airline they choose to fly. Since products and services are essentially standard, customers of this industry are price conscious under their belief that all airline companies will get them to their destination but would prefer to fly with the one that can get them there cheaper. With websites such ascheaptickets.com and universal booking and ticketing online, it is easily accessible for customers to research the best price. The recession and overall increase in fixed costs has hit the industry hard and as a result, they have had to raise their prices. By doing so it has led to airlines not filling some flights. High bargaining power for the buyers is a product of this condition because it keeps the average flight cost lower than what it should be given the current industry conditions and promoted competition to the airlines to be price leader.

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4. Threat of Substitute products - High The numbers of substitutes available in the traveling industry as a whole are numerous. They range from trains such as Amtrak, buses such as Greyhound to boats and personal vehicles. The airline industry faces little threat from substitute products however since the cost of traveling is on the rise, people desire a cheaper way to get around if it is feasible. Furthermore, with the state of the economy people are inclined to travel less hurting the industry as a whole and now more than ever people will drive further if they believe it will save them more money.

5. Intensity of Rivalry among Competitors - High The intensity of rivalry among competitors in the airline industry is very high. This is due to the numerous companies that strive for the dominant market share in the industry. Airlines typically try their hardest to differentiate themselves to gain a competitive advantage, but these actions typically invite competitive responses from the others. Other factors that contribute to rivalry include high fixed and storage costs, slow industry growth as a whole and readily available prices via the Internet. By adding all these factors up, it is clear that the airline industry is not attractive. However, by JetBlue’s application of unique business strategies and core competencies they have been able to make a profit in excess of the industry average. JetBlue has been able to accomplish this in the hardest times following the September 11 attacks by reporting a net income of $28.3million on total revenues of $224.9 million.

VII. 

PRIMARY ACTIVITIES OF JETBLUE

Inbound Logistic Low cost, simple to use cost effective reservations system, ticketless travel, pre-assigned seating, paperless cockpits, search engine optimization and BlueTurn; for minimizing ground time.



Operation Movement of good and passengers, Aircraft maintenance, crew training, piloting, customer service, administration.



Outbound Logistics Completion rate. In terms of customers, the services are consumed as it is produced. Baggage handling – Hotel packages.

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

Marketing and Sales Low cost animated TV ads plus American Express loyalty card and word of mount. Innovative marketing campaigns utilizing customers feedback, comical postcards, leather benches and snack bins in Airport, JetBlue exhibits and direct marketing campaigns with students.



Service Simple to use reservation system, ticketless travel, pre-flight conveniences, pre-assigned seating, leather seats and extra leg room, free DIRECTV service and complimentary snacks and ‘comfort kits’.

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Core Competencies Valuable rare inimitable Organized to take advantage Collective knowledge base, extendable to multiple markets

VIII. FIVE GENERIC STRATEGIES

The two bases of JetBlue’s competitive advantage are ‘Cost Leadership’ and ’Differentiation’. JetBlue achieves cost leadership by attaining efficient operations. New planes minimize maintenance and fuel costs, larger planes ensure more revenue per flight, longer hauls on an average as compared to other point-to-point services keep planes longer in air. No-meals served helps quicker turnarounds and reduce costs. Reservation agents working from home reduce need for physical infrastructure, and thereby reduce overhead costs. Firms pursuing low-cost strategy generally get trapped in focusing on too few of value chain activities, or lack parity on differentiation with competitors.

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The low-cost advantage also gets eroded when the competitive pricing information becomes available more easily. The strategy can be imitated too easily. The other component of JetBlue’s strategy is differentiation. Differentiation is achieved through a strong brand image, the various features such as DirectTV at each seat, more legroom etc. The problem with differentiation strategy is that differentiating features could be easily imitated. Firms may also get entrapped in too much differentiation, which customers may not value. Firms employing combination strategies would have a much stronger strategy to outperform rivals. They can achieve superior performance by successfully integrating low-cost operations with differentiation, thereby avoiding the pitfalls of either of the strategies. JetBlue employed a combination of these two strategies and that gives it a distinctive competitive advantage. It combined low-cost services with a differentiated offering. The company invested in technology for efficient operations right from its inception and, therefore, is able to provide high quality services at low-cost. Going forward, the extent to which JetBlue can maintain this integration of ‘low-cost’ and ‘differentiation’ will determine whether its competitive advantage is sustainable.

IX.

DIVERSIFICATION

JetBlue Airways has an unrelated diversification through its subsidiaries as it deals with airlines, insurance and TV station that has no strategic fit in the value chain activities. Below is the list of JetBlue’s subsidiaries until 2013: BlueBermuda Insurance, LTD (Bermuda corporation) LiveTV, LLC (Delaware limited liability company) LTV Global, Inc. (Delaware corporation) LiveTV International, Inc. (Delaware corporation) LiveTV Satellite Communications, LLC. (Delaware limited liability company) LiveTV is a major provider of airline in-flight entertainment systems. Originally a joint venture of Harris Corporation and BE Aerospace (BE Aerospace's interest subsequently sold to Thales Group), it was a wholly owned subsidiary of JetBlue Airways Corporation from its acquisition in 2002 until its sale to Thales in 2014. It has its headquarters in Melbourne, Florida.

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X.

CORPORATE AND GLOBAL STRATEGY

Corporate Strategy of JetBlue: The biggest aspect of JetBlue corporate strategy has been proving design in all aspects of their business. While they offer value airfare, they have never steered away from design and technology to be able to provide this value. Part of this involves JetBlue providing television on all flights and high level of customers’ service to all of their passengers. In 2008, JetBlue was recognized for corporate achievement in design by Smithsonian’s Cooper-Hewitt, National Design Museum. Below you will find an except from their official press release on this achievement. Every aspect of JetBlue process, from checking bags, printing tickets, and the air travel itself, they consider part of their ‘overall’ design and strategy as an airline business

International Strategy of JetBlue: While JetBlue has no plans to expand into overseas air travel, they do currently offer air travel to certain Caribbean islands, Mexico, and Latin America. JetBlue applies multidomestic strategy that emphasize on “Think Locally, Act Locally”. Still considered as a new airlines company, the flight of JetBlue only around American Continent. JetBlue’s crew also adapt with the culture of each country that been visited. All of JetBlue’s crew have to know and undestand the culture and manners in every country so they can behave politely as each country’s culture.

XI.

BCG MATRIX

True Blue Program

Gift Card s

JetPaws Wireless Internet

Baggage

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Stars – JetBlue has done a great job of promoting free WiFi because people will make a huge deal out of this. JetBlue probably loses money doing this, but makes up for it in the attention it receives. JetPaws is JetBlue’s exclusive program designed to provide pets and their owners the tips and the tools they need for a smooth trip from start to finish. JetBlue also appears to have the most user-friendly website, the appearance of empathy for the desire that customers have for their pets to be safe. Cash Cows –JetBlue has an advantage to its other competitors when it comes to price for luggage and it also become a huge competitive advantage. Question Mark – JetBlue has the lowest percentage (3,7%) and number of award issued (297,000), compared with its competitor, American Airlines that has issued the most rewards (3,1 M). JetBlue is one of the newest airlines and has one of the newest loalty programs, so they have a lot of room for growth, a lot of potential, especially considering how well they have done in other areas.

Dog– Gift cards are nothing new in airlines industry. All airlines companies provide gift cards and all these gift cards rank similarly.

XII.

BALANCED SCORECARD

The airline industry is more competitive than ever. The global marketplace is in a state of constant change and the needs of our customers continue to evolve. We believe our strong brand and differentiated product will help us continue to successfully compete in this dynamic environment.

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Strategy Map

Objective

KPI

Target

Initiatives

on Increase 1%  Operating and cost efficiencies

Financial

Stronger

Return

perspective

balance sheet

invested capital per year

(A321)  Offering new product (Mint and Fly-Fi)  Reduced total debt ($200 M), lower interest expenses

in- 196 aircraft

 Provide in-flight entertainment

Customer

Increase

Enhance

perspective

customer

flight

products

satisfaction

entertainment

LiveTV

Internal

Enhance

Number

business

efficiency

aircraft

process

performance

and

services

with

of Receive 15  Start retrofitting airbus aircraft A321

with Sharklets

aircraft

 Convert 18 A320 became A321

Employee

Opening

 Hire, train and retain qualified

perspective Learning

& Efficiency

growth

maintenance

understanding

new lodging

perspective

of the current

of new

facility

system

equipment

training purposes

for

employees of LiveTV

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REFERENCES

Borrayo, Juda. 2012. Bringing Humanity Back to Air Travel JetBlue. Retrieved from http://www.slideshare.net/JudaAdamBorrayo/bringing-humanity-back-to-air-travel-jet-blue on 23 February 2015 . InsideFlyer. 2009. Is the Perception That It's Constantly Getting More Difficult to Claim an Award Flight True?. Retrieved from http://www.insideflyer.com/articles/article.php?key=5277 on 23 February 2015 . Neo. 2012. JetBlue Airways. Retrieved from

http://mbacase.blogspot.com/2012/08/jetblue-

airways.html on 23 February 2015 . http://www.jetblue.com/about/ http://investor.jetblue.com/~/media/Files/J/Jetblue-IR/Annual%20Reports/jetblue-2013-10k-final-toprint.pdf http://www.bloomberg.com/quote/JBLU:US/news http://www.bloomberg.com/news/articles/2014-03-13/jetblue-sells-livetv-unit-to-france-s-thales-for400-million https://www.studymode.com/signup?redirectUrl=%2Fessays%2FPorter-5-Forces-Jetblue-Airway65190850.html&from=essay&from=essay http://en.wikipedia.org/wiki/JetBlue http://www.reuters.com/finance/stocks/companyProfile?symbol=JBLU.O http://www.jetblue.com/work-here/more-to-look-forward-to.aspx http://www.mbaskool.com/brandguide/airlines/4326-jetblue-airways.html http://www.scribd.com/doc/25223207/Jetblue-paper#scribd