Jet Blue Case Analysis

Group 3 : JetBlue Airways Corporation-2009 Case Analysis
1
Contents
1. Introduction ....................................................................................................................................... 2
2. Strategic Posture ............................................................................................................................... 2
2.1 Mission Statement ..................................................................................................................... 2
2.2 Customer's Bill of Rights .......................................................................................................... 2
2.3 Objectives ................................................................................................................................. 2
2.4 Strategies ................................................................................................................................... 3
2.5 Policies ...................................................................................................................................... 3
3. Synopsis ............................................................................................................................................ 3
4. JetBlue business practices and business strategy .............................................................................. 4
4.1 Stimulate demand with low fares .............................................................................................. 4
4.2 Commitment to low cost ........................................................................................................... 4
4.3 Offer high quality service and product...................................................................................... 4
5. Competitive profile ........................................................................................................................... 5
5.1 Cost structure ............................................................................................................................ 5
5.2 Marketing and Brand position ................................................................................................... 5
5.3 Marketing programme ............................................................................................................... 6
5.4 Financial Ratios and other facts ................................................................................................ 6
5.5 Comparison with the Competitor (Southwest Airlines) ............................................................ 7
6. Internal Factor Evaluation Matrix (IFE). .......................................................................................... 8
7. External Environment: Opportunities and Threats ........................................................................... 9
7.1 Natural Physical Environment: Sustainability Issues .............................................................. 9
7.2 Societal Environment ................................................................................................................ 9
8. External Factor Evaluation Matrix (EFE) ....................................................................................... 11
9. Competitive Profile Matrix (CPM). ................................................................................................ 12
10. SWOT Analysis .......................................................................................................................... 13
11. Internal-External Matrix (IE) ..................................................................................................... 18
12. Strategic Position and Action Evaluation Matrix (SPACE) ....................................................... 19
13. Recommended Strategic Course for JetBlue............................................................................... 20
14. References ................................................................................................................................... 21


2
1. Introduction
JetBlue was incorporated in Delaware in August 1998. David Neeleman founded the company in
February 1999, under the name "NewAir." Several of JetBlue's executives, including Neeleman,
are former Southwest Airlines employees. JetBlue started by following Southwest's approach of
offering low-cost travel, but sought to distinguish itself by its amenities, such as in-flight
entertainment, TV at every seat, and Sirius satellite radio. Since the inception, JetBlue
differentiated their service by having a startup capital of $100 million, flying new planes, hiring
employees through rigorous screening and focusing on customer feedback [1].
2. Strategic Posture
2.1 Mission Statement
The unwritten mission statement of Jet Blue Airways Corporation is reflected in its core values
and principles created and set by the company. In lieu of mission statement, a strategic set of
core values is being presented by Jet Blue Airways Corporation. These core values include
safety-new planes, caring attitude-service oriented staff, integrity, fun and passion [2].

2.2 Customer's Bill of Rights
"Above all else, JetBlue Airways is dedicated to bringing humanity back to air travel. We strive
to make every part of your experience as simple and as pleasant as possible. Unfortunately, there
are times when things do not go as planned. If youre inconvenienced as a result, we think it is
important that you know exactly what you can expect from us. Thats why we created our
Customer Bill of Rights. These Rights will always be subject to the highest level of safety and
security for our customers and crewmembers." It is the first and now only major airline which
has provided such a fundamental benefit to its customers [2].

2.3 Objectives
Come off as a Young, colourful and fun airline with excellent customer service.


3
2.4 Strategies
Using an "Anti-Establishment" strategy against accepted norms in the industry. By using major
international airports, such as New York, as hubs JetBlue would face very little competition from
domestic flights at this airports verses mainly domestic use alternatives.
Combine low airfares with several value-added services that improve customer service w/o
adding operating costs

2.5 Policies
JetBlue does not furlough crewmembers during economic downturns
Believes in a non-union workforce which provides more flexibility and allows the
company to be more productive.
Not overbook the flights.
Communicate openly and honestly with customers about delays and service disruptions.
Employee efficiency results from flexible and productive work rules, effective use of
part-time employees and the use of technology to automate tasks.
3. Synopsis
JetBlue is a low cost domestic airline in the United States following an interesting combination
of low fare, low cost passenger airline and differentiated product as its strategy. From its
inception in 1998 the airline grew to become the 11
th
largest player in the airline industry in a
short span of six years. It had been the only airline apart from South West Airlines, to have been
profitable during the aftermath of the September, 11 attacks on World Trade Centre and at a time
the entire airline industry was experiencing losses.
The core of JetBlue strategy was low cost achieved through a smaller and more
productive work force, automated processes, better use of technology, use of brand new single
model planes that reduced maintenance cost and training cost at the same time. The success of
JetBlue invited the attention of its competitors. New discount carriers were being launched that
closely imitated JetBlues differentiated product offering. This posed questions to the viability of
both the basis of JetBlues competitive advantage. Added to this was the prospect that JetBlue
would come head to head with other major airlines and discount carriers in its quest for
expansion into different geographic markets.

4
4. JetBlue business practices and business strategy
The business strategies and the goals formulated by JetBlue were to establish itself as a high
quality, low fare, low cost passenger airline. They intended to maintain a growth plan that takes
advantage of their competitive strengths. The key elements of the strategy are:

4.1 Stimulate demand with low fares
JetBlues low fare are designed to Stimulate demand particularly from fare conscious leisure and
business travellers who might otherwise have used alternative forms of transportation or would
not have travelled at all. By introducing new aircraft, JetBlue targeted to the mid-sized markets
and to further increase the frequency of flights of their existing routes.

4.2 Commitment to low cost
JetBlues low cost have allowed them to offer fares low enough to stimulate demand and to
attract customers away from the high priced competitors. JetBlue expected to continue to
aggressively control costs and maintain their focus on low cost carrier spending habits.

4.3 Offer high quality service and product
JetBlue believes that a key element of their success is that in addition to offering low fares, they
are offering to customers a better alternative to air travel. On-board JetBlue customers enjoy a
distinctive flying experience which is referred to as JetBlue experience that includes friendly,
customer service oriented employees, new aircraft, roomy leather seats with multiple channels of
free live TV and movie channels. The on-board offering includes generous helpings of branded
snacks, premium beverages and specially designed products for the overnight flights.

JetBlue makes it imperative to communicate openly and honestly with customers about
delays, especially when weather and mechanical problems disrupt services.


5
5. Competitive profile
5.1 Cost structure
Fuel On average since 2005, jet fuel purchases have comprised 34% of JetBlues
operating cost. Fuel expenses for JetBlue were impacted significantly by the spike in energy
prices from 2003 to 2008 [3].
Excluding Fuel Apart from fuel changes in airline operating expenses are driven
primarily by changes in capacity. JetBlues current cost structure is a source of competitive
advantage as it allows the company to offer lower fares than many of its competitors. However,
JetBlues cost advantage relative to peers has deteriorated since 2005.
The four drivers of historic advantage, identified by company management are:
High aircraft utilisation
Low distribution costs
Productive workforce
New and efficient aircraft

5.2 Marketing and Brand position
Target market - JetBlues target customers are fare conscious travellers who might
otherwise have used alternate forms of transportation or would not have travelled at all. The
current base consists primarily of leisure travellers, the most price sensitive class of travellers.
However, JetBlue is increasingly quoting a higher class of passengers who have the resources to
pay more for a business or first class ticket but appreciate a lower fare without sacrificing high
class customer service, especially when corporations are looking to reduce business travel due to
tough economy conditions.

Brand Identity - In the airline industry, few players have managed to build a unique
brand identity and achieve significant differentiation. JetBlue, however, has done so by taking up
the vacant position of low cost provider that also offers a top notch experience that legacy
airlines do not deliver through features such as leather seating, DirecTV for each seat, XM
satellite radio.


6
5.3 Marketing programme
JetBlue continuously markets itself through advertising and promotions in newspapers,
magazines, television, radio and on billboards. The firm relies on word of mouth because it
believes that it is the most effective advertising for the company. It also advertises through the
following:
Social media
Website
You Above All campaign
Promotions
Brand space
True blue
5.4 Financial Ratios and other facts
jetblue
Year 2006 2007 2008 2009
Current Ratio 1.1 0.9 0.9 1.3
Quick Ratio 1.1 0.9 0.9 1.3
Long Term Debt to Equity 2.8 2.5 2.3 1.9
Inventory Turnover 87.5 109.3 112.8 82.2
Total Assets Turnover 0.5 0.5 0.6 0.5
Accounts Receivable Turnover 30.7 30.9 39.3 40.6
Average Collection Period 11.9 11.8 9.3 9.0
Gross Profit Margin 0.054 0.059 0.031 0.085
Net Profit Margin
0.0004 0.0063 -0.0225 0.0177
Return on Total Assets (ROA)
0.0002 0.0032 -0.0126 0.0088
Return on Equity (ROE)
0.0011 0.0174 -0.0603 0.0377


7
5.5 Comparison with the Competitor (Southwest Airlines)
Company Worth Analysis JetBlue (2008) [2]
Stockholders' Equity $1,261,000,000
Net Income x 5 ($380,000,000)
(Share Price/EPS) x Net Income $10,975,294
Number of Shares Outstanding x Share Price $1,334,357,012
Method Average $556,583,077

Company Worth Analysis Southwest (2008) [4]
Stockholders' Equity $4,953,000,000
Net Income x 5 $890,000,000
(Share Price/EPS) x Net Income $183,587,444
Number of Shares Outstanding x Share Price $5,107,010,809
Method Average $2,783,399,563


8
6. Internal Factor Evaluation Matrix (IFE).
Internal Factor Evaluation Matrix (IFE)
Strengths Weight Rating Weighted
Score
1. Low-fares 0.13 4 0.52
2. 10th Rated in US 0.07 3 0.21
3. Best customer service 0.07 4 0.28
4. Variety 0.08 4 0.32
5. More number of Flights 0.05 3 0.15
6. High comparative Startup Capital 0.04 3 0.12
7. HR Policies 0.06 4 0.24
8. New Jets 0.07 4 0.28
9. Legal Assurance in form of Bill of Rights 0.03 3 0.09
10. Environmental Concern & Responsibility 0.01 3 0.03

Weaknesses Weight Rating Weighted
Score
1. Non utilisation of Award Schemes 0.02 2 0.04
2. Fuel expenses 0.11 2 0.22
3. Smaller Airline-Less Heard of 0.07 2 0.14
4. Unions & labor contracts 0.09 1 0.09
5. Increasing break-even load factor 0.04 2 0.08
6. Luggage Handling Problem 0.06 1 0.06
TOTALS 1.00 2.87


9
7. External Environment: Opportunities and Threats
7.1 Natural Physical Environment: Sustainability Issues
Weather storms can cause delays and ground aircraft for days if it is severe enough. Huge
snow storms and hurricanes are an ever increasing danger.
Do these forces have different effects in other regions of the world?
7.2 Societal Environment
Economic
Fuel prices have increased sharply over a short time, increasing operating costs for the
aviation industry.
Technological
Automation of ticketing and self check-in services lowers overhead costs.
Company internet websites account for the majority of sales, thus decreasing
operating costs.
Political-legal
Terrorist attacks on 9/11 brought many airlines into or close to bankruptcy and scared
passengers away from flying for many years after. The aviation industry is still
correcting from this.
Federal Regulations requires one flight attendant for every 50 passengers.
Sociocultural
Pension plans have become a thing of the past in aviation; these are expenses that
airlines chose to cut to maintain profitability.
An increasing petition to create a bill of rights for passengers that would allow
passengers to be compensated and to prevent them from having to be in aircraft for
hours on the ground.
7.4 Task Environment
Threat of New Entrants. The growing number of Low Costs Carriers (LCCs) in the
aviation industry, and the attempts of the Full Service Airlines (FSAs) to take away
market share from the LCCs had led to a fall in the average fares. Legacy airlines
launched low-cost subsidiaries of their own, to compete with LCCs.


10
Rivalry Among Existing Firms. Many airlines that were operating under Chapter 11
began to recapture the market share. These airlines were able to undercut competition by
offering very low fares, taking advantage of the protection of the bankruptcy laws.
Threat of Substitute Products or Services.
Legacys LCCs allowed connecting flights to their parents airlines, shared their frequent
flier programs and had access to parents gates and landing/takeoff slots.
Bargaining Power of Suppliers. Aircraft manufacturers would sell aircraft at higher
interest rate because of a limited number of substitute goods. Aircraft would also arrive to
airlines later than agreed, causing delays and loss of revenue and image.
Power of Other Stakeholders. Increasing Quality, safety, and environmental
regulations.
Bargaining Power of Buyers. Price is going to dictate with whom buyers spend their
money. The more buyers a company has, the more source of potential revenue there is.


11
8. External Factor Evaluation Matrix (EFE)
External Factor Evaluation Matrix (EFE)
Opportunities Weight Rating Weighted
Score
1. Targeting Undeserved Markets 0.09 4 0.36
2. Growing Airline Industry 0.07 2 0.14
3. US is the largest Travel Market 0.07 3 0.21
4. Refurbishing Old Planes 0.05 4 0.20
5. Use of Technology for Advertisement 0.06 2 0.12
6. Increasing Scope for Tourism Industry 0.06 1 0.06
7. Use of Luggage Tracking Technology 0.05 2 0.10
8. Overcome Effect of 9/11 0.04 1 0.04

Threats Weight Rating Weighted
Score
1. Viral Outbreak 0.08 2 0.16
2. Economic Crises 0.07 2 0.14
3. Competitors (Southwest) 0.09 3 0.27
4. Viral Outbreak 0.07 2 0.14
5. Increasing Breakeven Load Factor 0.05 2 0.10
6. Additional Fuel consumption 0.05 2 0.10
7. International Operations 0.05 1 0.05
8. Flight Delay/Cancellation 0.05 1 0.05
TOTALS 1.00 2.24


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9. Competitive Profile Matrix (CPM).
The position of the JetBlue has been analysed against its main competitor i.e. Southwest
Airlines, in the table given below.
Competitive Profile Matrix (CPM)
jetBlue Southwest Airlines
Critical Success Factors Weight Rating Score Rating Score
Advertising 0.13 2 0.26 4 0.52
Market Share 0.16 1 0.16 4 0.64
Customer Service 0.11 4 0.44 2 0.22
Diversification 0.12 4 0.48 3 0.36
Price 0.13 4 0.52 3 0.39
Financial Position 0.12 3 0.36 4 0.48
Expansion 0.09 3 0.27 4 0.36
Company Image 0.14 4 0.56 4 0.56
Totals 1.00 3.05 3.53

The above analysis reveals that company scores lowest in advertising and market share and the
same needs to be improved.


13
10. SWOT Analysis
Strengths
It is top ranked in Customer Satisfaction among Low cost carriers in North America.
JetBlue Airways has differentiated itself by providing various facilities to the customers
such as in-flight entertainment, satellite radio and TV on every seat, etc.
JetBlue provides 60 destinations in 21 states and 11 countries in the Latin America and
Caribbean.
JetBlue was one of only few U.S. airlines that showed a profit during the decline in
airline travel after the 9/11 attacks.
JetBlue has around two billion dollars in market capitalization.
The robust marketing campaign giving emphasis to service, complimentary on-board
services and aggressive fares.
JetBlue was listed the number one US home airline by Readers Choice Awards for the
sixth year in a row.
New and efficient aircrafts (youngest fleet amongst any major U.S. airline)

Weaknesses
True-Blue rewards offered to the customers not fully utilized.
Operational issues, low fares, high fuel prices, ranks trademark, contributed in bringing
economic performance of JetBlue down.
JetBlues higher costs linked to the airlines several facilities were making the company
less competitive.
Although JetBlue continued to add routes and planes to the convoy at a fast pace, it
witnessed unsustainable growth rate.
JetBlue estimated a loss due to lofty fuel prices, fleet costs, and operating inefficiency.
JetBlues website and airport cabin are not easy to get.
The Company has less international destinations because it only covers 11 countries. The
company does not have presence in Asia and other unsaturated areas.


14
Opportunities
After the economic crisis in 2009, revival has pursued rapidly as the industry consistently
revisited its long term increase rate of approximately 5% per year.
Rapidly increasing air service within China and other rising economies along with the
increase of low cost carrier business models all over the world drive this market segment.
Introduction of new planes has created the opportunity for additional route. \
Increase international tourism and investment is consequently vital to the globalisation
taking place in numerous other industries.
USA is the largest single market in the world.
Traveller traffic is predicted to rise.
Technology has increased the ways of advertisement. Similarly, it has facilitated the ways
of ticketing such as internet etc. Therefore, improvement in technology is a good
opportunity.
Tourism is increasing all over the world and it has also increased longer duration of
flights.
Threats
Demand for air travel fluctuates generally for the services to be provided (as in case of
viral outbreak).
Economic Scenario
Fuel prices are increasing.
Customers have complaints about refunds.
The majority of the major airlines have undergone cost reformation.
Strong competitors in terms of limitation capacity, pricing, consolidation scheduling and
alliance activities.
Increasing impact of the governmental regulations to the industry operations
Decreasing Yields
Delays and Cancellations


15
STRENGTHS-WEAKNESSES-OPPORTUNITIES AND THREATS MATRIX (SWOT)
SWOT MATRIX FOR
JETBLUE AIRWAYS

STRENGTHS-S
1. Top ranked in Customer Satisfaction among
Low cost carriers in North America.
2. Differentiated itself by providing various
facilities viz .in-flight satellite radio and TV on every
seat, etc.
3. 60 destinations in 21 states and 11 countries in
the Latin America and Caribbean.
4. Among few U.S. airlines that showed a profit
during the decline in airline travel after the 9/11 attacks.
5. Around two billion dollars in market
capitalization, around 650 aircrafts.
6. Robust marketing campaign giving emphasis to
service, complimentary on-board services and
aggressive fares.
7. Listed the number one US home airline by
Readers Choice Awards for the sixth year in a row.
8. New and efficient aircrafts
WEAKNESSES-W
1. True-blue rewards are not utilised
2. Operational issues, low fares, high fuel prices,
ranks trademark brought down economic performance
of JetBlue.
3. Higher costs linked to the airlines several
facilities were making the company less competitive.
4. Although JetBlue continued to add routes and
planes to the convoy at a fast pace, it witnessed
unsustainable growth rate.
5. JetBlue estimated a loss due to lofty fuel
prices, fleet costs, and operating inefficiency.
6. JetBlues website and airport cabin are not
easy to get.
7. Less international destinations, covers 11
countries. The company does not have presence in
Asia and other unsaturated areas.

16
OPPORTUNI TI ES-O
1. Revival of industry after the economic crisis in
2009, revisited its long term increase rate of
approximately 5% per year.
2. Rapidly increasing air service within China and
other rising economies along with the increase of low cost
carrier business models all over the world.
3. Introduction of new planes created the opportunity
for additional route.
4. Increase international tourism and investment is
consequently vital to the globalisation taking place in
numerous other industries.
5. USA is the largest single market in the world.
6. Traveller traffic is predicted to rise.
7. Technology has increased the ways of
advertisement. Similarly, it has facilitated the ways of
ticketing such as internet etc. Therefore, improvement in
technology is a good opportunity.
8. Tourism is increasing all over the world and it has
also increased longer duration of flights.
SO STRATEGY
1. Introducing new flights for the international travel
destinations with differentiated services. (S1, S5,
O4)
2. Launch new advertising campaigns with stress on
their differentiated services. ( S2, S7, S8, O1,
O4, O7)
WO STRATEGY
1. Marginal increase in fares keeping it below
competitors and also increasing operational
effectiveness. (W2, W5, O5, O8)


17
THREATS-T
1. Demand for air travel fluctuates generally for the
services to be provided (Viral outbreak).
2. Economic Slowdown.
3. Fuel prices are increasing.
4. The majority of the major airlines have undergone
cost reformation.
5. Strong competitors in terms of limitation capacity,
pricing, consolidation scheduling and alliance activities.
6. Increasing impact of the governmental regulations
to the industry operations.
7. Decreasing yields.
8. Delays and cancellations
ST STRATEGY
1. Provide lower fares during viral outbreak and
economic slowdown. (S1, T1, T2)

WT STRATEGY
1. Providing discounts in the form of true blue
rewards for unoccupied seats . (W1, T7, T8)

18
11. Internal-External Matrix (IE)

Strong Average Weak
3-4 2.0-2.99 1.0-1.99

As per the analysis given, the IFE Score is 2.87 and EFE score is 2.24 which falls in cell V and
can be managed best with hold and maintain strategies. Market penetration and product
development are two commonly employed strategies for these types of divisions. JetBlue
Airways in the future should hold and maintain their position using Market Penetration and
Product Development strategies. These estimations are based on approximation as per
indications given in the case.

I

II

III

IV
V
(2.87,2.24)

VI

VII

VIII

IX
High
3-4

Medium
2.0-2.99

Low
1.0-1.99
T
h
e

E
F
E

T
o
t
a
l

W
e
i
g
h
t
e
d

S
c
o
r
e
s

The IFE Total Weighted Scores

19
12. Strategic Position and Action Evaluation Matrix (SPACE)
I nternal Analysis: External Analysis:
Financial Position FP) Stability Position (SP)
Startup Capital 5 Economic Scenario -4
Wage Rates 7 Competition Pressure -2
Market Capitalisation 4 Price Elasticity of Demand -1
Revenue Growth 5 Viral Outbreak -2
EPS 2 Price Range of Competitors -2
Financial Position (FP) Average 4.6 Stability Position (SP) Average -2.2

Competitive Position (CP) Industry Position (IP)
Market Share -2 Growth Potential 6
Efficient Fleet -1 Increasing Demand for Air Travel 7
Customer Loyalty -1 Barrier for others' Entry into Market 6
Technology (Website Interface) -4 Untapped Market 5
Capacity Utilisation -2 Efficient Planes to increase utilisation 2
Competitive Position (CP) Average -2.0 Industry Position (IP) Average 5.2

X-axis
3.2
(-2.0+5.2)
Y-axis
2.4
(4.6-2.2)

20
The resultant strategy is Aggressive which implies that JetBlue should:

Continue to invest in innovation to sustain and build the competitive advantage which
exists.
Cover any moves made by competitors to develop alternative competitive advantages.
Close off the opportunities to build a differentiated value proposition that may prove
attractive to segments of the market.
Raise the stakes for other competitors to play the game.
Move into related markets which complement the existing position.

13. Recommended Strategic Course for JetBlue
13.1 International Operations
JetBlue should introduce new flights for the international travel destinations with differentiated
services and maximise management flexibility to adapt its growth strategy.
13.2 Increase advertisement and expand to other media
JetBlue can focus on market penetration by advertising on TV, Radio, and Online to boost revenues
and popularity of the airline. Relying on social media also greatly reduces the cost associated with
marketing. Stress the idea that the flying experience is significantly better with JetBlue than with
other airlines. Continuing this focus is the best way to ensure that the customer knows what
JetBlue stands for.
13.3 Effective use of Reward Policy
The reward policy of the JetBlue can be made more effective by offering trueblue rewards giving
massive discounts on passenger seats left empty on the last moments.


21
14. References
1. en.wikipedia.org/wiki/JetBlue
2. http://www.jetblue.com/about/pressroom/
3. http://business.library.wisc.edu/resources/kavajecz/10_Fall/JetBlue_Report.pdf
4. http://southwest.investorroom.com/company-reports
5. http://computerwranglers.com/Web%20test/mgt695/david/Internal-External%20Matrix.doc
6. http://casestudygp4.wikispaces.com/JetBlue+Airways
7. David.Fred.R, Strategic Management Concepts and Cases, Prentice Hall (13
th
Edition)

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Group 3 : JetBlue Airways Corporation-2009 Case Analysis

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