Jet Blue : A Strategic Management Case Study

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Information about Jet Blue : A Strategic Management Case Study
Business & Mgmt

Published on March 15, 2014

Author: fawadsiddequi



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

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


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.

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.


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.

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

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

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

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

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

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

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.

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

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

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

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

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

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

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

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.

New Slogan

JetBlue Valued Services

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


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