JetBlueAirways

TodayUnitedStatesairlineindustryisfacedwithsomany
trendsthatmayaffectacompanysstrategy.Mostairline
carriersarechargingafuelsurchargeontopoftheticketprices
becausetheyaresufferingfromfuelpricesandotherrising
costs,andiftheydontchargeafuelsurchargetheywilllose
moneyasaresult.Airlinesarealsochargingbaggagecosts,
feesfrom$15to$50ormoreforeachcheckedbag.Safetyand
maintenanceproceduresareanotherimportantaspectbeingthat
planessharespacesattheairports.Iftravelersdonotfeelthey
aresafeusingyourairline,theywilluseanother.Whenairline
industriesdeveloptheirstrategicplan,fuelcostsrisingor
declining,baggagecostsandthesafetyandmaintenancepolicy
andprocedureshouldbeconsideredwhenplanning.(Carlin)
JetBluesstrategicintentwastobeadiscountcarrier,toprovide
passengerswithlowfares,snacksandTVentertainment.
Neelemanknewtosatisfycustomersbecausethatwasthe
definitewaytogetareturn.Thetargetwasintendedforthe8
millionpeopleinafivemileradiusaroundJFKbuthefoundout
lateritattractedtheNewYorkCitytravelers.
JetBluesfinancialobjectivesweretodelivertoitsstockholders
overthefiveyearperiodendingDecember31,2007.They
wereunabletodothisbecauseoftheincreaseinfuelprices.Jet
Bluerevenuesgrowfrom$998millionin2003
to$2,842millionin2007andjetfuelincreasedby532percent
from2003to2007.BecauseofJetBluesbeingalowfare
competitor,itscostandcapitalstructurewasdifferentfrom
otherairlines.
JetBluesstrategicelementsofcostweretobeadiscountairline
industry.JetBluefareswereextremelylow.Itusedtwotypes
ofaircrafts,onewithfewerseatsforoffpeaktimeandonewith
themostseatsduringpeaktime.JetBlueusedinformation
technologyforbookings,ticketingandrevenuemanagementto
alsokeepthecostdown.Theyalsohiredagentstoselltickets
athomeoverthephone.JetBlueonlyprovidedsnacks;they

hadnocateringservicetoprovidemeals.JetBlues
organizationalculturewasputtogetherbyAnnRhoades,Jet
Bluesfirstexecutivevicepresidentofhumanresources.The
organizationalculturestructurewasverypowerful.The
structurehadfivestepsthatidentifiedthecompanysvalues:
1.SafetyagreementwithMedaire,Inc.,InflightHealth,Kevlar
cockpitdoorsandcabinsurveillancecamerasinallofits
airplanes
2.CaringAfter9/11companydidntlayanyoneoffand
continuedpayingsalariesandbenefitsandNeelemandonated
partofhissalarytocrisisfund,
3.IntegrityNeelemantookpersonalresponsibilitywhenstaff
violatedcompanypolicyandhiredsomeonetotakealookatthe
policyconcerningcarriersprivacytomakesurethepolicyhad
everything
itneeded
4.Funafriendlyworkenvironment,staffhadGeorgeForeman
grillsandpassengershadyellowpunchingbagstorelieve
stress
5.Passionemployeescaredaboutthecompany,thecompanys
productsandcustomers
JetBlueshumanresourcepracticesincludedhiring,training
andpaying.JetBlueusedateamwhichincludedthedirector,
managerofinflightrecruitmentandotherhumanresourceand
inflightleadershippersonnel.Theteaminterviewedandgot
togetherandtheinterviewingprocessandselectedtheoneswho
performedthebestduringthegroupactivity.JetBluehada
trainingcenteratOrlandoInternationalAirport.Thetraining
centerhadeightflightsimulators,twocabinsimulators,
classrooms,trainingpool,cafeteriaandafirefightingtraining
station.JetBluepaiditsstafflowerthanitscompetitors.They
madeupthedifferencebyofferingvariousbenefits:health
coverage,profitsharing,and401(k)retirementplans.Ifeelthe
strategiesfortheelementsofcostanditsorganizationalculture
gavethemacompetitiveadvantage.Idonotthinkthesalaries
andhumanresourcesstrategygavethemacompetitive

advantage.Inordertocompetewithitscompetitors,JetBlue
needstopayaroundthesamesalaryandmakesurethebenefits
adduptobethesame.
JetBluesstrategiesfor2008andbeyondwasto:
StrategiesImplementationofStrategy
1.Reevaluatethewaysthecompany
wasusingitsassetsDeployedtwooftheirkeyassets,JFKand
LiveTV
UseJFKasaquasihub
SignedacontractwithContinentaltoprovideitwithLiveTV
2.ReducecapacityandcutcostsAgreedtosellnineused
Airbusin2008resultinginanetcashgrainof$100million
Sellmoreaircraftin2009and2010
Delaydeliveryof21newAirbusfrom2009through2011to
2014and2015whichwilldelaypaymentontheplanesandsave
onoperatingexpenses
Reduceaircraftutilizationratefrom13hrsto12.5hrsperday
inthe4thquarterof2008
Suspendserviceinandoutof:Columbus,Ohio
Nashville,Tennessee
Tucson,Arizona
CancelplannedservicebetweenLosAngelesInternational
airport,BostonandNewYork
3.RaisefaresandgrowinselectmarketsOrlandowouldbeits
seventhfocuscity
OpenedservicebetweenOrlandoandCancunMexico,and
betweenOrlandoandSantoDomingo,DominicanRepublic
TentativeapprovalfromtheU.S.DeptofTransportationto
startOrlandosonlyservicetoSouthAmerican
Thisofferspassengersotherflightstointernational
designations
4.Offerimprovedservicesforcorporationsandbusiness
travelersRefundablefaresandmeetingspecificdiscounts
Complimentarytravelcertificateforevery40customers
bookedtothesameeventdestination
EnteredintoafiveyearagreementwithExpedia

AvailableforTravelocitybusinesscustomers
5.Form
strategicpartnershipsAnagreementwithAerLingusthat
allowedpassengerstomakeasinglereservationbetweenIreland
and40otherdestinationsintheUSthroughthehubatJFK
EnteredintoamarketingpartnershipwithMassachusettsbased
CapeAirthatwouldallowpassengerstotransferbetweenthe
twocarrierstovisitHyannis,NantucketandMarthasvineyard
6.IncreaseancillaryrevenuesChargeda$10callcentercharge
forbookingaflightoverthephoneorattheairport
Passengerscouldpayforextrafooditemsusingadeviceflight
attendantscarriedbyhand
Soldupgradedheadphonesfor$1anddiscontinuedhanding
outfreeones
Chargedpassengersadditionalfeesforseatsthathad
additionallegroommade$40millioninninemonthsin2008
withthisprogram
June2008chargedpassengersanadditionalfeeof$20for
secondbagandthisgeneratedmorethan$20millioninnew
revenuesinthelastsixmonthsof2008
ThebottomlineforJune2008displaysthatthestrategieswere
implementedbutdidnotmakeagreatdealofdifference.With
shareshittinganalltimelowinJuly2008,JetBluemayneedto
mergewithanothercarrierinordertosurviveinthefuture.
References
Thompson,A.A.,Strickland,A.J.,&Gamble,J.E.(2010).
Craftingandexecutionstrategy:Thequestforcompetitive
advantage:Conceptsandcases2009customedition(17thed.)
NewYork:McGrawHillIrwin

SWOTANALYSIS
Strengths
JetBluefinditsstrengthfromthefollowing:

StrongBrand
JetBlueisconsideredasastrongbrandwidelyknownamongthe
peopleofUS.JetBluewasnamedthenumberone
U.S.domesticairlinebyConedNastTravelermagazines
ReadersChoiceAwardsforthesixyearsinarow.This
furtherstrengthenpeoplestrusttoJetBlueandimprovesthe
companysbrandnameandcredibilityamongitsclientsand
competitors.
Uniqueflyingexperience
JetBlueoffersanewflyingexperiencebutataverylowcost.
Theyadheretotheircompanysgoalbeliefwhichisbringing
HumanityBacktoAirtravel.Itfollowsthelowcoststrategy
ofSouthwestAirlinesbutdifferentiateitselfbyfacilitating
customerwithentertainmentstuff.Theygiveuniqueflying
experiencebyprovidingnewaircraft,simpleandlowfares,
leatherseats,freeliveTVateveryseat,preassignedseatings,
reliableperformance,&highqualitycustomerservice.Theyare
alsofocusedonpointtopointservicetolargemetropolitanareas
withhighaveragefaresorhighlytraveledmarketsthatwere
underserved.
EfficientUtilizationofResources
Theyformulatedanoperatingstrategythathadproducedthe
lowestcostperavailableseatmileofanymajorUSAirlinein
20016.98centsversusindustryaverageof10.08cents.With
itsstrongcapitalbase,JetBluewasabletoacquireafleetof
newairbusA320aircraft.JetBluesfleet
isnotonlyreliableandfuelefficientthanotherairlinefleets,but
alsoattendedgreatereconomiesofscale.
Employees
Strongpeopleontopmanagement,severalJetBlueexecutives
areformeremployeesofSouthwestAirlines.Theyhaveprior
experienceinmanagingairlinesthusanymistakescommitted
beforeandcausednegativeimpactonpioneerairlinescanbe

avoided.Theycanusetheirpreviousexperiencetoformulate
policiesanddecisionstoimproveJetBlue.
Eticketing
WiththehelpofNeeleman,thecompanywasabletodoE
ticketingusingthesystemOpenSkies,fortheconvenienceof
thepassengers.Withthis,theirpassengersdonotneedtogo
directlytotheirticketingoffices,instead,theywouldbeableto
acquiretheirticketsonline.
AssuredValuationofCapitalInvestment
BasedonthecomputationofNPV,forbothyears,NPVis
positive.Thismeansthatafterpayingitsobligations,they
investmentstillyieldpositivemoney.Thus,itshouldbe
accepted.Furthermore,profitabilityratioismorethanonewhich
isfavourable.JetBluemaycontinuethebusinesseventhough
theyreceiveminimalpercentageofprofitabilitybecausebased
onthecomputationthereisapossibilityofearningmoreinthe
future.
FavorableCollectionandDistribution
BasedontheStabilityRatioanalysis,Inventorydaysand
collection,bothpossiblesales(fortheinventory)andcollection
(forthereceivables)are
notover30days.Infact,underinventory,itwillonlytake2to3
daystoselltheticketswhileaccountreceivablescollectionwill
onlytakelessthanamonthor22daystobeexact.
Weaknesses
TooMuchCapitalBorrowing
BasedontheincomestatementanalysisoftheJetBlue,the
companyslifeinitiallyreliedonborrowingcapitalinvestment.
Infact,
TooMuchDebt
BasedontheLeverageRatioAnalysis,hugepercentageofthe
TotalAssetsisdebt.BylookingatitsBalanceSheet,itcanbe

seenthatJetBluehadaccumulatedtoomuchcurrentandlong
termborrowings.Bystandard,capitalinvestmentborrowing
shouldonlyamountto30%to40%butinJetBluescase,its
debtamountsto73.54%.Thishasanegativeimplicationforthe
company.Toomuchdebtwillalsomeananincreaseininterest
expensethatthebusinessshouldpayaddingtoitsprincipal
obligation.
NegativeLiquidity
LiquidityRatiosofJetBlueisunfavourable.Inbothyears,
currentratioandacidtestratioofJetBlueislessthanone.This
impliesthatJetBluesassetisnotenoughtocoveritsliabilities.
CurrentRatiois0.65and0.74in2000and2001respectively.
Thistellsusthatforeverypesoofliability,JetBlueonlyhas
0.65in2000and0.75in2001workingassetforpayment.Thus,
theywillprobablyresorttoanotherborrowingtocoverforthis
deficit.Acidtestratioalsotellsusthesamething.Considering
cashandotherreceivables,
itisstillinsufficienttocoveritsliabilities.Foreverypesoof
liabilities,JetBluescashandreceivablescanonlycover0.61in
2000and0.71in2001.
LowProfitability
NetIncomeMarginofJetBlueshowslowlevelofprofitability.
Followingthestandard,itshouldamounttoatleast18%20%.
However,throughprofitabilityratios,althoughearningprofits,
JetBluehavenotmettheconservativepercentageofnetincome
margin.Itonlyhas11.02%netincomemarginin2001.We
shouldrememberthatweshouldnotonlyfocusonprofitability
persebutonimprovingitsvaluetostakeholders.
Opportunities
ImprovingSalesinNewYorkCity
SinceJetBluehasalreadytappedthemarketinNewYorkCity,
itcancapitalizedonthismarketbyimprovingitsmarketing

strategiestoincreasesales.Itshouldmaximizedthe
concentratedpopulationandrelativelargenumberoftravellers
intheCity.
NewMarket
JetBluecanalsoconsidertappingnewmarketssuchas
expandingtootherUSstatesandevenothercountriesthathas
highleveloftravellersorwithhighdemandforairlineservices.
Theycanalsoincreasenumberofflightstocaterformore
customers.
Otherservices
JetBluecanalsoincludeadditionalservicesontheirairtravel.
Theycanprovidetourpackagesthroughtieupswithhotelsfor
touristoradditionalservicessuchasfoodofferinginsidetheir
airlines.
Threats
Terrorism
Because
ofpoliticalinstabilityinsomecountriesaffiliatedwiththeUS
andthereignofterrorismhighlightedbythe9/11incident,an
increaseinthesecuritythreatofairlinessomewhataffectthe
salesanddemandforairlineservices.Furthermore,clients
somewhatlosttheirconfidencetolowcostairtravelservice,
thinkingthattheyarelesssaferthanhighcosthighclassair
travelservices.
EconomicInstability
ThreatforUSrecessionmayalsotriggerdeclineinthesalesof
airlineindustry.Businessfluctuationsmayreducespendingof
peopletotravelwhichwillhaveanimpacttoairlinessales.
OilPriceInstability
FuelpricesunpredictabilitycanalsoaffectJetBluesfinancial
condition.Sinceitadherestolowcosttravellingbutstill

providingadditionalservices,anyincreaseinfuelpriceswill
meananincreaseinthecostofproductionofJetBlue,thus,
forcingittoeitherincreaseitspriceorshouldertheadditional
costtoretainitspricetherebyreducingitsrevenues.
Competition
SinceJetBlueisstillnewinthebusiness,itscompetitorisalso
consideredasagiventhreattothecompany.Existingairline
companiescanfollowthestrategiesofJetBlueandcannibalize
themarketwhereJetBlueislocated.
ALTERNATIVECOURSEOFACTION
I.Implementitsinitialpublicoffering(IPO)toraiseadditional
capital.
ImplementinginitialpublicofferingcangiveJetBlueanample
amountofcash
thatitcanusetoincreaseitsprofitabilityandcompetitiveness.
TotappedtheopportunitiesstatedintheSWOTanalysis,cash
gatheredfromtheIPOcanhelp.Itcanbeusedtocreatea
marketingmixthatcanincreasethecompanyssalesand
improveitsservicestoattractmoreclients.Inotherwords,
goingpublicwillhelpJetBlueincreaseitsassetbase.
Moreover,goingpubliccanlowercompanyscostofcapital
sincetheycaneasilyselltheshares.Also,itlowersthe
proportionofdebttoequitywhichisfavourabletolenders.This
canhelpJetBlueincreaselendersconfidenceandcanaskfor
morealargeramountofdebt.
II.DonotimplementIPOatthemoment.Waitforthetime
whereJetBlueisalreadyripe
foropening.
SinceJetBlueishighlyindebted,goingpublicwillforcethe
companytopayforitscosts.Costofconductinganofferingis
quiethighsincetheunderwriterneededtofacilitatetheoffering
canchargeahigherfeeasapercentageoftheamountraisedin

ordertocoveritscostsandstillearnprofitonthetransaction.
Likewise,thecompanywillencounterotherproblemssuchas
lossofcontrol,informationdisclosureandtheobligationto
servenotonlythemanagementbutalsotheinvestingpublic.
RECOMMENDATION
Basedontheanalysisconducted,thegrouparrivedatthe
followingrecommendations:
1.JetBlueshouldnotimplementitsIPOasofthemomentsince
basedonthe
analysisofitsfinancialconditions,itwillbeunfairforthe
publictobuysharesfromacompanythatisnotsofinancially
sound.Ratioanalysisshowsthatthecompanyishighly
indebted,thus,moneythatwillbegatheredfromthesaleof
shareswillonlybeusedtofinancethisdebts.Furthermore,
paybackperiodisestimatedtobeat5yearsand263days.
Consideringthestandard,itwillbefavourableifpaybackperiod
willbeat3yearsorless.Also,accordingtoitsARR,aftertwo
yearsofoperation,thereisonly5%shareofnetincomeonthe
investedcapitalofJetBlueAirways.JetBlueshouldshownot
onlyitsfinancialstatementbutalsoanalysisofthesestatements
inorderforitsstakeholderstounderstanditscurrentcondition.
JetBlueisnotthatsolventtoopenforIPO.
2.JetBlueshouldconductstrategiesandeffortstoincreaseits
salestoearnmoreprofitsandstabilizedtheearningofdividends
toitsexistingstockholders.Inthatcase,commonshareholders
canreceiveitssaidtobedividends.Theycandothisby
applyingmarketingmixthatcanincreasedemandfortheir
productsatthesametimeincreaseinsalesandrevenues.
JetBlueshouldalsoconsidermarketsegmentationand
evaluationofothermarkets.Ifthefuturebalancesheetindicates
theconditionofprofitability(18to20%),thenitcanattract
otherstockholderstobepartofJetBlue.Then,thatsthetime
IPOisripeforopening.

JetBlueCaseAnalysis

Byvoge88,Apr2012|3Pages(721Words)|323Views
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JetBlue
Vision
Tobethebestmethodoftraveling
SWOT
Strengths
JetBlueAirwaysisthelowcostAirlineofAmerica.
Strongpeopleontopmanagement,severalJetBlueexecutives
areformeremployeesofSouthwestAirlines.
ItfollowsthelowcoststrategyofSouthwestAirlinesbut
differentiateitselfbyfacilitatingcustomerwithentertainment
stuff.
StrongBrandwidelyknownamongthepeopleofUS.
LiveTVateveryseatwith100channels.
Lowcostoperations
JetBluecontinuallyhiringtalentedandexperiencepeopleand
alsoretainingthem.
JetBluewasnamedthenumberoneU.S.domesticairlineby
ConedNastTravelermagazinesReadersChoiceAwardsfor
thesixthyearinarow.
Weaknesses
JetBluehasnotyettriedtoliftmoneybysellingsnacksduring
flights

Itwasestablishedinyear1999relativelynewairlinecompany
thatthereasonitstillnothavecompletemarketholdon50
states.
Inyear2005ithadfacedAircraftsproblemswhichreducedthe
profits.
Airlineisoperatingin12countries.
Opportunities
Theairlineindustrygrowthisnotuptothemarkbutstill
JetBlueprofitsareonhigherside.
Increasethenumberofflights.
PenetrateinUSmarket.
Majorityofinternationalmarketsareuntapped.
Threats
Theincidentof9/11increasesthesecuritythreatforairline
industry.
RecessioninUSmaylowertherevenues.
Thepriceoffuelisunpredictable.
JetBluefacingStrongcompetitioninUSandInternational
market.
PEST
Political
*September11,terroristattacks
*Politicalstability
*Competitiveairlineindustry
*Regulatoryfactors
Economic
*Improvedpurchasingpower
*RiseinInflation
*RiseinOilPrices
Social
*Greatercustomerawareness

*Increasedentertainmentlevel
*Securitylevelofcustomers
*BadServices(lostluggage)
Technological
*Beginningeticketing
*Automatedsystems(cockpits)
*Advertisements(newlyintroducedanimated)
Porters
BargainingpowerofBuyer:H
ThreatofSubstitute:H
BargainingPowerofSuppliers:H
ThreatofNewEntrance:L
CompetitiveRivalry:H
CoreCompetencies:Logistics
CompetitiveAdvantage:Efficiency
Strategy:LCP
4ps
Product:JetBlueiscorneringthemarketplacewithits
productivity,inflightfeatures,andcustomerservice.Duetothe
factthatthecompanyonlypurchasesnewplanesofasingle
type,maintenancedowntimeisreducedanditisabletokeepits
planesintheair.Infact,JetBluemaintainsthehighestinair
averageintheindustry.Additionally,JetBlueemploysan
"operationalrecoverytool"technologythatallowsplannersto
minimizeflightcancellationsanddelays.Onboard,JetBlue
pridesitselfontreatingallcustomersasequalsandproviding
morecomfortthanotherairlines.Featuresthatdrawcustomers
inincludeassignedleatherseats,morelegroom,andsuperior
onboardservice.Furthermore,JetBlueisoneonlyafew
airlinesthatofferseachpassengerfreeDirectTVandXM
satelliteradioentertainment.Finally,withregardtocustomer
service,JetBluefocusesintentlyonattractingandmotivatinga
talentedworkforce.Thecompanygiveseachemployeeasense
ofownershipintheoperations.Thisvalue
andrespectbestowedoneachemployeetranslatesintoa

motivated,productiveworkforcethatfocusesoncustomer
satisfactionandexceedsconsumerexpectations.
Price:AlthoughJetBluefocusesonservicevaluethroughhighly
productivepersonnelandaircraft,potentialconsumersarestill
interestedinvaluewhentheyfly;thePriceaspectofthe
marketingmix.Customersareinterestedinqualityserviceata
reasonableprice.Inthisregard,JetBlueexcels,doingthingsthat
theircompetitorscannotorwillnot;offeringthecheapestfares,
crosscountry.Withitslowcoststrategy,JetBluehasfoundthat
itcanincreasemarketshareanddazzlecustomerswithtop
qualityatlowerprices.Thiscombinationhasgenerateda
significantcompetitiveadvantageforotherairlinestosurmount.
(Penetration)
Place:JetBluecontinuestoanalyzethemarket.Throughan
investigativestudy,thecompanydetermineditwasbestnotto
competeintheNewYorkBostonandNewYorkWashington
shuttlemarketswiththecurrentdominanceofDeltaandUS
Airwaysshuttles.However,JetBlueisconsideringgivingmajor
airlinesarunfortheirmoneyastheyconsidertoenterthehigh
demandCaribbeanmarket.
Promotion:JetBluesurprisinglyhasquicklygarneredaloyal,
satisfiedgroupofflyerswhichhasledtorepeatbusiness.As
JetBluehasdiscoveredthatattractingnewcustomersand
customerturnovercanbecostly,thecompanyfocusesstrong
attentiononcustomerretentionthroughitshighquality/lowcost
strategyandfreewordofmouthadvertising.Thisapproach
helpsincreasethecompanysprofitmarginandsimultaneously
reducecosts.

JetBlueCase
Part1Analysis:
FinancialAnalysis
JetBlue,despitethehardtimesfacingtheairlineindustry,is
doingwellincomparisontoitscompetitors.Itisamuch
smallercompanyearningasmuchas$18millionlessthanits
competitorsinoperatingrevenues(Americanhadthemostat
20,657millionandJetBluehad1,701million).However,with

thatbeingsaid,itistheonlyleadingairlinetoshowanoperating
profitbesidesSouthwest.DoesthismeanJetBluewas
successful?Alongwithallofitscompetitors,withthe
exceptionofSouthwest,ithadanegativenetincomeand
negativeearningspershare.However,itslossesaremuchless
thanitscompetitors.Itsgrossprofitmarginwas.028,whileits
competitorssuchasDeltaat.12andAmericanat.17showing
thatwhileitmaynotlooklikeasuccessinthelargerpicture;it
isatacompetitiveadvantage,withtheexceptionofSouthwest.
VRIO
JetBluehasacompetitiveadvantageoveritscompetitors.It
enteredintothemarketofferingpricesthatwerelow.In
addition,itofferedluxuriessuchasleatherseatsandsatellite
televisionsonthebackofalltheseatsontheplane.These
luxurieswerenotofferedbycompetitorsatthelowpricesthat
JetBluewasoffering,notevenSouthwest,andofferedvaluefor
consumersthatwererare.Whiletheseservicescanbeimitated,
itwouldbeverycostlytodoso.Airlineswouldnotonlyhave
topurchaseplanesthatwerecomparabletoJetBluesandwith
thelowairfarecostJetBluewasoffering,competitorswere
alreadyhavingdifficultycompetingwithoutadditionalcosts.
JetBlue,inordertocontinuegrowth,decidedtoenterintothe
newmarketofshorthaulflightsthatitdidnotcurrentlyoffer.
TodothisitpurchasedtheE190whichoperatedataCASMof
34%lessthanthetypicalRJ.Thisputcompetitorsataneven
greaterdisadvantage.However,JetBlueranintocomplications
withorganizationwiththenewplane.Itwasverydifficultfor
pilotstobetrainedtoflythenewE190andtheircurrentA320.
Employeeswerealsohavingdifficultieswiththechangessuch
assmalleraislesandthenonslipfloorsofthecargospacethat
madeitimpossibletoslideluggageforcingemployeestocarry
theluggageandcausinginjuries.ThetypeofcustomerJetBlue
wasusedtocateringtohadalsochangedfromtheleisuretype
travelingtoFloridaforvacationfromNewYorktothebusiness
typeutilizingtheshorthaulflightsandrequiringtimely

schedules.Employeeswerenotpreparedtodealwiththis
changeincustomer.Alongwiththat,JetBluehada
policytonotavoidcancelingflightsatallcoststhatprovedtobe
verycostlyFebruary14,2007whenweathercaused131,000
customerstobeaffectedbycancelations,delays,anddiversions.
OrganizationwillrequireimprovementforJetBluetocontinue
tohaveacompetitiveadvantage.
ExternalEnvironment
1.ThreatofEntryWithmostairlinesshowingaloss,the
currenteconomicsituation,andthehighcostofentryintothe
market,thethreatofentryisverylow.
2.ThreatofRivalryTherearefiveothermajorairlinesthat
poseathreattoJetBlue.Theonlyoneofthesetoshowaprofit
wasSouthwest,makingitthebiggestrival.Rivalryisstrong,
evenwiththehighlossesofcompetitors,industrygrowthis
slowandproductdifferentiationisdifficultbecausethebottom
lineisthatalltheairlinesservethesameneedofthecustomerto
getonefromonedestinationtoanother.
3.ThreatofSubstitutesThethreatofsubstitutesistherebut
notstrong.Customershavetheoptionofdrivingfromone
destinationtoanother,butthiscouldbetimeconsuming,and
withthecurrenthighgasolineprices,expensive.Trainsare
anotheroptionbutagaintimeconsumingandunappealingto
businesscustomerswheretimeisveryvaluable.Theonly
substituteisthatofanother
airlineandJetBluedoeswellbyofferinglowcompetitive
airfare.
4.ThreatofSuppliersThethreatoftheairlineindustrys
suppliersislow.Companiesthatproduceairplanesmakea
transactionspecificproduct,withouttheairlinestopurchase
theirplanes,theyplaneshavesignificantlylessvalue.There
areenoughsuppliersbiddingforanairlinesbusinessthatthey
mustpriceplanescompetitively.Suppliersarealsounlikelyto
verticallyintegrateforwardduetothehighcostsinvolved.
5.ThreatofBuyersThethreatofbuyersissignificant.

Buyersofairlineticketsarelikelytodemandthelowestpossible
pricesforthehighestpossiblevalue.Ifabuyerdoesntfind
whatitwantswithoneairlineitcansoeasilyjustgotoanother
airlineandfindwhatheorshewants.
GeneralEnvironment
Theeconomicclimateisnotgoodfortheairlineindustry
makingtheindustryunappealing.Withunemploymenthigh,
thereislessdisposableincomeandconsumersarecarefully
watchingeverydollartheyspend.The9/11eventhasalsohad
alargenegativeimpactontheairlineindustrydrivingdown
salesbecauseofthefearofconsumerstofly.Demographic
trendshavealsoaffectedtheairlineindustry.Thebabyboomer
populationisnowolderwithmoredisposableincomeandthe
Hispanicpopulationhasalsogrowngaining29%indisposable
income.Whilethisincreaseindisposableincomeisbeneficial,
itrequiresmoreemployeestobebilingualtohandletheincrease
intheHispanicpopulation.Also,technologyhaschangedwith
theadditionofkiosksandtheabilitytobookticketsonline.
Thisincreasesthespeedofpurchasingbut,withpricesbeingthe
largestdecidingfactor,itcreatescutthroatcompetitiontowin
thecustomer.
Part2PresentationandEvaluationsofpotentialoptions
JetBlueenteredtheairlineindustrywithacostleadership
strategy.Theirmissionwascustomercentricbyofferingthe
comfortandqualitythatwasaffordableforconsumers.Their
lowfaresandaddedluxuriesputthematacompetitive
advantageintheindustry.Thentheadditionofshorthaul
flightstotheirlonghaulflightsandtheadditionoftheE190
furtheredtheirgrowthallowingthemtooperateinnew
environments.TheadditionoftheE190,whileitcamewithis
complications,wasagooddecision.Thelimittoonlylarge
citieslimitedJetBlueandcutoutthebusinessconsumer.There
aresomeconcernswithhowmanyE190planesandhowmany
A320planeswouldmakethemostprofitforJetBlue.While
A320showsa12%greaterCASM,italsohasanacquisition
cost

of5060million,wheretheE190is3040million.The12%is
alsobasedonlyonlongflightsfrommajorcitytomajorcity,it
isnotstatedhowtheshorthaulflightswouldaffecttheCASM
oftheA320.Becauseofitscosts,theA320shouldbeused
onlyforlonghaulflightsandtheE190shouldbeusedforshort
haulflights.Themostprofitablesituationwouldbetotakethe
demandforlonghaulflightsandthedemandforshorthaul
flightsandprovidetherightamountofeachplanetosupplythe
demandswithouthavingplanessitorflywithlowpassenger
countperseat.
Part3FinalStrategicRecommendationsandJustification
JetBlueishasstartedoutwithagoodreputationamong
customers.Itsfuturedependsonitscustomeranditscustomer
centricstrategy.ItisveryimportantforJetBluetocontinueto
makethecustomeratoppriorityandcontinuewithsuperior
customerserviceasithasdoneinthepastwiththingslikethe
customerbillofrights.ItisimportantasJetBlueaddscities
andgrowth,tocontinuetoincreasenamerecognition.Along
withaddingmoremidsizecities,itmaybenefitbyaddingmore
nonstopflightsthatarepopularamongconsumers.Bylimiting
thenumberofstopsJetBluespendslesstimeonthegroundand
moretimeintheairwhereprofitismade.

Jet blue assignment

JetBlueAirways
TodayUnitedStatesairlineindustryisfacedwithsomany
trendsthatmayaffectacompanysstrategy.Mostairline
carriersarechargingafuelsurchargeontopoftheticketprices
becausetheyaresufferingfromfuelpricesandotherrising
costs,andiftheydontchargeafuelsurchargetheywilllose
moneyasaresult.Airlinesarealsochargingbaggagecosts,
feesfrom$15to$50ormoreforeachcheckedbag.Safetyand
maintenanceproceduresareanotherimportantaspectbeingthat
planessharespacesattheairports.Iftravelersdonotfeelthey
aresafeusingyourairline,theywilluseanother.Whenairline
industriesdeveloptheirstrategicplan,fuelcostsrisingor
declining,baggagecostsandthesafetyandmaintenancepolicy
andprocedureshouldbeconsideredwhenplanning.(Carlin)
JetBluesstrategicintentwastobeadiscountcarrier,toprovide
passengerswithlowfares,snacksandTVentertainment.
Neelemanknewtosatisfycustomersbecausethatwasthe
definitewaytogetareturn.Thetargetwasintendedforthe8
millionpeopleinafivemileradiusaroundJFKbuthefoundout
lateritattractedtheNewYorkCitytravelers.
JetBluesfinancialobjectivesweretodelivertoitsstockholders
overthefiveyearperiodendingDecember31,2007.They
wereunabletodothisbecauseoftheincreaseinfuelprices.Jet
Bluerevenuesgrowfrom$998millionin2003
to$2,842millionin2007andjetfuelincreasedby532percent
from2003to2007.BecauseofJetBluesbeingalowfare
competitor,itscostandcapitalstructurewasdifferentfrom
otherairlines.
JetBluesstrategicelementsofcostweretobeadiscountairline
industry.JetBluefareswereextremelylow.Itusedtwotypes
ofaircrafts,onewithfewerseatsforoffpeaktimeandonewith

themostseatsduringpeaktime.JetBlueusedinformation
technologyforbookings,ticketingandrevenuemanagementto
alsokeepthecostdown.Theyalsohiredagentstoselltickets
athomeoverthephone.JetBlueonlyprovidedsnacks;they
hadnocateringservicetoprovidemeals.JetBlues
organizationalculturewasputtogetherbyAnnRhoades,Jet
Bluesfirstexecutivevicepresidentofhumanresources.The
organizationalculturestructurewasverypowerful.The
structurehadfivestepsthatidentifiedthecompanysvalues:
1.SafetyagreementwithMedaire,Inc.,InflightHealth,Kevlar
cockpitdoorsandcabinsurveillancecamerasinallofits
airplanes
2.CaringAfter9/11companydidntlayanyoneoffand
continuedpayingsalariesandbenefitsandNeelemandonated
partofhissalarytocrisisfund,
3.IntegrityNeelemantookpersonalresponsibilitywhenstaff
violatedcompanypolicyandhiredsomeonetotakealookatthe
policyconcerningcarriersprivacytomakesurethepolicyhad
everything
itneeded
4.Funafriendlyworkenvironment,staffhadGeorgeForeman
grillsandpassengershadyellowpunchingbagstorelieve
stress
5.Passionemployeescaredaboutthecompany,thecompanys
productsandcustomers
JetBlueshumanresourcepracticesincludedhiring,training
andpaying.JetBlueusedateamwhichincludedthedirector,
managerofinflightrecruitmentandotherhumanresourceand
inflightleadershippersonnel.Theteaminterviewedandgot
togetherandtheinterviewingprocessandselectedtheoneswho
performedthebestduringthegroupactivity.JetBluehada
trainingcenteratOrlandoInternationalAirport.Thetraining
centerhadeightflightsimulators,twocabinsimulators,
classrooms,trainingpool,cafeteriaandafirefightingtraining
station.JetBluepaiditsstafflowerthanitscompetitors.They
madeupthedifferencebyofferingvariousbenefits:health

coverage,profitsharing,and401(k)retirementplans.Ifeelthe
strategiesfortheelementsofcostanditsorganizationalculture
gavethemacompetitiveadvantage.Idonotthinkthesalaries
andhumanresourcesstrategygavethemacompetitive
advantage.Inordertocompetewithitscompetitors,JetBlue
needstopayaroundthesamesalaryandmakesurethebenefits
adduptobethesame.
JetBluesstrategiesfor2008andbeyondwasto:
StrategiesImplementationofStrategy
1.Reevaluatethewaysthecompany
wasusingitsassetsDeployedtwooftheirkeyassets,JFKand
LiveTV
UseJFKasaquasihub
SignedacontractwithContinentaltoprovideitwithLiveTV
2.ReducecapacityandcutcostsAgreedtosellnineused
Airbusin2008resultinginanetcashgrainof$100million
Sellmoreaircraftin2009and2010
Delaydeliveryof21newAirbusfrom2009through2011to
2014and2015whichwilldelaypaymentontheplanesandsave
onoperatingexpenses
Reduceaircraftutilizationratefrom13hrsto12.5hrsperday
inthe4thquarterof2008
Suspendserviceinandoutof:Columbus,Ohio
Nashville,Tennessee
Tucson,Arizona
CancelplannedservicebetweenLosAngelesInternational
airport,BostonandNewYork
3.RaisefaresandgrowinselectmarketsOrlandowouldbeits
seventhfocuscity
OpenedservicebetweenOrlandoandCancunMexico,and
betweenOrlandoandSantoDomingo,DominicanRepublic
TentativeapprovalfromtheU.S.DeptofTransportationto
startOrlandosonlyservicetoSouthAmerican
Thisofferspassengersotherflightstointernational
designations
4.Offerimprovedservicesforcorporationsandbusiness

travelersRefundablefaresandmeetingspecificdiscounts
Complimentarytravelcertificateforevery40customers
bookedtothesameeventdestination
EnteredintoafiveyearagreementwithExpedia
AvailableforTravelocitybusinesscustomers
5.Form
strategicpartnershipsAnagreementwithAerLingusthat
allowedpassengerstomakeasinglereservationbetweenIreland
and40otherdestinationsintheUSthroughthehubatJFK
EnteredintoamarketingpartnershipwithMassachusettsbased
CapeAirthatwouldallowpassengerstotransferbetweenthe
twocarrierstovisitHyannis,NantucketandMarthasvineyard
6.IncreaseancillaryrevenuesChargeda$10callcentercharge
forbookingaflightoverthephoneorattheairport
Passengerscouldpayforextrafooditemsusingadeviceflight
attendantscarriedbyhand
Soldupgradedheadphonesfor$1anddiscontinuedhanding
outfreeones
Chargedpassengersadditionalfeesforseatsthathad
additionallegroommade$40millioninninemonthsin2008
withthisprogram
June2008chargedpassengersanadditionalfeeof$20for
secondbagandthisgeneratedmorethan$20millioninnew
revenuesinthelastsixmonthsof2008
ThebottomlineforJune2008displaysthatthestrategieswere
implementedbutdidnotmakeagreatdealofdifference.With
shareshittinganalltimelowinJuly2008,JetBluemayneedto
mergewithanothercarrierinordertosurviveinthefuture.
References
Thompson,A.A.,Strickland,A.J.,&Gamble,J.E.(2010).
Craftingandexecutionstrategy:Thequestforcompetitive
advantage:Conceptsandcases2009customedition(17thed.)
NewYork:McGrawHillIrwin

1.DiscussthetrendsinU.S.airlineindustryandhowthese
trendsmightimpactacompanysstrategy.
Theairlineindustryexistsinanintenselycompetitivemarket.In
recentyears,therehasbeenanindustrywideshakedown,which
willhavefarreachingeffectsontheindustry'strendtowards
expandingdomesticandinternationalservices.Inthepast,the
airlineindustrywasatleastpartlygovernmentowned.Thisis
stilltrueinmanycountries,butintheU.S.allmajorairlines
havecometobeprivatelyheld.Theairlineindustryisfacing
oneofitsmostchallengingenvironmentsinhistory.Aglobal
economicrecessioncoupledwiththeterroristattacksof
September11,2001haveledtoadecreaseinpassengertraffic,
reductioninrevenuepermileflown,andrisinglaborcosts.
Additionally,acollapseinpricingpowerandashiftinthe
buyingbehaviorofbusinesstravelers,coupledwithfierce
competitionfromlowcostairlines,areforcingmajorairlinesto
restructuretheiroperationsorfacetheprospectofgoingoutof
business.Theairlineindustryhasrespondedtothisdifficult
environmentbytakingmeasurestoreducetheircosts.Airlines
announcedlayoffsinvolvingmorethan100,000employees
immediatelyfollowingtheattacks.Tomakemattersworsefor
theindustry,theFederalAviationAdministration(FAA)
predictsonlyagradualrecoveryinpassengertrafficduringthe
comingyears(AirlineIndustry).
2.DiscussJetBluesstrategicintent.
JetBluesstrategicintentwastoprovideanairlinewithlow
fares,comfortability,andinitiallytomakeaprofitforthe
company.Accordingtotheinitialstartup,thefounderofJet
BlueAirways,DavidNeeleman,wantedadiscountairline
carrierwiththecomfortsofasmallcozydeninpeopleshomes
(Thompson,Strickland,&Gamble,2010).Hebelievedthat

greatcustomerserviceandsatisfactionwasthekeytoa
successfulandprofitablebusiness.HedecidedtocreateJet
Bluesinternalandexternaldesigncorrespondingtohisown
personalexperiences.Insteadoffabricseats,hereplacedwith
leatherseats,whichhebelievedwasmoredurableandeasyto
clean.Headdedairtravelentertainmentforfree.Healso
introducedelectronicticketinganallowedhisagentstowork
fromhometosavemoney.
3.DiscussJetBluesfinancialobjectivesandwhetherornotthe
companyhasbeensuccessfulinachievingthisobjective.
ThefinancialobjectivesetforJetBluewastogenerateprofitby
offeringlowfares.Theirplaneshadmoreseatingthanother
airlines.Theyfound
waystosavemoneybyelectronicticketingandloweringwages,
butofferingbetterbenefitpackagestoincreaserevenue.They
alsoplannedtoreducecapacityandcutcost.Ultimately,Jet
Blueobjectivesworkedforacoupleofyearsbutsufferedalost
duetoincreasejetfuelandotherexpensesthatwerenecessities.
AsofJuly11,2008,thecompanyhasbeenunabletofully
achievetheirobjectives,andtherewasindicationthatJetBlue
mightbecomeatakeovertarget(Thompson,Strickland,&
Gamble,2010).
4.DiscussJetBluesstrategicelementsofcost,organizational
culture,andhumanresourcepracticesandevaluatewhether
eachelementprovidestheorganizationwithacompetitive
advantage.
JetBluewasadiscountairlinecarrier.Theyofferedpassengers
lowfares,operatedpointtopointsystems,usedtwotypesof
aircrafts(AirbusA320&theEmbraer),servedonlysnacks,and
maintainedquickturnaroundtimesatairports.Theiroperating
costswerelowcomparedtoothermajorU.S.airlines.By
creatingamixandmatchstrategy,Jetbluecouldprovidea
betterpatternofserviceforbusinesstravelersinterestedin
flyinginandoutofNewYorkthesameday(Thompson,
Strickland&Gamble,2010).JetBluewasonethefirst
companiestouseinformationtechnologytokeepcostdown.

Theywentpaperlessbyoperatingthe
saleandpurchaseofticketsandrevenuemanagement
electronically.AlotofJetBlueemployeesworkedfromhome
toreduceoverhead.JetBluealsoappealedmoretotheir
customersbyofferingseveralextracurricularactivities
throughouttheirterminalsforadultsandchildren.JetBlues
organizationalculturewasachievedandprogressby
implementinga5stepstrategyofvaluesforgreatjob
performance.Safety,thecompanysfirstpriority,followedby
caring,whichillustratedrespectandunderstanding;integrity,
whichenforcedethics;fun,whichwasevidentofafriendly
workingenvironment,andpassionincustomersatisfaction.
ThemainfocalpointofJetBlueshumanresourcemanagement
wastheirpeople.Employeeswereacknowledgedascrew
members,passengersascustomersandvendorsasbusiness
partners.Asfarasthehiringprocess,JetBluewanted
candidateswhoperformedverywellduringgroupactivities.
Theyimplementedaprogramtoanticipateashortageofairplane
pilotsbyofferinganinternshipforcandidateswhowere
interestedinbecomingprofessionalpilots.JetBluestraining
processconsistedofauniversitydividedinto5different
campusesaccordingtoeachdisciplineintheairlineindustry.
Pilots,flightattendants,maintenancecrew,gatestaff,and
reservationsagents,whereclassroomtrainingisheld
inthemajorcitiesJetBlueoperatesinacrosstheU.S.JetBlue
paidtheiremployeeslowersalariesthantheircompetitors,but
madeupforitbyofferinggreathealthcoverage,profitsharing,
and401(k)retirementplans.Ibelievethecompetitiveedgethey
hadoverotherairlineswastheirnolayoffpolicy.During
difficulteconomictimes,theyreliedondownsizingthrough
voluntarypackagesandattrition(Thompson,Strickland&
Gamble,2010).
5.DiscussJetBluesstrategiesfor2008andbeyondand
evaluatewhetherornotJetBluewillbesuccessful
implementingthesestrategies.
JetBluestrategiesfor2008andbeyondconsistedof6newways

toapproachasuccessfulfutureofthecompany.(1)
Managementwantedtodowasreevaluatethewaysthe
companywasusingitsassets.Theyfoundnewwaystodeploy
theairlinestwokeyassets;itsJFKterminalandLiveTV
subsidiary.DeutscheLufthansaAG,aglobalaviationgroup,
whichhelda19percentequitystakeinJetBlue,wouldbeable
touseJFKasaquasihub.JetBluealsosignedacontractwith
ContinentaltoprovideitwithLiveTV(Thompson,Strickland,
&Gamble,2010).Alongwiththisventure,thecompanyhired
afinancialadvisortoexplorestrategicalternativesforthe
subsidiarytoraisemorecash.(2)JetBluedecidedtoreduce
capacityandcutcosts.In2008,
theyagreedtosellnineAirbusA320sin2008,whichwould
resultinanetcashgainof$100million.Bydelayingthe
deliveryof21newAirbusA320sscheduledfor2009through
2011to2014and2015,wouldenableJetBluetopostpone
paymentfortheairplanesandsaveonoperatingexpenses.In
2008,JetBluealsodecidedtoreduceitsaircraftutilizationrate
from13hoursperdayto12.5hoursperday(Thompson,
Strickland,&Gamble,2010).Theybelievedthatsuspending
andcancelingcertainservicesinandoutofcertainareaswould
alsohelpreducecosts.(3)JetBluewantedtoraisefaresand
growinselectmarkets.InMarch2008,JetBlueannouncedthat
Orlandowouldbecomeitsseventhfocuscity,whichopened
upflightstointernationaldestinations(Thompson,Strickland,&
Gamble,2010).(4)JetBluewantedtoofferimprovedservices
forcorporationsandbusinesstravelers.Theyintroduced
refundablefaresandenabledcorporatemeetingplannersto
receivemeetingspecificdiscountsandacomplimentarytravel
certificateforevery40customersbookedtothesameevent
destination(Thompson,Strickland,&Gamble,2010).(5)Jet
Bluewasinterestedinpursuingpartnershipswithotherairline
companies.TheydevelopedanagreementwithAerLingusthat
enabledpassengerstomakeasinglereservationbetweenIreland
and

40destinationsintheUSthroughJetBlueshubatJFK.(6)Jet
BlueandthenewCEOBarger,believedthatbyincreasing
ancillaryrevenues,wouldenabletheairlinetooffsetsomeofthe
costsassociatedwithhighfuelprices.Suchcostsasimposinga
callcenterchargeof$10onpassengerswhobookedaflighton
thephoneorattheairport;creatingacashlesscabininwhich
passengerscouldpayforextrafooditemsviahandhelddevices;
stoppedhandingoutfreeheadphonesandsoldonlyupgraded
versionsfor$1atthegate;chargingpassengersadditionalfees
toreserveseatswithextralegroomanda$20servicefeefor
checkingasecondbagbeginningJune1,2008(Thompson,
Strickland,&Gamble,2010).Thesenewprogramsdid
generatemorerevenueinthelastsixmonthsin2008.However,
accordingtothefirstsixmonths,thecompanysperformance
seemeddoubtfuloftheactionstakenplace.

JetBlueAirways
JetBlueAirwaystooktotheskiesin2000underanovel
concept:bringinghumanitybacktoairtravel.BasedatNew
York'sKennedyInternationalAirport,JetBlue,anonunion
airline,distinguisheditselffromotherlowfarecarrierssuchas
SouthwestAirlinesbyofferingseatbackentertainmentsystems
withlivetelevision,comfortableseatsandbluecornchips.
Duringthelastsixyears,whentraditionalairlineswerepiling
upmorethan$40billioninlosses,JetBluegrewto$1.7billion
inannualrevenueandbecameincreasinglypopularwith
travelers.Butnowthatfuelpriceshavepushedupexpensesfor
allairlines,andoldercarriershavesharplycuttheirownlabor
costs,theadvantageJetBlueenjoyedasastartupisgreatly
reduced.JetBluetoonewtohavebuiltupexcessivecoststhat
cannowbetrimmed,istryingmightilytoraisefaresinabidto
restoreprofitsaftersurgingfuelpricescausedittolose$42.4
millionduringthefourthquarterof2009.
ThetrendsintheU.S.airlineindustryandhowthesetrends
mightimpactacompanysstrategy
Theairlineindustryissusceptibletoupturnsanddownturns
withthetrendsintheeconomy.Agrowingeconomyand
boomingbusinessmeangreaterdemandforairtravel,anda
slowdownintheeconomymeansreduceddemand,consequent
unutilizedcapacityandintensifiedcompetition.The

availabilityofventurecapitalandothercapitalsourceshavean
impactonthenumberofnewentrantsintotheindustry.
Interest
ratefluctuationshaveanimpactonthecostofoperationsfor
companiesthathavehighlevelsofdebt.Asaresult,theJetBlue
hasstruggledtosurvive.In2008,crudeoilpricesincreasedtoa
record$140perbarrel(Thompson,Strickland,&Gamble,
2010).ThisdramaticpriceincreasecausedairlinestoStruggle
tooffsetthecostoffuel.Manybeganimplementingnew
passengerfeesincludingafuelSurcharge,baggagecheckfees,
feesforheavybags,feesforbeveragesandsnacks,andeven
feesforusingblanketsandpillows.Presently,gaspriceshave
dropped.However,theairlinescontinuetopassalongthefeesto
itspassengerstoincreaserevenue.Clearly,thefeesthatbegan
originallyinresponsetofuelpricescontinuetobepartofthe
revenuegeneratingstrategiesofairlines.Asbabyboomersretire
bythethousands,theairlineindustryisexperiencingashortage
ofpilots.Beforebecomingcaptains,pilotsmustearnsufficient
flyhours.However,flyingschoolsdonothaveenough
instructorstotrainenoughnewpilots.Accordingtothe
InternationalAirTransportAssociation,anestimated3,000
morepilotsareneededeachyearthantrainingschoolscan
provide(Thompsonetal.,2010).Inresponse,theairline
industriesfaceincreaselaborcostsastheyraisepilotsalariesin
ordertoattractpilots.TheSeptember11,2001attacksonthe
WorldTradeCentercreatesfearsinthemindsofcustomers
towardairtravelandhaveasevereadverseimpactonthe
industry.Shortlyafterthe9/11
terroristattacks,CongresspassedtheAviationand
TransportationSecurityAct,whichcreatedtheTransportation
SecurityAdministration(TSA)andmandatedthatfederal
employeesbeinchargeofairportsecurityscreeningItalso
meansincreasedsecurityconcerns;delayedflights,reduced
turnaroundtimes,andallthesehaveanimpactonairline
profitability.
DiscussJetBluesstrategicintent

JetBluesfounder,David,NeelemanstartedJetBluewiththe
notionofbringinghumanitybacktoairtravel.Thegoalwasto
bealowdiscountairlinecarrierthatofferedcomfortandservice
toitscustomers.Forexample,thecompanysphilosophywasto
delayflightsratherthantocancelthem.Inaddition,JetBluewas
thefirstairlinetopublishaPassengersBillofRights;a
documentdiscloseditspoliciestopassengers.JetBluewasthe
firsttoofferelectronicticketingwhichwasconvenientfor
customers.Thecompanyalsoofferedextraslikeinseat
televisionandPayPalticketpayments.Tofurtherincrease
shareholderandcustomervalue,JetBluelaunchedstrategic
growthandrapidexpansioninitiatives.In2000,JetBluemade
theriskydecisiontostartupserviceinNewYorkscongested,
JFKAirportbetween8and9awaslighter.Itusedthishidden
opportunitytoitsadvantagetoofferflightsthatappealedto
young,affluentNewYorkers,aswellas,tothosetravelingto
NewYorkCity.Inlate2008,JetBlueopenedupTerminal5at
JRKtogivecustomersgreaterconvenienceandefficiencywhile
alsosavingthem$50millioninlabor,fuel,andvouchers.
Meanwhile,between2003and2008,JetBluebeganserviceto
manydestinationsincludingSanDiego,FortLauderdale,
Portland,andmore.ByDecember2007,thecompanyhad
expandedtoserveover53destinations(ThompsonEtal.2010).
Thisimpressivegrowthdidnotimmediatelyleadtoshareholder
value.
DiscussJetBluesfinancialobjectivesandwhetherornotthe
companyhasbeensuccessfulinachievingthisobjective.
AlthoughJetBlueshowedalotofpromise,thestock
droppedinvalueby50%inthefiveyearperiodending
December2007.AcloserreviewofJetBluesfinancial
performancerevealedthat,whilerevenuesgrew185%between
2003and2007,theiroperatingexpensesgrew222%duringthe
sameperiod.Thisrevenuelosswasattributedtojetfuel(532%
increases)andinterestexpense(658%increase)Insteadof
handlingtheinterestexpense,JetBluetookaconservative
financialstrategyinwhichtheymaintainedhighliquidratios

relativetotheothermajorairlines.Thiscashbalancewas
excludedandthesecuritieswerereclassifiedfromcurrentassets
tolongterminvestments.Nevertheless,JetBluewassuccessful
inobtainingnewequitycapitalandcreditneededtokeepthe
companyafloatdespitethesetbacks.
DiscussJetBluesstrategicelementsofcost,organizational
culture,andhumanresourcepracticesandevaluatewhether
eachelementsprovidestheorganizationwithacompetitive
advantage.
JetBlueoperatesat
alowercostthanitscompetitors.AccordingtoThompson,
Strickland
&Gamble(2010),JetBluestotaloperatingexpenseswere
$12.17perrevenuepassengermilein2008versus$18.18for
AmericanAirline,$18.18forContinental,$20.95forDelta,
$13.85forSouthwest,$19.13forUnited,and$21.45forUS
Airways.Itsplanes,suchas,theAirbusA320,tendedtobe
newerthanthoseofitscompetitorsresultinginlower
maintenancecostsandnomaintenancerelatedfines.The
companyincreasedflyingtimebyminimizingturnaroundtime.
Reservationagentsworkedathomeresultingincostsavingsas
comparedtoatraditionalcallcenter.Thesemeasurespaidoff
creatingmajorcompetitiveadvantagesintheformoflow
operatingcoststhatotherairlinesdidnotachieve.JetBlues
organizationalstructurewascreatedbasedonfivesteps.First,
thecompanysvaluesweredetermined.Then,hiringmanagers
selectedemployeeswhomirroredthecompanysvalues.Next,
thecompanyensuredthatthecompanyexceededemployee
expectationsandtolistentocustomers.And,finally,the
companycreatedaplantodriveexcellence.Thevalues
establishedbyJetBlueweresafety,caring,integrity,fun,and
passion.Asanexample,GeorgeFormangrillsweresetupatthe
JFKterminaltoallowemployeestohavefun.Byonlyhiring
employeesthatmirroredthosevalues,thecompanycould
encouragehiringmanagerstobecreativeduringthehiring
processandtoweedoutthosethatwouldnotbeafit.Bymaking

thesestepsanactive
partofgettingworkdone,JetBluedevelopedastrong
organizationalculture.Humanresourcepractices.JetBlueisa
companywithastrongfocusonpeople.Inanticipationof
airplanepilotshortagestheyimplementedAviationUniversity
Gateway,partneredwithuniversitiestoidentifyexceptional
candidates,andimplementedinternshipprograms.They
addressedalackofconfidenceinJetBluesleadershipby
providingleadershipdevelopmenttraining.Theydevelopedan
airlinetrainingcenterattheOrlandoInternationalAirport.To
makeupforpayingemployeesalowerbasesalarythanits
competitors,theyofferedhealthcoverage,profitsharing,and
401kretirementplans.Theyalsoavoidedlayoffsthrough
voluntarypackagesandattrition.Thisfocusonmeetingthe
needsofitsemployees,growingtalent,andcreatingatalent
poolwasessentialcompetitivebenefitsthatwereverydifficult
toimitate.
JetBluesstrategiesfor2008&beyondandevaluatewhetheror
notJetBluewillbesuccessfulimplementingthesestrategies.
In2008,JetBlueadaptednewstrategiestoreevaluatetheway
itsassetswereused,
reducecapacity,cutcosts,raisefares,growinselectmarkets,
offerservicesforbusinesstravel,
formstrategicpartnerships,andincreaseancillaryrevenues.
JetBlueformedanalliancewith
LufthansatoenablethecompanytousetheirterminalsatJFK
andsignedacontractwith
ContinentaltoprovideLiveTV.JetBluereducedtheircapacity
bysellingnineaircraftsandreducedcosts
bydelayingthedeliveryof21newaircraftstheyreduced
aircraftutilizationrates,suspendedserviceinsomecities,and
cancelledplanserviceinordertocutcosts.Afterchoosing
Orlandotobecomeatargetmarket,theythenraisedpricesbut
tolowerfaresthancompetitors.Furthermore,theyprovided
incentivestocorporatetravelers,enteredintoagreementswith
Expediaforleisuretravelers,andAnalysisofJetBlueAirways,

7Travelocityforbusinesscustomers,andwithAerLingusto
expandtheirreachinternationally.Togeneraterevenue,JetBlue
creatednewfees,includingafeeforasecondbagandforselect
seats.Evenwiththesestrategies,theairlinesfinancial
performanceshowsthattheyarefallingshortofexpectations
duringthefirstsixmonthsof2008(Thompsonetal.,2010).
However,2009wasasuccessfulyearforJetBlue.Thecompany
wasoneofonlyafewtoreportfourconsecutivequartersof
profitabilityinthisyear(JetBlue,2010).Anetincomeof$58
millionwasgeneratedwithanoperatingmarginof8.5%
whichwasanimprovementofmorethan$140million
comparedto2008.Theycontinuedtohaveoneofthestrongest
liquiditypositionsintheU.S.airlineindustryrelativetoour
revenues.Inaddition,JetBluegeneratedpositivefreecashflow
forthefirsttimeinitshistory.AccordingtoJetBlues2009
annualreport,theseresultsdemonstratedthebenefitsof
JetBluesdisciplinedgrowthstrategy,itsfocusonmanaging
capitalexpenditures,rationalizingcapacity,
maximizingrevenue,andcontrollingcosts.Giventhatthe
companyisprosperousinchallengingtimes,itislikelythatthe
companyssoundstrategiesandcashrichpositionswillgivethe
companylongevityoverthelongterm.
Conclusions
ThepurposeofthisreportwastoexamineJetBluesbusiness
strategy.TrendsintheU.S.
airlineindustryimpactingcrudeoilprices,pilotshortages,and
9/11aviationsecuritymeasures.
Overall,thesetrends,combinedwithaweakeconomy,caused
airlinestostruggletosurvive.
JetBluehassurvivedbyafocusonbringinghumanitybackto
airtravelatlowfares.JetBlue
Focusedonprovidesvalues,customerservice,anduniqueextras
forcustomers.Employeesbenefitfromtrainingandastrong
organizationalculture.Thebusinessbenefitedfrommeasuresto
cutcostsandformlucrativepartnerships.Presently,thefinancial
reportsofJetBlueshowedthatthecompanywasoutperforming

itscompetitorsinarecessionmakingthecompanyhighlylikely
tobesuccessfuloverthelongterm.
References
AnIndividualCaseAnalysisofJetBlueAirwaysretrievedon
April15,2011from
http://ivythesis.typepad.com/term_paper_topics/2009/09/strategi
cmanagement.html#ixzz1JYqipltQ
AnalysisofJetBlueAirwaysretrievedonApril16,2011from
http://www.scribd.com/doc/36263004/AnalysisofJetBlue
JetBlueAirways:ACadreofNewManagersTakesControl,
from
http://vizedhtmlcontent.next.ecollege.com/pub/content/6aac3f1a
078b4a95a84cc3b706d8bdef/03909633720.pdf

JETbLUE

StrategicPlanning:JetBlueAirways
GregoryJames
ProfessorJohnMitchell
BUS599StrategicManagement
April24,2011
Abstract
Thisreporthasbeenproducedtodetermineifthestrategic
planninginwhichnewofJetBlueAirwaysCEODavidBarger
hascreated,willhelptoensurethecompanylongtermsuccess.
Addressedinthisreportwillbethefollowingtopics:(1)What
arethetrendsintheU.S.airlineindustry?Howmightthese

trendsimpactacompanysstrategy?,(2)WhatisJetBlues
strategicintent?,(3)WhatareJetBluesfinancialobjectives?
Hasthecompanyhasbeensuccessfulinachievingtheir
objective?,(4)WhatareJetBluesstrategicelementsofcost,
organizationalculture,andhumanresourcepractices?Doeseach
oftheseelementsprovidetheorganizationwithacompetitive
advantage?,and(5)WhatareJetBluesstrategiesfor2008and
beyond?WillJetBluebesuccessfulimplementingthese
strategiesornot?
StrategicPlanning:JetBlueAirways
WhatarethetrendsintheU.S.airlineindustry?Howmight
thesetrendsimpactacompanysstrategy?
Withtheconstantchangesinthecountryseconomy,airlinesare
havingmoredifficultiesreachingacompetitiveadvantage.The
constantraiseinfuelandoilcosttofuelairplaneshascaused
airlinestocomeupwithaplantomaintainthesecost.In
addition,theairlinesalsofocusonincreasingprofitreturn
toshareholdersandcompanyexecutives.Toachievethisgoals
airlineshavestartedtochargefeesforservicessuchasfor
checkingininperson,bookingwithacreditcard,overweight
baggagebythepound,luggageperdistance,bookingonline,
bagsthatwantfitundertheseat,transferringticketstoanother
personsname,andtousethebathroom.Fromthesenewcharges
airlineshavereportedearninga$2.1billiondollarprofitin2010
(Mayerowitz,2011).
WhatisJetBluesstrategicintent?
Airlines,suchasJetBlue,strategizedinawaythatresultedin
reducedoperatingcosts.JetBluesstrategicintentistofocuson
customerserviceandlowfares.CeoDavidNeelemans
constructedhisplansuponhisownexperiencesasapassenger,
andalsohisprofessionalexperiencesemployedintheairline
industry.Additionally,JetBluescustomerserviceprovidedby
itsemployeesandNeelemanhimselfwentaboveandbeyondthe
callofdutytopleasecustomers.Neelemanoncedrovean
elderlycouplefromtheJFKairporttotheirhomeinConnecticut

tosavethem$200foratax(Thompson,Strickland,&Gamble,
2010).
Tocutcost,JetBlueAirlinesonlyofferonlyoneclassof
seating.Eachseatcontainedleatherupholsteredwithsatellite
televisionmonitorsinstalledineveryseat;whichwasfreeof
charge.Tocutoperatingcost,JetBluehasdecidednottooffer
mealstoitspassengers.Insteadtheyprovidedgourmetsnacks
tocustomersduringflights.AnotherplanorganizedbyJetBlue
waswhentheyimplementedinformationtechnology.Customers
nowhavetheoptiontopurchaseelectronicticketsbetterknown
asetickets,whichhelpedtoreducecostsbyninedollars.The
useofeticketssavedonoperatingcostsandprovideda
conveniencetoitscustomer.TheeticketallowedJetBlues
reservationagentstoworkathome,whichreducedthe
companysoverheadcostsanduseofsuppliesforpapertickets.
Theconvenienceofaneticketforitscustomersremediedtheall
toooftenoccurrenceofforgottenpaperticket.Thesestrategic
planshelpedtoreduceticketpricesandashorterwaittimefor
aircraftturnaround(Thompson,Strickland,&Gamble,2010).
WhatareJetBluesfinancialobjectives?Hasthecompanyhas
beensuccessfulinachievingtheirobjective?
JetBluesfinancialgoalwastomakeenoughprofitfor
expansion.JetBlueAirlinesbeganwithofferingservicestothe
NewYorkandmetropolitanarea.JetBluesfirsthomewasthe
JohnF.,Kennedy(JFK)InternationalAirport.Themissionwas
tooperateservicetohighsalarypaidprofessionalswithinafive
mileradiusoftheJFKAirport.Whentheissuesinvolvedwith
airtrafficcongestioninitsoperatinghomebecameaconcern.In
responseJetBlueexpandedandofferedflightsfromslighter
congestedairportswithinandsurroundingtheNewYorkCity
metropolitanarea.During
JetBluessecondyearinbusiness,itaddedadditional
destinations.(Thompson,Strickland,&Gamble,2010).
Inthethirdyearthecompanybegantoofferpublicstockand
acquireditssatellitetelevisionsystem,LiveTV,LLC.The
companyalsoagainexpandedtomoredestinationsandoffered

additionalweeklyflightstodestinationssuchasLasVegas.
Betweentheyearsof2003to2007,JetBlueacquiredmore
airplanes,offeredflightstotheCaribbean,Mexico,andPuerto
Ricoandmoreamenitiesandserviceswhileinflight
(Thompson,Strickland,&Gamble,2010).
WhatareJetBluesstrategicelementsofcost,organizational
culture,andhumanresourcepractices?Doeseachofthese
elementsprovidetheorganizationwithacompetitive
advantage?
JetBlueselementsofcostexercisedthecompanysstrategiesof
offeringservicesasadiscountairline.Thecompanyoffered
passengerslowfares;operatedpointtopointsystems;usedtwo
typesofaircraft;servedonlysnacks;andmaintainedquick
turnaroundtimesatairports.Thecostcuttingstrategiesenable
JetBluetokeepoperatingcostsandticketfarescomparatively
lowerthanotherU.S.carriers.Thecostcuttingstrategies
certainlygiveJetBlueacompetitiveadvantageovercompetitive
carriers(Thompson,Strickland,&Gamble,2010).
JetBluebelievedpeoplecanaccomplishtheextraordinarywhen
theyaregiventheauthorityandresponsibility
tosucceed.ThecompanysexecutivevicepresidentofHuman
Resources,AnnRhoades,establishedaculturethat
encompassedsafety,caring,integrity,funandpassion.Rhoades
challengedhiringmanagerstobecreativeintheinterviewof
candidatesandcreatedemploymentoptionssoemployeeswould
notfeeltheywerelockedintocontracts.Rhoadesalsocreated
programswhereemployeescouldshareresponsibilitiesanda
jobcouldbesplitsothatonecouldspendmoretimewiththeir
children.Rhoadesalsoensuredthatthecompanycontinually
exceededemployeeexpectationsandtoensurethatitlistenedto
itscustomers.Thecompanyaimstocontinuallyimproveits
servicesanddifferentiateitselffromitscompetitors(Thompson,
Strickland,&Gamble,2010).
Whenthecompanyseekstohirenewemployees,candidates
washiredbasedupontheirperformanceingroupactivities.
JetBlueofferslowersalariestotheiremployeesthananyother

airline.JetBluemakesupthelowsalarieswiththecompanys
benefitspackages.JetBluesbenefitsincludehealthcoverage,
profitsharing,and401kretirementplan.Thecompanyalso
incorporatedanolayoffpolicywherethecompanyreliedon
downsizingthroughvoluntarypackagesandattritionduring
difficulteconomictimes(Thompson,Strickland,&Gamble,
2010).
WhatareJetBluesstrategiesfor2008andbeyond?WillJet
Bluebesuccessfulimplementingthesestrategies
ornot?
In2008,JetBluesexecutiveswereconvincedinestablishing
newstrategieswhichincluded,reevaluatingthewaysthe
companywasusingitsassets,reducingcapacityandcutcosts,
raisingfaresandgrowinginselectmarkets,offeringimproved
servicesforcorporationsandbusinesstravelers,forming
strategicpartnerships,andincreasingancillaryrevenue.
Unfortunately,thenewstrategiesdidnotpreventthealltime
lowthatJetBluereachedonJuly2008.JetBlueonlyheld4.3
percentmarketshareintheairlineindustry.Withmostofthe
airlineindustrystrugglesof2008resultinginmergers,JetBlue
braceditselffortakeover(Thompson,Strickland,&Gamble,
2010).
AlthoughJetBlueholdsasmallpercentageofthemarketshare
intheairlineindustrythecompanyisstillinbusinesstoday.
Withothercompanyaddingnewfeeforpassengers,JetBlue
mayendupreceivingtheturnaroundcustomerswhodecides
theyarenotgoingtocontinuetopayforextrafees.By
continuingtostrivetobringbackhumanityintheairline
industry,JetBluecouldpossiblybecomeatopairlineinthe
U.S.
References
Mayerowitz,S.(2011).11NewAirlineFeesWeMightSeein
2011.Retrievedonlinehttp://abcnews.go.com/Travel/11airline

fees2011/story?id=12540664
Thompson,A.A.,Strickland,A.J.,&Gamble,J.E.(2010).
CraftingandExecutingStrategy(17thEd.).NewYork:
McGrawHillIrwin.

JETBLUEAIRWAYS
CASE#3
BY
DARRYLMITCHELL
DRJACKHUDDLESTON
BUS599/STRATEGICMANAGEMENT
16APRIL2011
DiscussthetrendsintheUSairlineindustryandhowthese
trendsmightimpactacompanysstrategy.
Todaysairlinecompaniesarefacedwithsubstantial

challengesinanefforttokeepairtravelanaffordableandviable
modeoftransportingpeopleinthefuture.Theairlineindustry
continuestofeelthepinchfromtheUSeconomicslowdownand
riseofcrudeoil/jetfuelprices,whichhaverisentorecord
numberswithnopredictableendinsight.Thedownturned
economyisalsoforcingcustomersbothbusinessandconsumer
travelerstolookforalternativestosavemoneythroughcutting
backontravelexpenditures.Thestrategiesthatairline
companiespursueforthefutureinanefforttooffset
skyrocketingfuelprices,andkeepairtravelaffordablepose
perhapsthemostsignificantchallengetoensuresuccessinthe
future.Roundingoutthelistofchallengesisthethreatof
increasedcompetitionduetothevulnerabilityofthemarketto
new(small)entrantspartiallyattributabletorisingfaresandthe
potentialforincreasedlaborcostsasaresultofthepossible
futureshortageofpilotspredictedbystudiessuchastheone
performedbytheInternationalAirTransportAssociation.
Tomeetthesechallengesairlinesmayfindthemselves
needingtodevelopandevaluatestrategiesassociatedwith
loweringoperatingexpensesandincreasingoperational
efficienciesthroughinitiativessuchasenergyconservation
measures,scalingbackoperations,targetingspecific
markets,pursuingpartnershipswithotherairlines,oreven
mergers.Otherstrategiesunderconsiderationmayinclude
identifyingadditionalancillaryrevenuestreams.Energy
conservationmeasuresbeingconsideredarefocusedon
reducingfuelconsumptionthroughtechniquessuchasflyingat
slowerspeeds,higheraltitudesandmakingairplaneslighter
aimedatreducingfuelburnrate.Strategiesforcutting
operationalcostsmayincludereducingcapacityandservice,re
evaluatingtheuseofassetandmostassuredlyadoptingproven
approachesforhedgingfuelcost.Asanyonewhohastraveled
recentlycanattestthecreationofadditionalrevenuestreamsis
apparentasairlineshavepassedadditionalchargestocustomers
intheformoffuelsurcharges,baggagefeesandchargingfor
amenitiesthatwerepreviouslyfree,allofwhichimpactthe

customersatisfaction.Affordabilityandcustomersatisfaction
willalwaysremainakeyobjectiveinachievingsuccessandas
companiesstrivetokeeptheselevelshigh,theymayhaveto
redirecttheirfocusonthecorporationandbusinesstraveler,
whicharewidelyknowntodominatetheairtravelmarket.
DiscussJetBluesstrategicintent.
JetBluesstrategicintentcenteredonprovidingtheultimate
bestvaluescenariobycombiningthelowfaresofadiscount
airlinecarrierwithenhancedcustomerserviceandcomfort
similartothosefoundincustomershomesandnormally
availableonlywiththepurchaseofafirstclassticket.Tokeep
fareslow,JetBlueconcentratedoncontrollingoperatingcost
andusinginformationtechnologytoachieveoperational
efficienciesintheareasofticketingandrevenuemanagement.
Theirmissionobjectivesweredeeplyrootedincustomer
service,especiallyonboardservice,gearedtowardnever
disappointingacustomer;becauseasatisfiedcustomerisaloyal
andreturncustomer.Thisstrategicintentflowedfromthetop
downasseveralexamplesofthepersonaldeedsoftopcompany
officialstowardordinaryeverydaycustomersweredetailedin
thecase.
AnotherkeycomponentofJetBluesvisionwastheir
employeefocusedorganizationalculturebasedonthevalues
ofsafety,caring,integrity,funandpassion.Theorganizational
culturestemmedfromabeliefthatordinarypeoplecan
accomplishextraordinarythingswhengiventheappropriate
levelofauthorityandresponsibility.
DiscussJetBluesfinancialobjectivesandwhetherornotthe
companyhasbeensuccessfulinachievingthisobjective.
OneofJetBluesprimaryfinancialobjectiveswastokeep
operatingcost(otherthanfuelcost)low.Thestrategiesthey
employedtocontroloperatingcostincludedpopulatingtheir
fleetwithnew,morefuelefficientaircraftthatwerelesscostly
tooperate,maximizingpassengercarryingcapacity,leveraging
technologytorealizeefficienciesassociatedwithelectronic

versuspaperticketing,providingemploymentpackagesthat
supplementedlowersalarieswithincreasedbenefits,and
embracingtheefficienciesprovidedbyteleworking.These
strategiesprovedeffectiveasby2008,theyledtheindustryin
lowesttotaloperatingexpensesasmeasuredbythemetric
centsperrevenuepassengermile.Specifically,
withtotaloperatingexpensesof12.17centsperrevenue
passengermile,theirexpenseswerebetween14%to76%lower
thancompetitors.
Anotherkeyfinancialobjectivewastogrowoperating
revenues;whichwassubstantial(185%)duringthe5year
periodbetween2003and2007.JetBluesabilitytorealizesuch
asubstantialgrowthofrevenuewasdirectlyattributabletothe
rapidexpansionofoperationsobservedduringthesame
timeframe.Thisrapidexpansionwasmadepossiblethrougha
heavyrelianceonfinancingwhichresultedinasubstantial
increaseininterestexpensesofthecompanyoverthesame
period.Thisstrategydidnotproveeffectivebecauseeven
thoughoperatingrevenuesgrewsubstantiallyduringtheperiod,
therapidexpansioncoupledwithrisingfuelcostcaused
operatingexpensestogrowatafasterrate(222%)thus
outpacingrevenuegrowth.Tocompoundmattersthenon
operatingexpensesofJetBlue(interestexpensebeingthe
largestnonoperatingitem)increasedby658%.Allofthese
factorsresultedina82%decreasetonetincomeofbetween
2003and2004
Asfuelcostcontinuedtorise,JetBlueadoptedafinancial
strategytohedgeitsexposuretorisingaircraftfuelcostthatwas
basedonderivativeinstrumentscomprisedofoptioncontracts
andswapagreements.Thisapproachposedasubstantialamount
ofriskbecausetherewasnoderivativemarketforaircraftfuel,
soderivativesforcrudeandheatingoil(whichhighlycorrelate
withairlinefuelprices)wereused.JetBluedidnotanticipate
theimpactofthecrackspreadordifferencebetweenabarrel
of
jetfuelandcrudeoil,causingjetfuelpricesriseevenfasterthat

crudeoilprices.AsaresultJetBlueshedgingstrategywasless
effectivethatitslowcostcompetitor(Southwest).Specifically
JetBluesfuelcostconsumedsubstantiallymoreofitsoperating
revenue(33%)thanthatofSouthwest(26%).
DiscussJetBluesstrategicelementsofcost,organizational
culture,andhumanresourcepracticesandevaluatewhether
eachelementprovidestheorganizationwithacompetitive
advantage
JetBluesstrategiccostelementofbeingadiscountairline
carrierbyofferinglowfaresandkeepingoperatingcostlow
withoutsacrificingservicelevelsandqualityisaveryattractive
strategytoaspecificmarketofairtravelerregardlessofthe
conditionoftheeconomy.Whenyoutakeintoconsiderationthe
depressedstateofthecurrenteconomythisstrategybecomes
evenmoreattractiveasbusinessandconsumerslooktosave
moneyinavarietyofways.Thekeyelementindeterminingif
thisstrategywilltrulyprovideacompetitiveadvantageisifJet
Bluecanremainprofitablewiththistypeofstrategyinan
environmentwhereexpensesassociatedwithoperations
continuetorise,whilethepocketsofcustomerscontinueto
shrink.Acriticalelementinachievingacompetitiveadvantage
throughalowcoststrategy,itistocounteracttightprofit
margins(normallypresentwithlowcoststrategies)by
increasingthroughputintermsofmarketshareandassociated
passengervolume.
JetBluesstrategicelementsassociatedwiththeir
organizationalculturewereputinplacetocreatestrong
valuesandempoweremployeestofunctioninadiscipline
cultureofsuccess.Anorganizationthatplacesitsvalueson
safety,caring,integrity,funandpassionmakethemattractive
placestoworkwhichalsocorrespondsintobecomingemployers
ofchoicethusreducingemployeeturnover.Thesesamevalues
translateintoanatmosphereofexceptionalcustomerservice
becausecustomersvaluethesameprincipals.Thisapproachis
definitelyacompetitiveadvantagebecausecustomerserviceis

absolutelyessentialinthesuccessofcompaniesintheservice
industry.
ThestrategicelementsofJetBlueintheareasofhiring,
trainingandpayresultinastable,welltrainedandloyal
workforcewhichisadistinctcompetitiveadvantage,especially
intheserviceindustries.Specifically,theirtargetedapproachto
identifyingqualifiedcandidatesthatfitwellwithinthe
organizationalcultureattheoutsetmitigatefutureturnoverand
content,inspiredemployeesgenerallytranslateintoenhanced
customerservice.Theirfocusontrainingreinforcedthe
importanceofprovidingemployeeswiththeappropriatetools
andskillstoeffectivelycarryouttheirresponsibilitiesandtheir
commitmenttoemployeesthroughpoliciessuchasnolayoffs
andprovideenhancedbenefitscreatesanatmosphereof
excellence.
DiscussJetBluesstrategiesfor2008andbeyondandevaluate
whetherornotJetBluewillbesuccessfulimplementingthese
strategies.
Accordingtothetext,JetBlueidentifiedseveralnew
strategiestocarryforwardin2008andbeyondwhichincludere
evaluationofwaystheyusetheirassets,
reducingcapacityandcuttingcosts,raisingfaresandgrowingin
selectmarkets,offeringimprovedservicesforcorporationsand
businesstravelers,formingstrategicpartnerships,andincreasing
ancillaryrevenues.Thesestrategieschartanappropriate
roadmaptomeetthechallengesfacingtheairlineindustryinthe
future,particularlyforacompanyfocusedonoperatingasa
discountaircarrier.Inmyopinion,therapidexpansionthatJet
Blueunderwentfrom2003through2007,wastheprimary
reasonthattheiroperatingperformancedidnotdeliverthe
expectedvaluetoitsstockholders.Theirstrategyofproviding
lowfaresandenhancedcustomerexperienceisasolidmodelfor
success,provideditiseffectivelyimplementandtargetedto
appropriatemarketsegments.Thedownturnoftheeconomy

whichresultedinreduceddependencyonairtraveland
passengerrevenuesacrosstheindustrycoupledwiththe
unexpectedandsubstantialincreasesinfuelcost(andtheir
failedhedgingstrategy),exacerbatedthevulnerabilityofJet
Blueasaresultoffundingtherapidexpansion.Severalofthe
strategiesidentifiedabove(assetuse,reducingcapacity,cutting
cost,targetingmarkets)aregearedtowardrightsizingand
refocusingthecompanyoncorecompetencies.Theformation
ofstrategicpartnershipsandincreasingancillaryrevenuesare
trendsthattheentireindustryseemstobemovingtowardsand
JetBluewillneedtofallinlinetoremaincompetitive.
BIBLIOGRAPHY
Thompson,A.A.,Strickland,A.J.,&Gamble,J.E.(2010).
Craftingandexecutingstrategy(17thed.).NewYork:McGraw
HillIrwin.

JETBLUEAIRLINESCORPORATION
JetBlueAirwaycorporationwasincorporatedintheyear1998
inDelawareandcommenceditsservicesin2000.Itsprimary
basisofoperationsareatNewYorksJohnFKennedyAirport.
Thegoalsofthefirmistoestablishitselfasaleadinglowfare,
lowcostpassengerairlinebyofferinghighqualitycustomer

servicesanddifferentiatedproducts.
STRATEGICISSUES
Thestrategyusedbythecompanytoattracttheircustomersis
lowcoststrategy,marketdevelopment,productdevelopment
anddifferentiationstrategy.Differentiationisachievedby
startingthebusinesswithhugecapitalofabout100million.
Flyingnewplainswhicharemorereliableandefficient.Provide
leatherseatswithindividualmonitors.Hiringthebestpeopleby
screeningtheemployeesrigorously,offeringexceptional
trainingandequippingthemwithbesttoolstherebymotivating
theemployees.Byfocusingoncustomerfriendlyandjoyful
flightservices.
ThemajorcompetitorofJBLUisSouthwestAirlines.David
NeelemanisthefounderofJBLUwhowasfiredbySouthwest
Airlines.In
theyear2006JBLUpublisheditsfirstcorporatesustainability
reportnamedasFirstAnnualEnvironmentalandSocial
Reportwhichconcentratedmoreonsocialresponsibilities.This
includedgreenhousegasemissions,conservationeffortsand
socialresponsibilityinitiativesinregardtocommunityservices
thatfocusesonchildren,education,communitiesand
environment.
Intheyear2007JBLUintroducedcustomerbillofrightswhich
providescompensationtocustomerswhoexperienceavoidable
inconveniences.Thiscompanyisthefirsttoprovidesuchtypes
ofservicetoitscustomers.In2008itintroducedrefundable
faresandnewpaymentoptions.
Thecostperseatexcludingfuelsis5.94centswhichwasthe
leastvaluegivenbyallUSairlines.Theaircraftwasoperatedat
anaverageof12.1hoursperdaywhichisthehighestamongall
theUSairlines.Boththefirmsfacedcomparativelylesser

competitionuntil2009andlateronfacedmorecompetitive
problems.JBLUwaswellpositionedinmetropolitanareasand
usewordofmouthstrategyforpromotion.Thecompany
adoptedatieupwithAmerican
ExpressCardwhichiscalledastrueblueflightgratitude
whichcreatesaB2BandB2Crelationship.77%ofbookingis
doneonline.Themajoroperatingexpenseofthefirmisitslabor
workforcefollowedbyfuelexpenseswhichisshowingan
increasingtrendnowadays.Oneofthereasonwhichleadsto
morefuelconsumptionisincreasedrateofobesityweremore
fuelisburnedtoliftmoreweight.
STRATEGICPROBLEMS
Southwestispricingitsticketsat$49andJBLUpricingat$39.
EventhoughJBLUispricedlowitsbettertofollowthisstrategy
asitshowsbetterperformanceatthispricelevel.
STRATEGICRECCOMENDATION
Thecompanycancontinuewithmarketdevelopmentand
concentrateonboththedomesticandinternationalmarkets.
Thefirmcanmoveonwithitslowcoststrategyasitsoneof
thefactorwhichattractsitscustomers.
Incaseofproductdifferentiationsthefirmcanadoptmore
innovativeanduserfriendlymethodsanduseR&Dsothatthey
canadoptmoredifferentiation.
Thefirmcanprovidemorepromotionaloffersandvalue
addedpackages.

StrategyforJetBlueAirways
Assignment#1
PeteTorres

BUS599
October20,2010
Abstract
Thepurposeofthispaperistoevaluatethebusinessstrategyof
JetBlueAirways.The
companysmainstrengths,i.e.,customervalueoriented,
employeeoriented,anditsabilityto
formulateandexecuteeffectiveandtargetedstrategies,enabled
thecompanytorapidlyexpand
itsdomesticandinternationalmarketbase.Recently,itscurrent
focusoncreatingshareholder
valueandconservative,highliquidityfinancialmanagementhas
causedthecompanytomake
gainsduringtherecessionof2009resultinginapositivecash
flowforthefirsttime.JetBlues
soundstrategyandsuccessinaweakeconomymakesitlikely
thatthecompanywillcontinueto
succeed.
Keywords:JetBlue,Trend,StrategicIntent,Financial
Objectives,CompetitiveAdvantage
JetBlueAirlineslauncheditsfirstceremonialflightin2000.
Sincethattime,thecompanyhasevolvedintoabilliondollar
corporation.ThepurposeofthisreportistoexamineJetBlues
businessstrategyanditslikelihoodtosurvive.
TrendsintheU.Sairlineindustryandimpactacompany's
strategy
TrendsintheUSairlineindustryhaveanimpactonthe
performanceandstrategiesoftheairlines.Asaresult,JetBlue
hasstruggledtosurvive.Thefollowingtrendswillbediscussed

infurtherdetail:(1)crudeoilpricingfluctuationsleadto
passengerfeesforrevenuegeneration,(2)shortages
ofpilotsincreasedlaborcosts,and(3)post9/11Aviation
Securityincreasedoperatingexpenses.
Crudeoilpricingandpassengerfees.In2008,crudeoilprices
increasedtoarecord$140perbarrel(Thompson,Strickland,&
Gamble,2010).Thisdramaticpriceincreasecausedairlinesto
struggletooffsetthecostoffuel.Manybeganimplementing
newpassengerfeesincludingafuelsurcharge,baggagecheck
fees,feesforheavybags,feesforbeveragesandsnacks,and
evenfeesforusingblanketsandpillows.Presently,gasprices
havedropped.However,theairlinescontinuetopassalongthe
feestoitspassengerstoincreaserevenue.Clearly,thefeesthat
beganoriginallyinresponsetofuelpricescontinuetobepartof
therevenuegeneratingstrategiesofairlines.
ShortageofPilots.Asbabyboomersretirebythethousands,the
airlineindustryisexperiencingashortageofpilots.Before
becomingcaptains,pilotsmustearnsufficientflyhours.
However,flyingschoolsdonothaveenoughinstructorstotrain
enoughnewpilots.AccordingtotheInternationalAirTransport
Association,anestimated3,000morepilotsareneededeach
yearthantrainingschoolscanprovide(Thompsonetal.,2010).
Inresponse,theairlineindustriesfaceincreaselaborcostsas
theyraisepilotsalariesinordertoattractpilots.
Post9/11AviationSecurity.Shortlyafterthe9/11terrorist
attacks,Congresspassedthe
AviationandTransportationSecurityAct,which
createdtheTransportationSecurity
Administration(TSA)andmandatedthatfederalemployeesbe
inchargeofairportsecurityscreening(Kaplan,2006).These
mandatescausedtheairlinestoadoptseverallayersofsecurity.
TSAimplementedmorethoroughscreeningproceduresfor
passengersandtheirbaggage,includingrequiringpassengersto
removetheirshoes,limitingcarryingfluidsontotheplane,and
requiringpassengerstoremovetheircomputersforxray
inspection.Beyondpassengerscreening,TSAdevelopedthe

SecureFlightProgramforpassengerprescreeninganda
RegisteredTravelerprogramwithvoluntarybackground
informationandbiometricsforfrequentflyers(Kaplan,2006).
Inaddition,severalnewmeasuresdesignedtoprevent
hijackingsalsowereadopted,including,fortifiedcockpitdoors,
armedpilots,andarmedundercoverofficersonpassenger
flights.Theseactionshavehadafinancialimpactontheairline
industry.Since9/11,about$6billionayearhasbeenspenton
aviationsecuritytopreventasimilarattack(Schneier,2008).Jet
Bluesstrategyhelpedthecompanytoovercomethese
obstacles.

JetBlue'sstrategicintent
JetBluesfounder,DavidNeeleman,startedJetBluewiththe
notionofbringinghumanitybacktoairtravel.Thegoalwasto
bealowdiscountairlinecarrierthatofferedcomfortandservice
toitscustomers.Forexample,thecompanysphilosophywasto
delayflightsratherthantocancelthem.Inaddition,
JetBluewasthefirstairlinetopublishaPassengersBillof
Rights,adocumentdiscloseditspoliciestopassengers.JetBlue
wasthefirsttoofferelectronicticketingwhichwasconvenient
forcustomers.Thecompanyalsoofferedextraslikeinseat
televisionandPayPalticketpayments.
Tofurtherincreaseshareholderandcustomervalue,JetBlue
launchedstrategicgrowthandrapidexpansioninitiatives.In
2000,JetBluemadetheriskydecisiontostartupservicein
NewYorkscongested,JFKAirportbetween8and9awas
lighter.Itusedthishiddenopportunitytoitsadvantagetooffer
flightsthatappealedtoyoung,affluentNewYorkers,aswellas,
tothosetravelingtoNewYorkCity.Inlate2008,JetBlue
openedupTerminal5atJRKtogivecustomersgreater
convenienceandefficiencywhilealsosavingthem$50million
inlabor,fuel,andvouchers.Meanwhile,between2003and
2008,JetBluebeganservicetomanydestinationsincludingSan
Diego,FortLauderdale,Portland,andmore.ByDecember
2007,thecompanyhadexpandedtoserveover53destinations

(Thompsonetal.,2010).Howeverthisimpressivegrowthdid
notimmediatelyleadtoshareholdervalue.
JetBlue'sfinancialobjectivesandsuccessinachievingthis
objective
AlthoughJetBlueshowedalotofpromise,thestockdroppedin
valueby50%inthefiveyearperiodendingDecember2007.A
closerreviewofJetBluesfinancialperformancerevealedthat,
whilerevenuesgrew185%between
2003and2007,theiroperatingexpensesgrew222%duringthe
sameperiod.Thisrevenuelosswasattributedtojetfuel(532%
increase)andinterestexpense(658%increase).Insteadof
handlingtheinterestexpense,JetBluetookaconservative
financialstrategyinwhichtheymaintainedhighliquidratios
relativetotheothermajorairlines(Thompsonetal.,2010).This
cashbalancewasexcludedandthesecuritieswerereclassified
fromcurrentassetstolongterminvestments.Nevertheless,Jet
Bluewassuccessfulinobtainingnewequitycapitalandcredit
neededtokeepthecompanyafloatdespitethesetbacks.
JetBlue'sassessmentofcompetitiveadvantage
Cost:JetBlueoperatesatalowercostthanitscompetitors.
AccordingtoThompson,Strickland&Gamble(2010),Jet
Bluestotaloperatingexpenseswere12.17perrevenue
passengermilein2008versus$18.18forAmericanAirline,
$18.18forContinental,$20.95forDelta,$13.85forSouthwest,
$19.13forUnited,and$21.45forUSAirways.Itsplanes,such
as,theAirbusA320,tendedtobenewerthanthoseofits
competitorsresultinginlowermaintenancecostsandno
maintenancerelatedfines.Thecompanyincreasedflyingtime
byminimizingturnaroundtime.Reservationagentsworkedat
homeresultingincostsavingsascomparedtoatraditionalcall
center.Thesemeasurespaidoffcreatingamajorcompetitive
advantagesintheformoflowoperatingcoststhatotherairlines
didnotachieve.
Organizational

culture:JetBluesorganizationalstructurewascreatedbasedon
fivesteps.first,thecompanysvaluesweredetermined.Then,
hiringmanagersselectedemployeeswhomirroredthe
companysvalues.Next,thecompanyensuredthatthecompany
exceededemployeeexpectationsandtolistentocustomers.
And,finally,thecompanycreatedaplantodriveexcellence.
ThevaluesestablishedbyJetBlueweresafety,caring,integrity,
fun,andpassion.Asanexample,GeorgeFormangrillswereset
upattheJFKterminaltoallowemployeestohavefun.Byonly
hiringemployeesthatmirroredthosevalues,thecompanycould
encouragehiringmanagerstobecreativeduringthehiring
processandtoweedoutthosethatwouldnotbeafit.Bymaking
thesestepsanactivepartofgettingworkdone,JetBlue
developedastrongorganizationalculture.
Humanresourcepractices:JetBlueisacompanywithastrong
focusonpeople.In
anticipationofairplanepilotshortagestheyimplemented
AviationUniversityGateway,partneredwithuniversitiesto
identifyexceptionalcandidates,andimplementedinternship
programs.TheyaddressedalackofconfidenceinJetBlues
leadershipbyprovidingleadershipdevelopmenttraining.They
developedanairlinetrainingcenterattheOrlandoInternational
Airport.Tomakeupforpayingemployeesalowerbasesalary
thanitscompetitors,theyofferedhealthcoverage,profit
sharing,and401kretirementplans.Theyalsoavoidedlayoffs
through
voluntarypackagesandattrition.Thisfocusonmeetingthe
needsofitsemployees,growingtalent,andcreatingatalent
poolwasessentialcompetitivebenefitsthatwereverydifficult
toimitate.
JetBlue'sstrategyfor2008andbeyondandlikelihoodfor
success
In2008,JetBlueadaptednewstrategiestoreevaluatetheway
itsassetswereused,
reducecapacity,cutcosts,raisefares,growinselectmarkets,

offerservicesforbusinesstravel,
formstrategicpartnerships,andincreaseancillaryrevenues.Jet
Blueformedanalliancewith
LufthansatoenablethecompanytousetheirterminalsatJFK
andsignedacontractwith
ContinentaltoprovideLiveTV(Thompsonetal.,2010).Jet
Bluereducedtheircapacityby
sellingnineaircraft'sandreducedcostsbydelayingthedelivery
of21newaircraft's(Thompson
etal.,2010).Theyreducedaircraftutilizationrates,suspended
serviceinsomecities,and
cancelledplanserviceinordertocutcosts.Afterchoosing
Orlandotobecomeatargetmarket,
theythenraisedpricesbuttolowerfaresthancompetitors.
Furthermore,theyprovided
incentivestocorporatetravelers,enteredintoagreementswith
ExpediaforleisuretravelersandTravelocityforbusiness
customers,andwithAerLingustoexpandtheirreach
internationally.Togeneraterevenue,JetBluecreatednewfees,
includingafeeforasecondbagandforselectseats.Evenwith
thesestrategies,theairlinesfinancialperformanceshows
thattheyarefallingshortofexpectationsduringthefirstsix
monthsof2008(Thompsonetal.,2010).
However,2009wasasuccessfulyearforJetBlue.Thecompany
wasoneofonlyafewto
reportfourconsecutivequartersofprofitabilityinthisyear(Jet
Blue,2010).Anetincomeof$58
millionwasgeneratedwithanoperatingmarginof8.5%
whichwasanimprovementofmore
than$140millioncomparedto2008.Theycontinuedtohave
oneofthestrongestliquidity
positionsintheU.S.airlineindustryrelativetoourrevenues.In
addition,JetBluegenerated
positivefreecashflowforthefirsttimeinitshistory.According
toJetBlues2009annual
report,theseresultsdemonstratedthebenefitsofJetBlues

disciplinedgrowthstrategy,itsfocus
onmanagingcapitalexpenditures,rationalizingcapacity,
maximizingrevenue,andcontrolling
costs.Giventhatthecompanyisprosperousinchallenging
times,itislikelythatthecompanys
soundstrategiesandcashrichpositionswillgivethecompany
longevityoverthelongterm.
Conclusions
ThepurposeofthisreportwastoexamineJetBluesbusiness
strategy.TrendsintheU.S.
airlineindustryimpactingcrudeoilprices,pilotshortages,and
9/11aviationsecuritymeasures.
Overall,thesetrends,combinedwithaweakeconomy,caused
airlinestostruggletosurvive.
JetBluehassurvivedbyafocusonbringinghumanitybackto
airtravelatlowfares.They
focusedonprovidingvalue,customer
service,anduniqueextrasforcustomers.Employeesbenefit
fromtrainingandastrongorganizationalculture.Thebusiness
benefitedfrommeasurestocutcostsandformlucrative
partnerships.Presently,thefinancialreportsofJetBlueshowed
thatthecompanywasoutperformingitscompetitorsina
recessionmakingthecompanyhighlylikelytobesuccessful
overthelongterm.
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