Jetblue Case Study
INTRODUCTION JetBlue Airways is a low-cost passenger airline that provides customer service primarily on point-to-point routes. JetBlue offers its customers a quality product with young, fuel-efficient aircraft, leather seats, free in-flight– (24-Channel live television via satellite Direct TV, Thompson et al. p C-53)–entertainment at every seat, pre-assigned seating and reliable performance. JetBlue. . As of Dec 31 2008, serves 52 destinations in 19 states, Puerto Rico, Mexico, and five countries in the Caribbean and Latin America.
JetBlues fully owned corporate subsidiary, LiveTV, LLC, or LiveTV provides in-flight entertainment systems for commercial aircraft, including live in-seat satellite television, digital satellite radio, wireless aircraft data link service and cabin surveillance systems. As of Dec 31 2008, Co. operated an average of 600 daily flights with a fleet consisting of 107 Airbus A320 aircraft and 35 EMBRAER 190 aircraft. . •JetBlue was the first U. S. Airline to provide 100% ticket less boarding •JetBlue was the first U. S. Airline to install security cameras in passenger cabin for customer crew and safety •JetBlue was the first U.
S. Airline to install bulletproof cockpit doors across the fleet. BRIEF HISTORY JetBlue which was begun by Brazilian born and Seattle raised David Neeleman who studied accounting at the University of Utah for 3 years before dropping out to start his own Traveling Agency business partnering with Pineapple Express to sell Hawaiian packages including airfare and time-share vacation residence. He had to shutdown his Travel Agency business when his partner Pineapple express went out of business in 1983 when it run out operating cash.
His next job at Morris Air, Seattle based local carrier for which he worked for 8 years beginning in 1984 (Thompson et al. , pC-53) Prepared him as executive vice president and president and later became part of senior management after a 1993 acquisition of Morris by Southwest Airlines. He was with Southwest for about 5 years pertaining to his contract and severance when he lost his job at Southwest to lounge the company JetBlue. Learning from Southwest, JetBlue was begun in 1998 with some venture capitalist money and a fourth of money, 5million dollars he earned through the acquisition that once made him a Southwest executive.
David Neeleman initially staffed JetBlue Executive team with David Barger as president and COO; John Owen as executive vice president and CFO; Thomas Kelley as vice president and general counsel then executive secretary; and Ann Rhoades as executive president of Human Resources. Senior Management who to date serve in some capacity at the corporation with a few casualties including the top guy. Newbies Include Russel Chew hired in March 2007 as COO when David Barger Assumed David Neelemans job as CEO because Neeleman left the company to start an airline company in Brazil.
Ed Barnes assumed the CFO position officially February 13, 2008 when a previous CFO John Harvey only lasted 18 months on the job. Leaving CEO David Barger on helm with new leadership to direct the future path of struggling company with potential. TRENDS IN US AIRLINE INDUSTRY AND HOW THEY IMPACT COMPANY’S STRATEGY The principal competitive factors in the airline industry are 1) fare pricing,2) customer service,3) routes served, 4)flight schedules, 5)types of aircraft, 6)safety record and reputation,7) code-sharing relationships,8) in-flight entertainment systems and 9) frequent flyer programs.
Much of the same advanced technologies that other companies use such as 10) ticketless travel, 11) laptop computers and 12) website bookings, Most Airlines are now using this president initiated by JetBlue. However with major trends including frequent bankruptcy, and failing airlines; the need for groups of airlines to consolidate and merge due to rising and operating cost and fees in doing business; and the toll the recession of 2007-2008 has resulted in skyhigh fuel prices and skyrocketing ticket prices. Specifically for JetBue has been faced with 5 Operational discrepancies .
Problems and Issues that Management Needs to AddressMakeshift SolutionsMy Timeframe Recommendations in Industry: Some of the Pressing Issues Facing Management Included 1. How to raise JetBlue’s Spiraling Stock Price From $12. 99 Feb 13, 2007, to $3. 97 May 30, 2008 per share to $3. 14 July 11, 2008 to its Current October22,2009 $5. 38 to prevent takeover target 2. How to account for rising Fuel Costs. 3. How Prevent a possible Bankruptcy: and failing airlines. Or Takeover 4. Consolidation and Merging surged by rising operating costs and fees.
Reaction Solutions: Raise Airfares 5. High Cost Of Doing Business through Energy Conservation: Employee Salaries and Oil prices affecting cost of Jet Fuel& Ticket prices Reaction Solution: Hedge on GAS; Buy fuel efficient Planes 6. Increase Competition from New Entrants: Newair and Tours and Virgin America to make a all saturated market moreso 7. How to replace aging baby-boomer Airline Pilots going into retirement. 8. Specific Operational Discrepancies that affect Jet Blue A. How to avoid Bumped passengers: operational margin: filling customer seats B.
How to increase On-time arrival: Delays and cancellations C. How to avoid Lost baggage: no computerized system to record and track lost bags. D. How to improve Customer Service 9. Profitability and Growth: cutting cost by lowering wages, and grounding aircraft and trying not to Grow too Fast. JETBLUE FINANCIAL OBJECTIVES ANALYSIS JetBlue which only has only 4. 2% of revenue per passenger miles of the Domestic Market Shares of Major U. S. Airlines. JETBLUE STRATEGIC ELEMENTS OF COSTAND SERVICE QUALITY PROVIDES COMPETITIVE ADVANTAGE
JETBLUE ORGANIZATIONAL CULTURE PROVIDES COMPETITIVE ADVANTAGE Executive Ann Rhoades, VP of Human Resources Identified the 5 steps that define JetBlues strategic business philosophy, values and code of ethics. These Values which also are part code of ethics listed are 1. (Safety, (Caring, () Integrity, ()Fun, and passion. company Philosophy which included as company officials explained (Thompson et. al. , p C-51)”that JetBlue’s philosophy was to delay flights than cancel them. ” 1. The top 5 values with emphasis place on Safety for the company and its ustomers has been a mainstay—with addition to include Website “Infligt Health” and Medaire window to Landbased emergency phycians via crew.. Caring in the Form of Executive Staff about issues facing customers. Integrity to customers not to divulge personal data and Financial Advising from Accounting Firm Deloitte & Touche. Fun include company George Foreman Grill Barbeques and Punching Bags. Passion about work for employees and taking care of customers a priority. 2. Rhoades implemented managers hired employees who mirrored company values.
Looking for someone not only experience with details of job but also had people skills and practical experience. 3. To Ensure that Jetblue continually exceeded employee expectations: by giving them outstanding benefits and profit sharing opportunities barring the lowest wage comparison among competitors. 4. To Ensure that they listened to Customers: with current feedback including same sex bathrooms and low-carb snacks being two examples of customer’s sugguestion on how the airline could provide better service. 5.
To Create a “disciplined culture of excellence” as stated by Ann Rhoades by continually improving unique services to differentiate from competitors. JETBLUE HUMAN RESOURCE PRACTICES PROVIDE COMPETITIVE ADVANTAGE Human Resources at Jet Blue consisted of three phases: Hiring, Training and Paying. JETBLUE (6) NEW STRATEGIES FOR 2008 Managers Evaluate how to best (1) reevaluate the ways the company was using its assets 2 Key: JFK terminal and LiveTV subsidiary. Partnering with Lufthansa and BMI Bristish Midland to compete with British Airlines in New York-London routes.
LiveTV customers include WesstJet, Virgin Blue, AirTran. (2) reduce capacity and cut costs, Sell Airbus A320s in 2008 estimated cash revenue 100 million. Need to sell more aircraft in 2009 and 2010: revenue maker. Delay delivery of 21 New Airbus A320s schedule for 2009 thru 2011 to 2014 and 2015:: delay payment save on operating expenses. Reduce airline utilization rate 13 hours to 12. 5 hours: Suspend service to some cities in Midwest and Southwest. Cancel LAX Boston Flights : too much fuel $9600 to $15000 2007-8 (3) raise fares and grow in select markets
By growing in certain markets forced to raise faires. Fare in March 2008 topple $138. Transcontinental fares $279 to $599 (4) offer improved services for corporations and business travelers Corporate travelers receive meeting specific discounts. Patnership with Expedia to find leisure and corporate customers. (5) form strategic partnership, and Partner with Aer Lingus: Ireland and 40 us destination. Massachusetees Cape Air share transferring customers to Hyannis, Nantucket and Marthad Vineyard (6) increase ancillary revenues. Cost attached to high fuel prices cut down: ancillary revenue opportunities. Call center $10 charge if call booked on phone instead of website or airport. •Cashless cabin: Hanheld devices from flight attendant to pay for extra food. •No more free headphones: charge $1 at gate. •Passenger paymore for more legroom (generated $40 million in incremental revenue in 9 months in 2008. •Charge $20 service fee for checking second bag generate ($20 millio in new revenues in last 6 months in 2008) oThese were the strategies the JetBlue’s Management team had developed to deal with what Barger called “the new normal environment” •1)Rising Fuel Prices 2) Increased competition ?Would this ensure JetBlue’s Survival. SPECIFIC TIME FRAMED RECOMMENDATIONS. Specific to Jet Blue In Crisis: Jet Blue Solutions 1. Backed up Baggages1. Worked with Navitaire to double the number of agents who could simultaneously use reservation 2. Computer and Telephone Lines in Storm Emergency2. Provide Cross-Training so employees could learn skills necessary to use reservation flight and crew scheduling systems 3. Booking CancelationspC-483.
JetBlue upgraded its Web site to allow passengers on canceled flights to rebook online and at airport kiosks. Through e-mail and telephone alert passengers about flight delays and cancellations. Provided crew members with ability to inform crew schedulers of their availability and location via the Internet or via hand-held devices such as mobile phones Jet Blue Solution to Hire Crisis Communications Agency=June 2008 hire MWW Group “oversee its communications for “any tpe of catastrophic event” and to train executives and airport managers in media relations. Role to teach managers how to better communicate with media •Respond appropriately to lawsuits •Monitor Effectiveness of its advertising References Thompson, A. A. , Strickland, A. J. , & Gamble, J. E. (2010). Crafting and executing strategy (17th ed. ). New York: McGraw-Hill-Irwin pp. C51-C76.