JETBLUE AIRWAYS:

MANAGING GROWTH

NAME: Femi Bode-George

ID:
102614431

INTRODUCTION
JetBlue Airlines is a fairly new company in the highly competitive airline
industry. JetBlue was founded in 1999 by David Neeleman, who from the start built the
airline as a growth company. JetBlue competes in the Low-cost carrier (LCC) sector of
the airline industry that is dominated by Southwest airlines. The company has grown at a
very fast pace in a very short period of time. The company achieved major-airline status
in 2004 after only four years of service by exceeding $1 billion in annual revenue and as
of the beginning of 2007 held 30% market share of domestic departures. In 2003 the then
CEO david Neeleman decided to expand JetBlue in an unorthodox manner for a Lowcost carrier by adding the Embraer E190 to its fleet. The company fell into crisis in
February due to operational difficulties. The company now led by a new CEO David
Barger is considering how to implement his new vision for the company by controlling
and managing the growth and minimizing cost to the business. His mission is to
restructure the company by decreasing aircraft deliveries but his not certain of how to
distribute this reduction between its two aircraft the E190 and the A320. David Barger
would have to consider some key issues in making his redistribution decision these
include the following:
KEY ISSUES

Increase in cost due to rising fuel prices in the airline industry and also an
increase in maintenance cost due to the differences between the A320 and the
E190
Pilots dilemma based on how both aircrafts affect pilot compensation and
seniority.
Complications in its operations due to the introduction of the E190 to its fleet.
Thinner profit margins caused by the competitive nature of the airline industry
and higher cost.
Unclear decision as to which order of aircraft to reduce, to slow the growth of the
company.

INTERNAL ENVIRONMENT
JetBlue has differentiated itself from the legacy airlines and from Southwest. By
providing low-cost and added quality service to its operations whereby creating a
competitive advantage for itself. To examine if the competitive advantage possessed by
JetBlue still exist and what areas it can use its resources and capabilities to create new
competitive advantages. The VIRNE model will be appropriate in testing these resources
against five basic characteristics listed below:
VALUE
JetBlues ability to differentiate itself through its unique capabilities and resources
provide the company with great value and access to a niche market its competitors are not
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able to service, thus has resulted in cost-savings which are transferred to its customers.
But this cost-saving ability is being eroded by maintenance cost and fuel prices.
RARITY
JetBlue provides a rare service to the customers of its A320 aircraft. As it provides the
comfort of the legacy planes combined with the low-prices of the (LCC) airlines to its
customers.
INIMITABLE / NON-SUBSTITUTABLE
JetBlues combination of resources and capabilities is inimitable but would be difficult
and expensive to mimic. JetBlue had developed its competitive advantage over time with
strategic planning and experience. Substitutable is in JetBlues case is based on distance
and preference. Customers that are traveling a distance less that 500miles might prefer
using a car or a bus rather than air travel. For longer distances is could be substituted by
other airline carries. It comes down to customer preference; customers that are prepared
to pay a little extra for comfort would always fly JetBlue.
EXPLOITABILITY
JetBlue has a lot of potential in the long-run in the Regional jet sector as the market for
shorter flights expands, its operations would have to expand with it.
EXTERNAL ENVIRONMENT
The external environment plays a major role in the executive decisions made by
JetBlue. An analysis of the external environment is therefore imperative. This would be
done using the tools from a PESTEL analysis
POLITICAL FACTORS:
The airline industry in the U.S was not the same after the 9/11 terrorist attack. As more
and more people were in fear of more hijacks and refused to travel by air. This caused a
huge decline in revenue for the airline industry. The airline industry is mostly dominated
by unionized employees. JetBlues employees are not unionized, meaning its regional jet
decisions are not regulated by the Air Line Pilots Association (ALPA) that sets the guide
lines and limitations of capacity and routes that can be flown for all unionized airlines.
ECONOMIC FACTORS:
JetBlue and its competitors are faced with raising fuel prices. That cut into their revenue
which in turn would have to be passed on to the customer thus resulting higher prices or
losses incurred by Jet blue and its competitors.
TECHNOLOGICAL FACTORS:
JetBlue is an innovator in the airline industry as its always looking for way to improve
the quality of its aircraft. This is evident as it was the first airline to invest in the Embraer
E190 and used it as an advantage to significantly alter the design of the interior to
maximize customer comfort.

ENVIRONMENTAL FACTORS:
JetBlue has 2 contradicting environmental factors that impact its cost and level of service.
First the A230 aircraft is widely used in the industry wish makes its part easy to purchase
or repair and a secondary market exist for such planes incase JetBlue decide to sell.
Second the E190 is a new aircraft in the industry and its parts can only be retrieved from
the manufacturer Embraer due to it just being introduced to the market.
VERDICT
JetBlues original core values led it to great heights by creating a profitable competitive
advantage the firm holds 30% of all domestic flights but the companys plan to be a
growth company hit a stumbling block as its cost were rising faster than its revenue. Jet
Blues strategic plan did not include measures that could be taken to tackle such a
situation as over growing. As it expands, its value creation from its competitive
advantage created by the single aircraft model is being eroded by the complexity created
by managing two types of aircrafts. Jet Blue would have to slow its growth to match its
increasing rate of cost and its lower profit margin.
ALTERNATIVES AND RECOMMENDATIONS
CUTTING COST:
Jet Blue could follow in the footsteps of its competitor Southwest airlines by
hedging fuel prices.
The firm could also negotiate with Embraer to alter certain aspects the designs of
the E190 to make it slightly similar to the A320. So as to standardized some
aspects of the maintenance and offloading requirements of both aircrafts.
IMPROVING REVENUE:
Jet Blue can improve its profits by focusing more on its customers, by offering
incentives for customer loyalty. This could be in the form of flyer miles programs
and other customer appreciation programs would surely gain the hearts of the
customers.
SOLUTION TO PILOTS DILEMMA:
There would need to be improvements in the ground time that E190s
experiences. By improving the loading and unloading process.
Since both the A320 and E190 increase cost when they flight the same routes, it
would be best for the company to pick one type of aircraft per route. For example
giving the E190 all the routes that are less than 500miles. These routes which
have been on a consistent increase could be handled by the E190. And all other
flights longer than 500 miles should be handled by the A320 aircraft. it might
improvement the flight time flown by the E190 pilots and boost their seniority.
DECISION TO REDUCING AIRCRAFT ORDERS:
The options provided will be evaluated against their ability to meet the following
decision criteria: Is it cost saving? Is it profitable? Is the room for growth in the future?
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See figure I
REDUCING THE NUMBER OF A320:
JetBlue could choose to reduce the number of A320 in its fleet. In the near future JetBlue
could profit from the sale of its A230. These assets are liquid, due to the availability of a
secondary market for the A230. In doing this the firm could be preparing itself for the
future market of the growing regional jet sector. In the long-run the company would
benefit from economics of scale as the E190 becomes well integrated into the industry.
This will lead to cost-savings that could be passed on to customers through: cheaper and
more efficient maintenance services.
REDUCING THE NUMBER OF E190:
The firm could reduce the amount of E190s ordered. JetBlue could keep its regional jet
operations to a minimal and focus on its medium to long distance flight destinations.
Basically go back to basics which the employees are already accustomed and the
management could focus on gaining a larger market share in the Low-Cost Carrier
industry.

FIGURE I : DECISION VARIABLE TEST

Option
cost saving
Reducing number of A230
X
Reducing number of E190
X

profitable
X
X

growth
X

IMPLEMENTATION
Stage 1: Hedging the fuel prices for more cost saving: Jet Blue would have to heir
professional hedge traders with lots of experience in forecasting the airline industrys fuel
pricing.
Stage 2: Restructuring the business processes: Restructuring the business processes
would include: the single plane single route. To reduce the complexity involved
managing two aircrafts. Improving the loading and unload process of the E190 to reduce
ground time. This could be accomplished by re-training its loading staff.
Stage 3: reducing the order of A320 and maintaining the current fleet: To prepare Jet
Blue for the Future, the firm would have to reduce its order of A320s. In doing so, Jet
Blue would be preparing for a future dominated by expansions in short-haul flights that
would be handled by the E190.