Question

JETBLUE AIRWAYS CORPORATION: GETTING OVER THE “BLUES”?

In 2017 JetBlue faced challenges that included rising fuel prices, troubling technical disruptions, and declining quality of the flying experience. Since the beginning of 2016, JetBlue had enjoyed low fuel prices that helped increase their earnings about 18 percent during the second quarter of 2016, but the company experienced technical issues that caused booking problems and resulted in delays, as well as bad publicity. In order to cope with the likelihood of a rise in future fuel prices, JetBlue undertook massive cost reductions by investing in cabin restyling, for instance, adding more seats to JetBlue’s A320 airplanes. However, the shrinking legroom that accompanied the cabin restyling was despised by passengers, which posed a problem for an airline that had once offered customers a captivating (as opposed to a captive) flying experience. To meet the challenges, new CEO Robin Hayes orchestrated various initiatives that the company planned to take through 2017. Those initiatives included wider fare options, enhanced Mint services, cabin restyling, new lines of JetBlue credit cards, and partnerships with other airlines.

JetBlue had been established with the goal of being a leading low-fare passenger airline that offered customers a differentiated product and high-quality customer service on point-to-point routes. JetBlue had a geographically diversified flight schedule that included both short-haul and long-haul routes. The mission of the company, according to Neeleman, was “to bring humanity back to air travel.” To stimulate demand, the airline focused on underserved markets and large metropolitan areas that had high average fares.JetBlue was committed to keeping its costs low. To achieve this objective, the company originally operated a single-type aircraft fleet comprising Airbus A320 planes as opposed to the more popular but costly Boeing 737. The A320s had 162 seats, compared to 132 seats in the Boeing 737. According to JetBlue, the A320 was less expensive to maintain and more fuel-efficient. Since all of JetBlue’s planes were new, the maintenance costs were also lower. In addition, the single type of aircraft kept training costs low and increased personnel utilization. JetBlue was the first to introduce the “paperless cockpit,” in which pilots, equipped with laptops, had ready access to flight manuals that were constantly updated at headquarters. As a result, pilots could quickly calculate the weight, balance, and takeoff performance of the aircraft instead of having to download and print the manuals to make the calculations.

The paperless cockpit ensured faster takeoffs by reducing paperwork and thus helped the airline achieve quicker turnarounds and higher aircraft utilization. No meals were served on the planes, and pilots even had to be ready, if need be, to do cleanup work on the plane to minimize the time the aircraft was on the ground. Turnaround time was also reduced by the airline’s choice of less congested airports. Innovation was everywhere. For example, there were no paper tickets to lose and no mileage statements to mail to frequent fliers. With friendly, customer service–oriented employees; new aircraft; roomy leather seats with 36 channels of free Live TV, 100 channels of free XM satellite radio, and movie channel offerings from FOX Inflight; and more legroom (one row of seats was removed to create additional space), JetBlue promised its customers a distinctive flying experience, the “JetBlue experience.” With virtually no incidents of passengers being denied boarding; high completion factors (99.6 percent as compared to 98.3 percent at other major airlines); the lowest incidence of delayed, mishandled, or lost bags; and the third-lowest number of customer complaints, the company was indeed setting standards for low-cost operations in the industry. JetBlue was voted the best domestic airline in the Conde Nast Traveler’s Readers’ Choice Awards for five consecutive years. Readers of Travel + Leisure magazine also rated it the World’s Best Domestic Airline in 2006. In addition, it earned the Passenger Service Award from Air Transport World.

Hitting Bumpy Air

Nevertheless, high fuel prices, the competitive pricing environment, and other cost increases made it increasingly difficult to keep JetBlue growing and profitable. The airline suffered it’s first-ever losses after its IPO in 2005. It posted net losses of $20 million and $1 million for 2005 and 2006, respectively. The ice storm on Valentine’s Day 2007 that cost Neeleman his job was a nightmare in JetBlue’s hitherto high-flying history for more than one reason. Not only did the event destroy JetBlue’s reputation for customer friendliness, but it also exposed critical weaknesses in the systems that had kept the airline’s operations going. The airline’s reputation hit rock bottom. To limit the damage, JetBlue announced huge compensations to customers—refunds and future flights—which were to cost the airline about $30 million. Neeleman quickly followed up with a new Customer Bill of Rights. The Customer Bill of Rights outlined self-imposed penalties for JetBlue and major rewards for its passengers if the airline experienced operational problems and could not adjust to weather-related cancelations within a “reasonable” amount of time. All these announcements and even a public apology could not restore things to normalcy. Neeleman was pushed out as CEO on May 10, 2007. Dave Barger, the president, assumed the position of chief executive officer.

Restoring JetBlue’s Luster?

Under the second CEO, Dave Barger, JetBlue added several new services and embarked on capacity expansion to give the airline a new boost. In July 2007, it became the first U.S. carrier to let passengers send free email and text messages from wireless handheld devices, a technology developed through its Live TV LLC subsidiary. Later, in September 2007, it expanded to smaller cities that did not have sufficient demand for the larger planes flown by Southwest, Virgin America, and Sky bus Airlines. It also introduced Embraer jets to its fleet. In 2007, JetBlue had its first full-year profit in three years as an increase in traffic and operational improvements helped compensate for skyrocketing fuel costs. However, as a result of global financial turmoil and skyrocketing fuel prices, JetBlue’s profits tanked again in 2008, and the company reported a net loss of $85 million. Nevertheless, the company returned to profitability in 2009. In April 2010, JetBlue successfully completed the International Air Transport Association’s (IATA’s) Operational Safety Audit (IOSA) and achieved IOSA registration, meeting the same highest industry benchmarks as other world-class airlines.

Dave Barger was known for “being overly concerned” with customer service and comfort. During Barger’s tenure, JetBlue earned tributes for its customer service. However, its low-fare business model was being threatened as its costs kept going up. In April 2014, its pilots, long nonunion, voted to join the Air Line Pilots Association. In the wintertime the airline was again racked by weather-driven flight cancelations. JetBlue’s stock under Barger’s leadership lagged behind big legacy carriers Delta Air Lines and fellow discounter Southwest Airlines. The shares were up just 9 percent since Barger became CEO. In the same period, Southwest’s shares gained more than 140 percent and the overall Bloomberg U.S. Airline index gained 49 percent. Barger had said he was not interested in doing any acquisitions, and he did not see JetBlue as a target for a buy-out offer, even though the Luftanza deal had caused some speculation about this. Yet the airline had expanded into Alaska and on the West Coast of the United States, and there were multiple code share agreements in place as of 2015. Starting in 2014 JetBlue “will begin vying for big-spending business travelers” by offering “lie-flat seats and private suites on transcontinental flights on the highly competitive routes between Los Angeles and New York and San Francisco and New York… the new seats added to Airbus A321 planes will have adjustable firmness, a massage function, a 15-inch wide-screen television and a “wake-me-for-service” indicator if the flier decides to sleep. The private suites will include a closeable door for privacy. The airline plans to dedicate 11 planes to serve the two transcontinental routes, with expansions along the same routes and the addition of lie-flat seats on other routes, depending on demand.” In 2015, JetBlue was set to fly these “Mint business-class seats” between New York and the Caribbean. And as another example of how JetBlue was trying to add special “perks” to its service, here’s a story from August 2013: “. . . as the airline industry continues to put the squeeze on luggage fees, US-based carrier JetBlue has launched a baggage delivery service that will allow flyers to bypass the carrousel and proceed directly home or to their resort holiday. JetBlue unveiled details this week of its new Bags VIP concierge service, which will hand deliver checked bags to customers’ final destination within a 40-mile radius of the airport. Promotional pricing starts at $25 for delivery of one bag and $40 for up to 10 bags.”

What internal resources and assets does JetBlue have, that may give it a competitive advantage?Critically discuss whether Jet Blue position is supported by its value chain and other internal resources. (35 marks-800 words)

You must acknowledge all sources of information using full Harvard Style Referencing (In-text referencing plus list of references at the end) Minimum of 3 references are required

Answer 1

What internal resources and assets does JetBlue have, that may give it a competitive advantage?Critically discuss whether Jet Blue position is supported by its value chain and other internal resources.

Leadership and Venture connection. Thus helps them to establush their airways brand . A well though or well analysed aquisition, efficient infrastructure also give them an upper hand through gaining competitive advantage.Leadership, David Neelaman is one of the valuable resource.his experience and ingenuity brought new innovations. He also helps in pioneering electronic ticet system. Infrastructure, Lower training and maintainance cost,Seletion of Boeing 7373 which is more economical and long running model.

Jet Blue has the following internal resources and assets

• Strategic location of its bases at JKF on the east costs and Long Beach on the west coast thus serving two regions with some of highest population in the US. Thus Jetblue is able to capitalize on high number of air travellers in the both west coast and east coast expecialy the new york city travelers.
• Jetblue has enough financial resources to compete with other firms being on of the largest low cost carrier in the US by passengers number Jetblue has financial muscle to compete with other carriers.
• Technical and professional competency of its employees - JetBlue employees are well trained and have the required technocal and professional qualification in addition to experience to deliver the objective of the company.
• Technology -JetBle is a leading Airline in adoption of technology in its operations for example use of social media such as facebook and also it was the first airline to use paperless cockpit.

Low-cost model Jetblue has a highly competitive and profitable business model that lowers operating costs and retains an improved profit-margin in contrast to its rivals. For example, using JetBlue's internal resources such as its infrastructure such as its New York City and Long Beach hubs, a relatively new airplane fleet that reduces operating cost in the company, uses most of the fleets from the same vendor to reduce training costs, is helpful in supporting the value chain as well as other internal resources. The company has well trained staff and ensures that the best employees are recruited and trained through its personnel department.The business only procures aircraft that reduce operating costs and this is the most competitive in the industry. The organization retains the new technology. These tools are used in key business operations , for example the use of hubs for inbound and outbound logistics, technology to promote, consumer goods like social networking, internal communication and Customer Care. These tools are used by the enterprise.