Crafting & Executing Strategy

JetBlue: Analysis of a Company's Situation

JetBlue: Analysis of a Company's Situation

Trends in the U.S. Airline industry

The commercial airline industry has always been particularly vulnerable to economic and political changes. In times of crisis, people travel less while fuel may cost more. The deregulation of the U.S. airline industry in 1978 was a watershed event that led to intense price competition, and several factors conspired in recent years to make the goal of profitability even more difficult for major airlines to achieve. The global airline industry has undergone numerous changes since airline markets were first deregulated in the USA three decades ago. The liberalization of airline markets has become a global phenomenon and growing competition has forced airlines around the world to arch for ways to operate more efficiently (Oum & Yu 1998 p 5-6). There are limits to the discount airline dominance, however. As fuel prices soar, the ability to keep fare low becomes more and more difficult. In 2006, Southwest broke its self-imposed fare cap while JetBlue faced problems while attempting to introduce a new type of aircraft and had to delay the delivery of 12 planes. Major U.S. airlines such as American Airlines, United Airlines, Delta Air Lines and Continental Airlines have all slashed operating costs and lowered fares to compete. Major airlines are also considering buying regional jets and/or making new alliances with regional carriers to serve smaller markets more efficiently (Belobaba et al 2009). Regional jet pilots earn far less than pilots on larger jets, and the smaller planes may use less fuel to haul passengers and cargo, giving airlines strong incentives to use them. Some carriers are trying to pass on their added costs to customers through fuel surcharge fees. But this move has had only limited success, largely because of the competitive pricing environment. If an airline charges an extra fee, the customer may go elsewhere. As such, many of these airlines are taking the fuel cost hit themselves, and instead are looking for ways to limit their fuel consumption (Griffin 2007 p 40-41).

Jet Blue's strategic intent

David Neelman, the founder of the company had formed the company with the intent of combining low fares of a discount airline carrier with the comforts of a small cozy den in peoples' homes. The airline was committed to getting its passengers to their destinations despite bad weather. This however, proved false after an ice storm delayed Jetblue's flight boarding passengers for as long as eleven hours. Company's officials explained that Jetblue's philosophy was to delay flights rather than cancel them. After the Feb 2007 ice storm on Airbus A320, a new management took charge of Jetblue's deploring performance. The new management team needs to put in place new operating procedures, communication systems and information technology solutions to prevent another weather related ordeal (Wynbrandt 2004 p 36-39). JetBlue was one of the first companies to use information technology to keep the cost down. It hired full time reservation agents to sell tickets over ...