JetBlue
A case presentation on jetBlue, its current direction, industry analysis, company analysis, possible future strategies, and strategy evaluation.
Content
Emily Sinnott Samwan Rob Ross Evancoe Mike Waxman
jetBlue
Founded in February 1999 by David Neeleman
³Bringing humanity back to the air travel´
Awarded 75 take off/landing sites at JFK International in September 1999 Formal US authorization in February 2000 Began operations on February 11, 2000 Went public in 2002
Arenas
Low-cost, one-class air carrier US, Mexico, Columbia, and the Caribbean Fleet of approximately 150 planes
Airbus A320 Embraer 190
Vehicles
Codeshare agreements with Aer Lingus, Lufthansa, Cape Air and American Airlines LiveTV DirecTV satellite television FoxTV 20th Century Fox The Simpsons Movie ³The official airline of Springfield´ Yahoo!, Research in Motion XM Radio
Differentiators
Emphasis on unique in-flight amenities
Leather seats, satellite TV, satellite radio, movies
Exceptional Customer Service
³Best Airline Service Award´ -Associated Press 2004-2009 ³Highest in Customer Satisfaction Among Low Cost Carriers in North America´ ±JD Power and Associates
Customer Bill of Rights
Economic Logic
Provide low cost flights by eliminating extras
No in-flight meals Removing seats
Decrease fuel costs Lower staffing costs
Staging
February 2000
Two aircrafts, flying to one destination
December 2009
151 aircrafts, flying to 60 destinations, 20 states, Puerto Rico, 11 countries in Caribbean and Latin America
External Analysis
Macro Analysis: PESTEL
Political US Foreign Relations and 9/11(revenue drop of 38% in transport industry) Aviation and Transport Security Act 2001 (unreimbursed security costs) Economic Global Recession (decreased purchasing power) Rapid decline in IT industry (25% airline revenue is from cargo) Fuel price (15% of operation costs)
Macro Analysis: PESTEL
Sociocultural Greater customer knowledge Need to be bilingual and culturally sensitive Increased ancillary services (baggage, catering)
Technological E-ticketing & kiosks (elimination of agents) Faster reservations and purchasing Increased competition (biggest purchase factor is price incentive)
Macro Analysis: PESTEL
Environmental Unfavorable weather (causes 70% of delays) Outdated air traffic control (planes idle on tarmac, inefficient routes) IATA¶s plan to cap emissions by 2020
Legal Regulatory factors (1978 deregulation win) Federal Aviation Administration (safety measures)
Key Success Factors
Attracting customers
Attractiveness of services, effectiveness of promotions
Capacity utilization
Effective scheduling, effective fleet management
Managing People
High employee morale = high customer satisfaction
Competitive Structure: Porter¶s Five Forces
Primary competitors: United, American, Southwest
Threat of new entrants LOW
Massive capital requirements, low margins, difficult to differentiate, history of failures, need for strong brand identity
Power of Suppliers HIGH
Boeing & Airbus domination, price of jetfuel is subject to political, economic, and market factors outside airlines' control.
Competitive Structure: Porter¶s Five Forces
Power of Buyers HIGH
standardized products, availability of substitutes, no switching costs,
Threat of Substitute products HIGH
Road and rail transport methods are threats for short distances, also consider recession and lower disposable income
Rivalry among Competitors HIGH
Imperfect oligopoly, sensitivity to economic cycles, need to keep capacity utilization at acceptable levels, frequent flyer programs
Opportunities
Route & fleet expansion Diversification in ancillary services Monopoly in routes can offer pricing power Creation of alliances Technological improvements in airplane design, operation and maintenance Deregulation of international air travel
Threats
Security Increase in fuel price Strong competition Global crisis New regulations by FAA
Internal Analysis
Strengths
Low cost ticket prices to high market cities High customer satisfaction rating In-flight entertainment system Advertising
Dear jetBlue
Weaknesses
Newer company, not as many destinations. Weaker brand recognition Smaller planes and fleet Single Class
Distinctive Competencies
Free in flight entertainment system Terminal 5 at JFK Airport True Blue rewards program
Income Statement
Financial Condition
2010 Qtr 1 Financial Position vs. Primary Competitors
Basic Issues
Basic Issues
Can jetBlue continue to keep their prices so low in such a volatile environment? As jetBlue is expanding can they maintain their high customer satisfaction ratings? Do third party travel services present a problem for jetBlue? Can jetBlue offset the debt they have accumulated from recent large expenditures?
1.
2. 3.
4.
Alternative Strategies
Alternative Strategies
1. Develop innovative, ancillary services to extend jetBlue¶s brand name into related industries.
2. Expand domestically by adding additional focus cities.
Strategy 1
Arenas- penetrate the additional travel industries Vehicles- joint ventures, acquisitions Staging- Within 3-5 years be partnered with taxi service and begin transportation program to and from airports. In ten years create hotel chain. In 15-20 years develop programs that include cruise and vacation packages. Differentiators- Increase brand name recognition to all facets of travel. Superior customer service will be prevalent throughout more than one travel industry. Economic Logic- Not the most cost effective, but will increase customer base in the long-run.
Strategy 2
Arenas- major cities such as Denver, Chicago, and Phoenix. Vehicles- We will assess each major city with current corresponding routes and pick three that will have the greatest possible impact on the direct flight ratio. Staging- 2011 Chicago, 2013 Denver, 2015 Phoenix (five year plan) Differentiators- Will allow for more direct flights which will increase convenience and satisfaction for customers, while simultaneously increasing operating efficiency and reducing carbon footprint. Economic Logic- By reducing the amount of connecting flights, jetBlue will decrease fuel, staff, and miscellaneous operating costs.
Visual Destination Breakdown
Strategy Defense
Strategy 2 Defense
Strategy cohesive with environment? Exploiting key resources? Sustainable? Are elements internally consistent? Resources to pursue strategy? Implementable?
Thank you!
jetBlue
Founded in February 1999 by David Neeleman
³Bringing humanity back to the air travel´
Awarded 75 take off/landing sites at JFK International in September 1999 Formal US authorization in February 2000 Began operations on February 11, 2000 Went public in 2002
Arenas
Low-cost, one-class air carrier US, Mexico, Columbia, and the Caribbean Fleet of approximately 150 planes
Airbus A320 Embraer 190
Vehicles
Codeshare agreements with Aer Lingus, Lufthansa, Cape Air and American Airlines LiveTV DirecTV satellite television FoxTV 20th Century Fox The Simpsons Movie ³The official airline of Springfield´ Yahoo!, Research in Motion XM Radio
Differentiators
Emphasis on unique in-flight amenities
Leather seats, satellite TV, satellite radio, movies
Exceptional Customer Service
³Best Airline Service Award´ -Associated Press 2004-2009 ³Highest in Customer Satisfaction Among Low Cost Carriers in North America´ ±JD Power and Associates
Customer Bill of Rights
Economic Logic
Provide low cost flights by eliminating extras
No in-flight meals Removing seats
Decrease fuel costs Lower staffing costs
Staging
February 2000
Two aircrafts, flying to one destination
December 2009
151 aircrafts, flying to 60 destinations, 20 states, Puerto Rico, 11 countries in Caribbean and Latin America
External Analysis
Macro Analysis: PESTEL
Political US Foreign Relations and 9/11(revenue drop of 38% in transport industry) Aviation and Transport Security Act 2001 (unreimbursed security costs) Economic Global Recession (decreased purchasing power) Rapid decline in IT industry (25% airline revenue is from cargo) Fuel price (15% of operation costs)
Macro Analysis: PESTEL
Sociocultural Greater customer knowledge Need to be bilingual and culturally sensitive Increased ancillary services (baggage, catering)
Technological E-ticketing & kiosks (elimination of agents) Faster reservations and purchasing Increased competition (biggest purchase factor is price incentive)
Macro Analysis: PESTEL
Environmental Unfavorable weather (causes 70% of delays) Outdated air traffic control (planes idle on tarmac, inefficient routes) IATA¶s plan to cap emissions by 2020
Legal Regulatory factors (1978 deregulation win) Federal Aviation Administration (safety measures)
Key Success Factors
Attracting customers
Attractiveness of services, effectiveness of promotions
Capacity utilization
Effective scheduling, effective fleet management
Managing People
High employee morale = high customer satisfaction
Competitive Structure: Porter¶s Five Forces
Primary competitors: United, American, Southwest
Threat of new entrants LOW
Massive capital requirements, low margins, difficult to differentiate, history of failures, need for strong brand identity
Power of Suppliers HIGH
Boeing & Airbus domination, price of jetfuel is subject to political, economic, and market factors outside airlines' control.
Competitive Structure: Porter¶s Five Forces
Power of Buyers HIGH
standardized products, availability of substitutes, no switching costs,
Threat of Substitute products HIGH
Road and rail transport methods are threats for short distances, also consider recession and lower disposable income
Rivalry among Competitors HIGH
Imperfect oligopoly, sensitivity to economic cycles, need to keep capacity utilization at acceptable levels, frequent flyer programs
Opportunities
Route & fleet expansion Diversification in ancillary services Monopoly in routes can offer pricing power Creation of alliances Technological improvements in airplane design, operation and maintenance Deregulation of international air travel
Threats
Security Increase in fuel price Strong competition Global crisis New regulations by FAA
Internal Analysis
Strengths
Low cost ticket prices to high market cities High customer satisfaction rating In-flight entertainment system Advertising
Dear jetBlue
Weaknesses
Newer company, not as many destinations. Weaker brand recognition Smaller planes and fleet Single Class
Distinctive Competencies
Free in flight entertainment system Terminal 5 at JFK Airport True Blue rewards program
Income Statement
Financial Condition
2010 Qtr 1 Financial Position vs. Primary Competitors
Basic Issues
Basic Issues
Can jetBlue continue to keep their prices so low in such a volatile environment? As jetBlue is expanding can they maintain their high customer satisfaction ratings? Do third party travel services present a problem for jetBlue? Can jetBlue offset the debt they have accumulated from recent large expenditures?
1.
2. 3.
4.
Alternative Strategies
Alternative Strategies
1. Develop innovative, ancillary services to extend jetBlue¶s brand name into related industries.
2. Expand domestically by adding additional focus cities.
Strategy 1
Arenas- penetrate the additional travel industries Vehicles- joint ventures, acquisitions Staging- Within 3-5 years be partnered with taxi service and begin transportation program to and from airports. In ten years create hotel chain. In 15-20 years develop programs that include cruise and vacation packages. Differentiators- Increase brand name recognition to all facets of travel. Superior customer service will be prevalent throughout more than one travel industry. Economic Logic- Not the most cost effective, but will increase customer base in the long-run.
Strategy 2
Arenas- major cities such as Denver, Chicago, and Phoenix. Vehicles- We will assess each major city with current corresponding routes and pick three that will have the greatest possible impact on the direct flight ratio. Staging- 2011 Chicago, 2013 Denver, 2015 Phoenix (five year plan) Differentiators- Will allow for more direct flights which will increase convenience and satisfaction for customers, while simultaneously increasing operating efficiency and reducing carbon footprint. Economic Logic- By reducing the amount of connecting flights, jetBlue will decrease fuel, staff, and miscellaneous operating costs.
Visual Destination Breakdown
Strategy Defense
Strategy 2 Defense
Strategy cohesive with environment? Exploiting key resources? Sustainable? Are elements internally consistent? Resources to pursue strategy? Implementable?
Thank you!
