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A. SUMMARY
In April 2009, the fear of swine flu going viral shakes the airline industry. JetBlue's stock
decreases by 7% to $4.91. Such bad outbreaks could be disastrous for an industry's economy.
The risks are even high for JetBlue because it is on track to generate free cash flow for the first
time in nine years. JetBlue is a low-cost, low-fare passenger airline and is on road to increase its
revenues slightly for the year 2009. JetBlue is ranked number 10 in United States by traffic. The
number 1 airline in the industry is Southwest airlines, based in Dallas, Texas.
JetBlue has over 11,000 crew members and achieved the number 1 customer service rating. The
company has a lot to offer its passengers like new air craft's, more space, luxurious seats, 36
DirectTv channels and premium movie channels. Their onboard products and services include
unlimited brand beverages and snacks, and for purchase many other premium brands. JetBlue
operates around 650 flights per day and is serving more than 56 cities in 19 states. JetBlue first
began international flights in mid of 2009 to Jamaica, Mexico and Dominican Republic.
JetBlue stated its operations from Delaware in 1998 and services in 2000 with their primary base
of operations in New York. The goal they have set for themselves is to become the leading low-
fare, low-cost passenger airline by offering their customers high-quality and differentiated
service and products. Since the inception, JetBlue differentiated their service by having a startup
capital of $100 million, flying new planes, hiring employees through rigorous screening and
focusing on customer feedback. Most of the JetBlue business model is from the Southwest
airlines playbook. The founder of JetBlue airways was a former employee at Southwest airways.
Because they play by the same strategies as Southwest airlines, JetBlue also takes pride in their
superior customer service. JetBlue also became the first carrier to introduce the Customer Bill of
Rights which held them accountable if they did not make the customer's travel convenient. In
2008, JetBlue introduced refundable fares and new payment options for their passengers. They
also launched a Spanish version of their website to cater that target market. For many years
JetBlue and Southwest avoided competition but when companies battling each other in 2009
with the same airports, before these low-cost carriers crossed each other in a very few of cities.


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The total of JetBlue's sales booked on their website is 77%. JetBlue also introduced TrueBlue
flight gratitude program to awards their regular or VIP passengers with award points. The
number of these awards used during 2008 was approximately 297,00 that represented 4% of the
total revenue passenger miles. But due to the structure of the program and low level redemptions
the displacement revenue by passengers using the TrueBlue awards has been minimal up to date.
In financial terms the 2nd largest expense for the company is airline fuel. Although JetBlue
enters into agreements with suppliers to partially protect itself from increase in fuel prices. In
current scenario the prices are highly effected by the state of the economy, international events
and bundle the carriers are offering to their customers. The passengers are more and more
interested in low prices as well as comport and luxury for their travels. Some of the other airlines
are even providing WiFi services to their passengers onboard. Demand for regional airline
capacity remains strong, mainline carriers continue to align capacity more closely with demand.
One of the major problems that airlines face today is labor union contracts. Labor negations can
take a lot of time i.e. 1.3 years. Once the negotiations are done it goes through several months of
federal mediation. Unions such as the International Association of Machinists and the Aircraft
Mechanics Fraternal Association works hard on behalf of the ramp workers. The major pitfall to
the labor union negotiations is that unions can plan to strike if the agreements are not reached.
The congress placed a security reform after the terrorists attacks in 2001. And in 2009 President
Obama outlined a new administration budget plan that proposed to increase per passenger fee to
$2.50. This fee was to be used to fund the next-generation air traffic control projects. Rising
break-even load factor is also threatening airline finances. Most of the airlines since 2000 have
been suffering from increase in break-even load factor. This factor is measured by the number of
seats the carriers have to sell to cover the operating expenses.
Passengers select airlines based on their reliability and on-time travel. The delay or cancellation
of flights can could very because of bad weather, unsafe environment, emergencies, airport
congestion, maintenance and so on. Competition is very strong in many medium to long haul
connecting markets. But with all the efforts, Southwest remains the nation's leading low-fare
carrier. They differentiate themselves by charging the passenger no extra fees for window or
aisle seats and continues to offer complementary snacks, soda's and coffee.

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B. STRENGTHS-WEAKNESSES-OPPORTUNITES-THREATS (SWOT)

a) STRENGTHS
Low-fare, low-cost passenger airline.
Ranked among top 10 U.S airlines by traffic.
Number 1 customer service ranking among low-cost carriers.
Wide variety of services for passengers.
Operates 650 flights per day.
Only carrier with $100 million startup capital.
Hiring process rigorously exceptional.
New planes with high reliability and efficiency.
Introduction of Bill of Rights.
Launch of Spanish version of official website.


b) WEAKNESSES
Minimal use of True-blue awards.
2nd largest expense is fuel.
23% increase in fuel expenses from 2007 to 2008.
Union labor contracts a major problem.
Rising break-even load factor.
Mishandling of luggage.


c) OPPORTUNITIES
Plans to increase TV channels from 36 to 100+.
Existence in the largest travel market that is New York.
Continuous increase in Travel business.
Designing more space into new planes and retrofitting old ones.
Opportunity to cater underserved markets.


d) THREATS
Viral outbreaks resulting in decreasing stocks.
Slow economic growth and unemployment.
Competition from biggest competitor Southwest Airlines.
Continuous increase in fuel prices.
Additional consumption an environmental problem.
$2.5 increase in passenger fee to fund air traffic control projects.
Decreasing passenger yields due to increased fuel costs.
Flight delays and cancellation due to unforeseen factors.


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C. PROBLEM STATEMENT

The problem currently for JetBlue Airways is to compete with Southwest Airlines in a very
competitive industry. Other issues involve the major economic slowdown, changes in technology
and high unemployment. The Major segment of the industry is all under Southwest Airline's
command. So, JetBlue Airways requires a clear strategic plan to tackle competitors, keep
growing and to keep the financials in shape.

D. EXTERNAL FACTOR EVALUATION MATRIX (EFE)
Key External Factors Weight Rating Weighted
Score
Opportunities
1. Plans to increase TV channels from 36 to 100+.

0.05 4 0.20
2. Existence in the largest travel market that is New York.

0.11 4 0.44
3. Continuous increase in Travel business.

0.09 3 0.27
4. Designing more space into new planes and retrofitting old ones. 0.08 4 0.32
5. Opportunity to cater underserved markets. 0.07 3 0.21
Threats
1. Viral outbreaks resulting in decreasing stocks. 0.09 2 0.18
2. Slow economic growth and unemployment. 0.11 1 0.11
3. Competition from biggest competitor SouthWest Airlines.

0.11 3 0.33
4. Continuous increase in fuel prices. 0.09 2 0.18
5. Additional consumption an environmental problem.

0.04 2 0.08
6. $2.5 increase in passenger fee to fund air traffic control projects. 0.06 3 0.18
7. Decreasing passenger yields due to increased fuel costs. 0.06 2 0.12
8. Flight delays and cancellation due to unforeseen factors. 0.04 1 0.04
Total 1.00 2.66


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E. INTERNAL FACTOR EVALUATION MATRIX (IFE)

Key Internal Factors Weight Rating Weighted
Score
Strengths
6. Low-fare, low-cost passenger airline.

0.13 4 0.52
7. Ranked among top 10 U.S airlines by traffic.

0.07 3 0.21
8. Number 1 customer service ranking among low-cost carriers. 0.07 4 0.28
9. Wide variety of services for passengers.

0.08 4 0.32
10. Operates 650 flights per day. 0.05 3 0.15
11. Only carrier with $100 million startup capital. 0.04

3 0.12
12. Hiring process rigorously exceptional. 0.06 4 0.24
13. New planes with high reliability and efficiency. 0.07 4 0.28
14. Introduction of Bill of Rights. 0.03 3 0.09
15. Launch of Spanish version of official website. 0.01 3 0.03
Weaknesses
1. Minimal use of True-blue awards.

0.02 2 0.04
2. 2nd largest expense is fuel. 0.11 1 0.11
3. 23% increase in fuel expenses from 2007 to 2008.

0.07 2 0.14
4. Union labor contracts a major problem. 0.09 1 0.09
5. Rising break-even load factor. 0.04 2 0.08
6. Mishandling of luggage. 0.06 1 0.06
Total 1.00 2.76

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F. COMPETITIVE PROFILE MATRIX (CPM)















JetBlue Airways
SouthWest
Airlines
American
Airlines
Critical Success
Factors
Weight Rating Score Rating Score Rating Score
Advertising

0.15 2 0.30 4 0.6 3 0.45
Market Share

0.2 2 0.4 4 0.8 3 0.6
Company Image

0.17 4 0.68 4 0.68 3 0.51
Expansion

0.1 3 0.3 4 0.4 2 0.2
Diversification

0.13 4 0.52 3 0.39 3 0.39
Market Capital

0.1 3 0.3 4 0.4 3 0.3
Competitive Prices

0.15 4 0.6 3 0.45 2 0.3
Total 1.00 3.10 3.72 2.75
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G. STRENGTHS-WEAKNESSES-OPPORTUNITIES AND THREATS MATRIX
(SWOT)
SWOT MATRIX FOR
JETBLUE AIRWAYS

STRENGTHS-S
1. Low-fare, low-cost
passenger airline.
2. Ranked among top 10 U.S
airlines by traffic.
3. Number 1 customer service
ranking among low-cost
carriers.
4. Wide variety of services
for passengers.
5. Operates 650 flights per
day.
6. Only carrier with $100
million startup capital.
7. Hiring process rigorously
exceptional.
8. New planes with high
reliability and efficiency.
9. Introduction of Bill of
Rights.
10. Launch of Spanish version
of official website.
WEAKNESSES-W
1. Minimal use of True-
blue awards.
2. 2nd largest expense is
fuel.
3. 23% increase in fuel
expenses from 2007 to
2008.
4. Union labor contracts a
major problem.
5. Rising break-even load
factor.
6. Mishandling of luggage.
OPPORTUNI TI ES-O
1. Plans to increase TV channels
from 36 to 100+.
2. Existence in the largest travel
market that is New York.
3. Continuous increase in Travel
business.
4. Designing more space into new
planes and retrofitting old ones.
5. Opportunity to cater underserved
markets.
SO STRATEGY
1. Plan new flights for the
underserved international
markets using differentiated
services. (S1, S5, O5)
2. Start a new advertising
campaign highlighting
JetBlue's new planes, their
reliability, efficiency and
space and other services.
( S2, S3, S8, O1, O4)
WO STRATEGY
1. Increase passenger fee
slightly keeping it below
the competitors fees to
increase revenues.
(W2, W3, W5, O2, O3)

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THREATS-T
1. Viral outbreaks resulting in
decreasing stocks.
2. Slow economic growth and
unemployment.
3. Competition from biggest
competitor Southwest Airlines.
4. Continuous increase in fuel prices.
5. Additional consumption an
environmental problem.
6. $2.5 increase in passenger fee to
fund air traffic control projects.
7. Decreasing passenger yields due to
increased fuel costs.
8. Flight delays and cancellation due
to unforeseen factors.
ST STRATEGY
1. In case of a viral outbreak or
economic slowdown
decrease prices to minimum
lower levels to maintain
operations. (S1, T1, T2)

WT STRATEGY
1. Using True Blue awards
give massive discounts on
passenger seats left empty
on the last moments .
(W1, T7, T8)


















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H. STRATEGIC POSITION & ACTION EVALUATION MATRIX (SPACE)
Financial Position rating 1 (worst) to 6 (best) Ratings
1 Market capital of JetBlue Inc. is $1.35 Billion 5
2 Gross Profit Margin for JetBlue Inc. is 26.18% 5
3 Revenues of $3.4 Billion 4
4 Earnings per share of -0.336 2
Industry Position rating 1 (worst) to 6 (best) FP Total 16
1 Continuous growth in air travel 5
2 Increased demand for regional airline capacity 5
3 Fluctuating fuel prices 2
4 Strongest barrier to entry 5
Stability Position rating -1 (best) to -6 (worst) IP Total 17
1 Recession & unemployment -5
2 Competitive Pressure between JetBlue & SouthWest -2
3 Viral outbreak of swine flu -5
4 Competitive Pricing -2
Competitive Position rating -1 (best) to -6 (worst) EP Total -14
1 Market share -2
2 Capacity Utilization -2
3 Website ease of access and language options -4
4 Customer loyalty -2
CP Total -10
SP Average = -3.5, IP Average = +4.25
CP Average = -2.5, FP Average = +4.0
Directional Vector Coordinates: x-axis: -2.5+(+4.25) = +1.75
y-axis: -3.5+(+4.0) = +0.5










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I. INTERNAL-EXTERNAL (IE) MATRIX

Total IFE Weighted Score

The interaction point lies in the V Quadrant Cell in Average category and the best strategies for
this quadrant are "hold and maintain strategies" i.e. market penetration & product development.
So, JetBlue Airways in the future should hold and maintain their position using
Market Penetration and Product Development strategies. Although these estimations are based
on approximation, but are not far from what the case is indicating to the reader in a very clear
concise manner.








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J. QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)
Alternative Strategies
Key Internal Factors




Weight
Start a new advertising
campaign highlighting
JetBlue's new planes, their
reliability, efficiency,
space and other services.
Using True Blue
awards give massive
discounts on
passenger seats left
empty on the last
moments
Strengths AS TAS AS TAS
1. Low-fare, low-cost passenger airline.

0.13
2 0.26 2 0.26
2. Ranked among top 10 U.S airlines by
traffic.
0.07 3 0.21 3 0.21
3. Number 1 customer service ranking
among low-cost carriers.
0.07
3 0.21 3 0.21
4. Wide variety of services for passengers.
0.08
4 0.32 2 0.16
5. Operates 650 flights per day.
0.05 3 0.15 2 0.10
6. Only carrier with $100 million startup
capital.
0.04
- - -
7. Hiring process rigorously exceptional.
0.06
2 0.12 - -
8. New planes with high reliability and
efficiency.
0.07
4 0.28 - -
9. Introduction of Bill of Rights.
0.03
3 0.09 2 0.06
10. Launch of Spanish version of official
website.
0.01
- - - -
Weaknesses

1. Minimal use of True-blue awards. 0.02
1 0.02 2 0.04
2. 2nd largest expense is fuel. 0.11
- - 1 0.11
3. 23% increase in fuel expenses. 0.07
1 0.07 1 0.07
4. Union labor contracts a major problem. 0.09
- - - -
5. Rising break-even load factor. 0.04
- - 1 0.04
6. Mishandling of luggage. 0.06
2 0.12 - -

1.00

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Alternative Strategies
Key External Factors




Weight
Start a new advertising
campaign highlighting
JetBlue's new planes, their
reliability, efficiency,
space and other services.
Using True Blue
awards give massive
discounts on
passenger seats left
empty on the last
moments
Opportunities AS TAS AS TAS
1. Plans to increase TV channels from 36 to
100+.

0.05
3 0.15 2 0.10
2. Existence in the largest travel market that
is New York.
0.11
3 0.33 3 0.33
3. Continuous increase in Travel business. 0.09
- - 3 0.27
4. Designing more space into new planes
and retrofitting old ones.
0.08
4 0.32 3 0.24
5. Opportunity to cater underserved markets. 0.07
2 0.14 3 0.21
Threats

1. Viral outbreaks resulting in decreasing
stocks.
0.09
1 0.09 2 0.18
2. Slow economic growth and
unemployment.
0.11
1 0.11 1 0.11
3. Competition from biggest competitor
SouthWest Airlines.
0.11
2 0.22 3 0.33
4. Continuous increase in fuel prices. 0.09
2 0.18 2 0.18
5. Additional consumption an environmental
problem.
0.04
3 0.12 3 0.12
6. $2.5 increase in passenger fee to fund air
traffic control projects.
0.06
2 0.12 1 0.06
7. Decreasing passenger yields due to
increased fuel costs.
0.06
- - 3 0.18
8. Flight delays and cancellation due to
unforeseen factors.
0.04
2 0.08 3 0.12
TOTAL
1.00 3.71 3.69

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QSPM indicates that the first alternative strategy is the comparatively more viable to execute as
determined by the total scores. The strategy is to Start a new advertising campaign highlighting
JetBlue's new planes, their reliability, efficiency, space and other services.

K. CONCLUSION
It is quite clear from the above analysis of the JetBlue Airways company that they require
strategic course of action to counter competitors like Southwest Airlines.. The suggested strategy
in the QSPM could work if properly implemented. It is apparent from the results of the above
analyses that JetBlue Airways has to come up with another change in strategy to retain the
domestic as well as international market. The above viable strategy if implemented in an
effective way could prove to be very fruitful for JetBlue Airways.

L. ANNEXURE

PRO-FORMA INCOME STATEMENT:


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ASSUMPTIONS:
The above is a pro-forma income statement projection for the year 2009. A 20 % increase in
operating income is assumed. Other income (expenses) to be 70% of operating income and 56%
tax rate. Retained earnings and dividend ratio has not been used because no such sort of policy
was discussed in the case. Simple financial terms have been used to elucidate that increasing net
income figure. All the above figures used are in millions.