• Why Changes Took Place 


1. Jet Blue was founded 1999 as a low cost airline carrier based in New York
2. New Leadership structure was announced in May 2007
3. David Barger President and Chief Operating Officer (COO) of the airline, replaced David
Neeleman as CEO.
4. Neeleman, who founded Jet-Blue in 1999, had been its CEO ever since
5. Neeleman was designated as the non-executive Chairman of the Board
6. Russell Chew, a former Federal Aviation Administration took over as the COO
7. Neeleman said that the board’s suggestion that he step down nothing to do with the service
breakdown that Jet-Blue had experienced in February 2007
8. Jet Blue Breakdown happened when the northeast region of the United States had been hit by a
severe snowstorm
9. The airline’s slow reaction to the adverse weather had left thousands of passengers stranded at
airports In addition to having serious financial affect Jet blue image was broken and
harmed as a customer friendly airline and tarnished its reliability record.
10. Analysts greeted the leadership change positively.
11. Several years after it was set up, Jet-Blue had been one o When JetBlue had first started
operations, it had used new planes and fittings, which did not
12. cost much in terms of maintenance.f the most successful airlines in the United
States rivaling Southwest Airlines in profitability and growth
13. jet Blue was facing various problems, both internal and external, in 2005–2006 ,Several
analysts were of the opinion that Jet-Blue’s growth in its early years had been too fast and
unsustainable in the longer term and no changes been done when the business
environment changed.

• Background

14. Business plans for setting up Jet-Blue were developed by Neeleman in 1998.
15. Neeleman raised $160 million in capital from top investors
16. founded the airline in February 1999
17. In September 1999, Jet-Blue was awarded 75 landing and takeoff slots at the John
F. Kennedy International Airport which was to serve as its base
18. The airline started commercial operations on February 2000

• Business Model 

19. Jet-Blue’s business was guided by five key values safety, caring, integrity, fun, and
passion.
20. Jet Blue went against many of the accepted norms of the aviation industry Ex Jet Blue
choose to operate from JFK Kendy which other domestic airlines avoid as its very
expensive and considered more as international airport
21. Neeleman, however, reasoned that because JFK handled mostly international flights,
JetBlue would face very little competition from domestic flights at that airport.

• Positioning

22. Jet-Blue was positioned as a colorful and fun airline
23. The airline combined low fares with several value-added services that improved customer
service without adding to operating costs.
24. All the planes operated at Jet-Blue were fitted with leather seats instead of cloth
ones Leather furnishings cost twice as much as cloth ones, but also lasted twice as long.
25. JetBlue provided assigned seating and allowed passengers to choose their seat on the
plane whenever possible
26. JetBlue served light snacks such as chips, cookies, and crackers, and coffee and
canned drinks, which cost a fraction of a regular meal
27. The snacks were complimentary, unlike in LCCs that sold food to passengers
28. JetBlue estimated that it saved about $3 per passenger by choosing to serve sacks instead
of regular food.
29. JetBlue provided free personal satellite television to all the passengers. The television
sets reportedly cost only about $1 per passenger per flight—one-fourth the cost of a meal.
• Operations
30. JetBlue’s operations were the key to its low costs
31. JetBlue did not use old planes, but operated a fleet of new Airbus A-320 aircraft
32. The Airbus A-320s were chosen over the more popular Boeing-737s7 (which Southwest
used) because although they cost more initially,would be easier to maintain and were
more fuel-efficient.
33. The planes also came with a five year warranty
34. Operating a uniform fleet of planes was also economical, as it reduced costs significantly
in the areas of pilot training, maintenance, and spare parts.
35. All the aircraft were configured in a single class This also allowed JetBlue to put in the
maximum number of seats possible in its planes.
36. Initially JetBlue did not try to fly too many routes, concentrating instead on the
Northeast, the West Coast, and Florida—routes for which demand was high,and it was
easy to undercut the fares of rivals
37. JetBlue also flew to secondary cities that were neglected by major carriers.
38. JetBlue flew mainly to secondary airports that did not handle too much air traffic. In
this way, the airline was able to avoid congestion to a great extent and to establish a good
on-time record.
39. In 2001–2002, JetBlue had an on-time performance record of 80 percent, as against the
72 percent for the top ten airlines in the United States
40. JetBlue flew only point-to-point flights, avoiding the hub-and-spoke model used by
major carriers. This helped it avoid the complications that resulted from connecting
flights and passenger transfers and the airline was also able to operate with far fewer
airport staff
41. JetBlue used electronic ticketing extensively. Typically, more than 70 percent of the
tickets were booked through the airline’s Web site etBlue also cut down on the costs of
back-end operations by allowing its call-center operators and customer service executives
to work from home, using voice-over-Internet protocol
42. JetBlue was the first airline to introduce paperless cockpits, where the pilots were
equipped with laptops to access flight manuals and make the requisite calculations before
takeoff
43. JetBlue was also one of the first airlines in the United States to allow automatic check-in
and electronic baggage tagging
44. Automation helped JetBlue maintain a lean workforce
45. In 2002, JetBlue’s cost per available seat mile was 7 cents, which was 25 percent less
than the average of the major carriers
46. JetBlue was thus able to offer fares that were typically 30 to 40 percent lower than other
airlines

• Culture

47. JetBlue was also one of the few airlines in the U.S. airline industry that had a non-
unionized workforce. All the employees from the CEO down to the lowest ranking ones
were called “crewmembers.”
48. The top management tried to create a family-like atmosphere at the airline.
49. JetBlue looked for a positive attitude in its employees, as they were often called on to
do things that were outside their job descriptions the flight attendants and sometimes the
pilots were expected to pitch in to get the flight ready for the next takeoff. Airport ground
staff also loaded or unloaded baggage from the flight
50. However JetBlue rewarded employees frequently with bonuses and profit sharing
programs
51. Initiative was encouraged, and all employees were free to suggest ideas to cut costs and
improve operations
52. Because of the positive work culture, when customers flew JetBlue, they were
impressed by the energy and attitude of the employees.
53. JetBlue also went out of its way to avoid inconveniencing customers. The airline had a
policy of never canceling flights
54. JetBlue also avoided overbooking flights When there was a delay, passengers were
informed well in advance
55. During extreme delays, JetBlue would hand out gift vouchers that could be redeemed for
a future flight even when the delay was because of uncontrollable factors
56. JetBlue’s passenger complaint numbers and baggage handling errors were among the
lowest in the industry

• Growth and Expansion

57. JetBlue was founded during one of the most turbulent times in the history of civil
aviation in the United States due to the terrorist attacks in 2001
58. JetBlue planned to launch an IPO to fund its expansion plans The IPO had to be
postponed in light of the terrorist attacks
59. but JetBlue continued with its expansion plans using its share of the $15 billion bailout
($5 billion in direct compensation and another $10 billion in loan guarantees)
60. JetBlue was one of the first airlines to take a proactive approach to increase safety on
aircraft
61. It was the first national carrier to install bulletproof, deadbolted cockpit doors on its
aircraft, even before the FAA mandated their use
62. It ran a newspaper advertisement that said: “We know you need time to heal. JetBlue
will be here when you’re ready to fly again.
63. For a few weeks after flights resumed, JetBlue aircraft flew almost empty from New
York to the 17 destinations it served at that time, but the airline did not scale back
operations
64. JetBlue’s management identified the routes on which other airlines had cut capacity. For
instance, most of the major airlines had cut down their flights from New York to
Florida JetBlue boosted its services to Florida, adding seven new flights per week on this
route within a few months
65. JetBlue was one among only three airlines in the United States (the other two being
Southwest and AirTran Airways [AirTran]) to post a profit in 2001
66. The company posted a profit of $38.5 million, up from a loss of $21.3 million in 2000
67. In April 2002, JetBlue launched an IPO of 5.87 million shares, raising $158
million.15 That year
68. JetBlue started expanding operations on theWest Coast, using LosAngeles as a second
hub.
69. In late 2002 JetBlue acquired 100 percent ownership of LiveTV, the company that
maintained its in-flight satellite TV channels, for $41 million in cash and the retirement
of $39 million in debt
70. It also started a customer loyalty program, TrueBlue, in mid-2002, collecting nearly
40,000 members by the end of the year
71. In 2002, JetBlue’s cost per available seat mile (CASM) was 6.43 cents, lower than all
the other major U.S. airlines, which reported an average CASM of 9.58 cents
72. In 2003, JetBlue placed an order for 100 Embraer-19019 regional jets for a price of $3
billion, with options for another 100 planes to serve more regional routes as a part of
its expansion plans. This was in addition to the 16 A-320 aircraft added to the fleet that
year, with an order for 65 more, and options on another 50
73. The A-320 aircraft were configured in a 162-seat arrangement, while the Embraer
aircraft, which were configured with 100 seats, were a more suitable size for regional
routes. The first Embraer planes entered service in October 2005.
74. In 2003, JetBlue received permission to build a new terminal at JFK, giving it 26
more gates, Construction of the terminal began in late 2005
75. In 2004, JetBlue announced that it planned to take delivery of one new Airbus A320
every three weeks and to hire five crew members per day during the year
76. During 2004, JetBlue performed well on many operating metrics, with a 99.4
percent completion factor, the highest on-time performance of 81.6 percent in the
industry, and the fewest baggage mishandling of 2.99 per 1,000 customers boarded.
77. By the end of 2004, JetBlue flew to 30 destinations, including one international
destination—the Dominican Republic—launched that year
78. However, in the fourth quarter of 2004, JetBlue recorded a drastic drop in profits. It
announced a net income of $2.3 million compared to $19.54 million in the corresponding
quarter of the previous year
79. The drop in earnings was attributed to increased operating expenses a result of a rise in
fuel prices. The airline ended the year with a net income of $46 million, on revenues of
$1.2 billion
80. Following this, it was recognized as a “major airline” by the DOT

• Turbulent Times
81. JetBlue’s performance in all the quarters of 2005 was considerably poorer than in the
corresponding quarters of 2004
82. in the fourth quarter of 2005, it posted a quarterly loss for the first time since its IPO
83. JetBlue ended the year with its first annual loss of $20 million on revenues of $1.7
billion
84. The airline’s operating margins fell to 2.8 percent from 8.8 percent in 2004
85. JetBlue’s performance statistics also showed a downward trend, and in 2005, the
airline’s on-time performance record fell to 71.4 percent which was lower than almost all
the major airlines in the United States
86. which was lower than almost all the major airlines in the United States
87. JetBlue’s problems were attributed to a combination of several internal and external
factors

• Rising Fuel Costs

88. Fuel prices around the world experienced a sudden rise in 2004.


89. Fuel was the second major expense in an airline’s operations after labor in the United
States
90. Fuel typically constituted between 10 percent and 14 percent of an airline’s operating
expenses
91. However, after the price increases, its share in operating expenses became more than 20
percent
92. Although the rise in fuel prices affected all airlines, its effect on LCCs such as JetBlue
was greater
93. In 2005, fuel prices increased by nearly 50 percent over 2004.
94. But even as fuel prices pushed up operating expenses, JetBlue was unable to increase its
fares significantly
95. The growing number of LCCs in the aviation industry, and the attempts of the FSAs to
take away market share from the LCCs had led to a fall in the average fares
96. The average price for a passenger to fly a mile fell by more than 10 percent between
2000 and 2006
97. JetBlue had hedged only 20 percent of its fuel requirements for 2005 at $30 per
barrel, compared to the 42 percent hedged in 2004.
98. By 2005, fuel constituted nearly 30 percent of JetBlue’s operating expenses, compared to
14.4 percent in 2002
99. It exceeded 33 percent in 2006

• Industry Factors

100. When JetBlue had first started operations, it had used new planes and fittings, which did
not cost much in terms of maintenance.
101. as the fleet aged, maintenance costs began to rise
102. JetBlue had to employ more people to meet its requirements
103. also give pay increases to people who had been with the airlines for several years
104. JetBlue had also kept adding new in-flight services In an effort to differentiate itself
from its competitors
105. the airline changed the configuration of its A-320 aircraft, removing one row of seats
from the plane, in order to improve legroom for passengers (the number of seats was
brought down to 156, from 162 While this made the aircraft more comfortable for
passengers, it also lowered JetBlue’s revenue earning capacity However, the move was
expected to cut fuel costs, due to the lower weight of the aircraft
106. In 2005, JetBlue upgraded its seatback televisions.All the new aircraft were fitted with
larger TVs, and all the old aircraft were retrofitted.
107. the airline also equipped all its planes with XM Satellite radio, and increased the size of
the overhead bins on the aircraft
108. Most LCCs gave complimentary beverages and sold food, or served complimentary
refreshments in strictly measured quantities. But JetBlue offered a range of
complimentary snacks and beverages in unlimited quantities.
109. over the years it added several items to its line of in-flight refreshments. As of 2007, the
airline offered a range of hot and cold beverages and several varieties of snacks. It also
sold a variety of cocktails at $5 each
110. Passengers traveling on red-eye flights were given complimentary spa amenity kits
containing mint lip balm, body butter, an eyeshade, and ear plugs.
111. JetBlue also set up a complimentary snack bar in the plane for overnight flights, and
passengers were given complimentary hot towels, Dunkin Donuts coffee or tea, orange
juice or bottled spring water, just before they landed the next morning.
112. Another issue was the problems that JetBlue experienced with its new Embraer-190
aircraft that entered service in late 2005. JetBlue faced a lot of glitches in integrating the
new aircraft into its operations.
113. To begin with, Embraer delivered the planes two weeks behind schedule, which caused
several flight delays and cancellations. Second, JetBlue’s employees lacked familiarity
with the planes. Third, the Embraer-190 had some technical issues that caused several
delayed flights and significantly lowered JetBlue’s aircraft utilization rates
114. the opinion of some analysts, JetBlue had been too optimistic in placing such a large
order for the untried Embraer planes fter two consecutive losses in the last quarter of
2005 and the first quarter of 2006, several analysts started comparing JetBlue to People
Express Airlines,31 a low-cost airline operated in the United States between 1981 and
1987

The Return to Profitability Plan

115. In April 2006, soon after announcing the first quarter loss, Neeleman and Barger
announced a recovery plan for JetBlue called the “Return to Profitability” plan
116. The main aims of the RTP were revenue optimization, improved capacity management,
cost reduction, and retaining the commitment to deliver high-quality service on every
flight.
117. As a part of the revenue optimization goal, JetBlue announced that it would reduce
the number of long-haul flights and shift its focus back to short-to-medium routes.
118. The company said that it planned to reduce the ratio of long-haul to non–long-haul
flights from 1.5:1 in 2005, to 1.2:1 during 2006
119. JetBlue also said that it would offer fewer tickets at very low fares and more tickets at
mid-level fares on all its routes to improve the mix of fares in its revenues
120. The average fare was expected to rise to at least partly reflect the increased fuel prices.
During 2006, JetBlue increased its lowest transcontinental fare from $349 to $399
121. JetBlue also committed itself to conducting a careful scrutiny of its yield
management practices to ensure it did not sacrifice revenues to increase the load factor.
122. Trying to increase the load factor put stress on an airline’s operations and also led to
delays as the airlines tried to get as many passengers on board as possible, even minutes
before a flight’s scheduled departure
123. JetBlue’s load factor was 85.2 percent and the yield per passenger mile was 8.02 cents.
This changed to a load factor of 81.6 percent and yield per passenger mile33 of 9.53
cents in 2006, which was nearly a 19 percent increase in yield per passenger mile
over the previous year.
124. The RTP also committed JetBlue to manage capacity better by cutting it on
unprofitable routes, and adding it on high-demand routes
125. During 2006, JetBlue added only 21 percent capacity, instead of the previously projected
28 percent
126. The capacity on the New York—Florida route was cut by 15 percent, while the New
York—Los Angeles route saw an 8 percent reduction in capacity
127. On the other hand, JetBlue introduced short-haul routes from Boston toWashington,
New York to Richmond, and Boston to Richmond; and medium-haul routes from New
York to Austin, Boston to Austin, and Boston to Nassau.
128. The airline introduced nonstop service on two high-demand long-haul routes from
Burbank (California) to Orlando (Florida) and Boston to Phoenix (Arizona)
129. On the whole, JetBlue added 16 new destinations during 2006, which mainly involved
“connecting the dots” between its existing destinations using the Embraer-190 aircraft
130. JetBlue sold five of its oldest A-320 aircraft during 2006, and deferred the delivery of 12
A-320 aircraft that had originally been planned for 2007–2009, to 2011–2012. The
options the airline held on the A-320s were also adjusted
131. JetBlue also increased its focus on cost management. The airline managed to control
its distribution cost by achieving 80 percent of its bookings through its website in 2006—
the highest in the U.S. airline industry.
132. It also implemented several initiatives to conserve fuel and improve fuel efficiency,
especially by using single-engine taxi techniques, utilizing ground power units, and
identifying ways to remove excess weight from the aircraft.
133. In late 2006, Jet- Blue announced it would remove one more row of seats from its A-320
aircraft, bringing the total seat number down to 150
134. In addition to this, JetBlue was also putting in efforts to improve the efficiency of its
crew members and was trying to accomplish more with fewer full-time employees per
aircraft than before.
135. The elimination of one row of seats allowed JetBlue to operate each flight with
three attendants instead of four, as federal regulations require one flight attendant for
every 50 passengers.
136. JetBlue also began to go slow on hiring people for non-operational positions.
Better flight scheduling practices were also implemented to control costs
137. JetBlue started charging for some premium services. For instance, the company changed
some of its refund policies, and increased the fees it charged for flying unaccompanied
minors and the cancellation charges on confirmed flights
138. The RTP started showing results by the end of 2006. In the fourth quarter of 2006,
JetBlue posted a profit of $17 million on revenues on $633 million, compared to a loss of
$42 million in the corresponding quarter of the previous year.
139. Analysts had expected the company to return to profitability only in the first quarter of
2007
140. JetBlue ended 2006 with a net loss of $1 million, compared to a loss of $20 million in
2005. The operating margin also increased to 5.4 percent in 2006 compared to 2.8
percent in 2005
141. The airline expected that the combination of higher revenues and lower costs would help
it achieve savings of around $70 million by the end of 2007
The Customer Service Fiasco
142. Even as its financial performance started showing signs of improvement, JetBlue faced
another crisis in February 2007, when a snowstorm hit the Northeast and Midwest
regions of the United States, throwing the airline’s operations into chaos.passengers were
kept waiting at airports for their flight to take off. In some cases, passengers who had
already boarded their planes were kept waiting on the tarmac for several hours and not
allowed to disembark In one extreme instance, passengers were stranded on board a
plane on the tarmac at JFK for 11 hours after all this, the airline was eventually forced to
cancel most of its flights because of bad weather
143. Even after the storm cleared, JetBlue struggled to get back on its feet as the
canceled flights had played havoc with its systems, which were not equipped to deal with
cancellation.
144. The airline’s poor database management systems resulted in major problems in tracking
and lining up pilots and flight crew who were within federal regulation limits for the
number of flying hours to operate the resumed flights.
145. In addition, the delays and cancellations had caused a baggage crisis, with several
passengers losing their luggage. The airline had to give all its passengers full refunds if
their flights were canceled, or rebook them on new flights, which added to the
complications
146. The airline had canceled nearly 1,200 flights in the days following the storm and it
took several days of its operations to get back to even keel In contrast, American,
Continental, and Delta, which had canceled flights immediately after the storm broke,
were able to resume operations more quickly
147. The fiasco reportedly cost JetBlue $30 million (which included $10 million in refunding
tickets for canceled flights, $16 million for issuing travel vouchers, and $4 million for
incremental costs, such as hiring overtime crews).
148. in spite of the financial loss, the loss of goodwill was expected to be much more
serious for JetBlue.
149. Traditionally, JetBlue had had one of the lowest rates of consumer complaints filed with
the DOT.38 It also usually ranked high on customer service. But following the fiasco,
 BusinessWeek , a prominent business magazine, pulled JetBlue off its list of
Customer Service Champs
150. Some analysts felt that JetBlue had taken its low-cost philosophy too far in having
failed to set up the necessary systems to support its rapid growth
151. Following the fiasco, JetBlue published apology letters in the New York Times and
USA Today , among other places
152. Neeleman also apologized during his appearances on the Late Show with David
Letterman on the CBS Network, and on YouTube
153. In late February 2007, Neeleman unveiled a “Customer Bill of Rights,” which laid out
the airline’s policy on compensating passengers for delays and cancellations
154. Additionally, JetBlue launched a new database management system to help it track crew
and baggage better, and upgraded its Web site to allow online re-bookings
155. Employees at the airline’s headquarters were being trained to help out with operations at
the airport in emergency situations. JetBlue also became more proactive during bad
weather conditions in the months following the storm
156. In March 2007, when bad weather hit the East Coast once again, JetBlue was one of the
first airlines to cancel flights to and from airports on the East Coast. The airline
reportedly canceled nearly 230 flights during this time.
157. According to analysts, JetBlue’s handling of the events following the crisis was likely
to go a long way in redeeming it in the eyes of the public
158. Several consumer polls conducted after the February 2007 crisis also showed that
JetBlue’s popularity with passengers continued to remain high.
159. The crisis and its repercussions were expected to put a burden on JetBlue’s already
strained finances. But JetBlue managed to return to profitability in the second quarter of
2007, after a first quarter loss of $22 million

More Turbulence Ahead?

160. Analysts felt that the appointment of Barger as the new CEO was likely to benefit
JetBlue. According to them, the fresh leadership was likely to help JetBlue through its
growing pains and provide it with a positive direction for the future.

161. They also pointed out that Barger differed considerably from Neeleman in his leadership
style. (Barger was thought to be more organized than Neeleman, and much more focused
on operational issues than the latter, who enjoyed strategizing.)
162. However, JetBlue was likely to face many more challenges in the future than it had
faced during the first few years of operations. The FSAs, most of which recovered by
2007, were ready to defend their turf against LCCs. Delta had launched a big sale of
discounted tickets during the Thanksgiving weekend in 2006, triggering a price war in the
industry.
163. In addition to this, JetBlue was likely to face competition from other LCCs such as
Air- Tran and Frontier, which had formed an alliance in late 2006, to combine their
marketing and mileage programs
164. Competition was also expected from new airlines like Virgin America, which had been
launched amidst a lot of buzz in August 2007, and was positioned as a “value” carrier.
Like JetBlue, Virgin America also tried to attract passengers with amenities such
as satellite TV, mood lighting, onboard self-service mini bar, and meals-on-demand.
Virgin America had announced that it expected to expand to 10 cities within a year of
operation and to up to 30 cities within five years
165. Rising fuel costs were also a major concern for JetBlue in the future, as were
potentially increasing operational expenses as the airline’s fleet aged and operations
expanded.
166. Analysts also thought that JetBlue’s growth would dilute the close-knit culture that the
company enjoyed in its initial years
167. However, many industry experts still believed that the airline would be able to overcome
most of the hurdles it faced and enjoy significant growth in the future