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Case study – Uncertain Course for Jet Blue

JetBlue appears to be stuck in the middle. The airline has grown rapidly since its
founding in 1999 to become the fifth-largest airline in the United States. It has long positioned
itself as the “egalitarian” airline, where customers all get the same level of service at largely
the same price-point. It structured itself as a low-cost airline but one that provided a higher
level of service that included more legroom than competitors, individual TV screen, and Wi-Fi
access in its all – coach cabins. In essence, it was the “cheap chic” airline that generated
great customer appreciation and commitment.

But JetBlue now faces some challenges. Internally, its costs are rising. After being
presented by its pilots. JetBlue collectively raised pilot pay by $145 million from 2014 through
2017. But it’s decided to unionize anyway – which suggests future cost increases. Externally,
JetBlue faces increasing pressure on both ends of the strategy spectrum. At the low cost end,
hard-discount airlines, most notably Spirit Airlines. Are effectively undercutting JetBlue’s
prices and stealing the price-conscious consumer. At the differentiation end, the mainline
airlines, such as Delta and American, have expanded the services and amenities they
provide, especially the higher fare business travellers. And JetBlue has difficulty matching the
global network of routes these airlines can provide business travellers. As a result, JetBlue’s
sales growth and profitability have lagged its main competitors.

JetBlue has responded by moving to become more like the main airlines. The firm
ordered new jets that have first class cabins for use on their flights between the east and west
coast. JetBlue restructured its pricing system to offer different levels of service, with the
lowest level requiring that passengers pay to check luggage and providing lower frequent –
flyer credit than other fares. JetBlue is also adding seats to its planes by reducing legroom.
Airlines executives argue JetBlue isn’t abandoning its core customers, but others argue that
changes will erode the airline’s reputation and customer’s loyalty.

Questions (5 points each)

1.1. Is it wise for JetBlue to change its strategy to become more like Delta, American, and
United? 5 points
1.2. What are the risks and benefits of the change? 5 points
1.3. What does JetBlue need to do to retain its distinctiveness in customers’ eyes? 5 points

3. Choose a firm that has attained a differentiation focus or cost focus strategy. Are its
advantages sustainable? Why? Why not? (10 points)

4. Write an insightful paper on “How do changes in the environment affect the success of a
company’s business model?” (10 points) (DO NOT ANSWER)