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Crafting & Executing Strategy: Jet Blue Airways Harry E. Sloan, Jr. BUS-599 April 17, 2011 Dr. Brian Grizzell Strayer University
Jet Blue’s strategic elements of cost organizational culture. while anticipating the rebound of the economy. which simply means positioning themselves upon capitalizing on the current and future market trends and conditions and in the “roller-coaster” airlines industry. This paper will examine and discuss the key strategic factors regarding Jet Blue’s success that will reach and extend far beyond what the text book offers. BMW in South Carolina and etc… .S. Focusing on “mid-size communities” versus the major metropolitan areas that are having substantial growth due to key industry and manufacturing investments by major foreign companies like Mercedes & Kia in Alabama.S. • • • Negotiating “predetermined” fuel prices into the contracts.Crafting & Executing Strategy Sloan Introduction Since its conception in 1999. it’s the early bird that wins.com). Jet Blue currently is the nation’s 6th largest airline operating 650 flights daily (www. Jet Blue Airways has emerged as one of the airline industry’s leaders as a “low cost” carrier with high levels of customer service. (to stay updated with the latest and current events with Jet Blue and the ever-changing airline industry) that will focus on the following: The trends in the U. Constantly revising and creating new route systems to maximize profit optimization. Airline Industry For “low-cost” airlines like JetBlue to remain successful they must stay ahead of the curve. and human resource practices and Jet Blue’s strategies for 2008 and beyond to sustaining their competitive advantage. airline industry. The Trends in the U. Jet Blue’s strategic intent. Jet Blue’s financial objectives.jetblue.
offering the most leg room. Traditionally. . • Strategic Intent and Market Share Less Means More JetBlue has succeeded as both a low-cost and a high quality carrier. more efficient scheduling. However. Catering to the “last second flyer” with strategic partnerships with third-party online booking sites like Expedia. JetBlue’s strategy of only supporting the Airbus A320 is instrumental to the company’s low cost (Carter. • Partnering with hotels and rental car companies with special promotions and incentives. exceptional customer service in JetBlue’s case • Focusing on the “business traveler” allows low-cost carriers like JetBlue and AirTran. Hotwire. reduced spare parts inventory. 2002). offering one class of service. A primary operating challenge for JetBlue moving forward will be to continue growing while maintaining both high quality service and its leadership as a low cost carrier. JetBlue’s low cost structure results from operating one type of aircraft. such a strategy would be considered “stuck in the middle". to generate the most revenue & profit by promoting “value-added” complimentary services. such as unlimited snacks and candy. Major benefits to operating one type of aircraft include lower costs through simplified maintenance. Orbitz and Travelocity to secure last minute sales. 2002). lower training costs and reduced aircraft acquisition costs through a volume discount. Single Aircraft Business Model Offering a single type of aircraft model increases the ROI & efficiency of operations. and supporting a ticketless reservation system (Carter. free TV & digital entertainment.Crafting & Executing Strategy • Sloan Gorilla Marketing “Key business drivers”.
but introduce service offerings of low fares. and differentiated product that are designed to stimulate demand. A key element of the company’s growth strategy is not only to establish a presence in underserved markets. Utilization and high yields are key to generating revenues (Carter. JetBlue’s New Orleans to New York round trip fare is significantly cheaper than that of alternative carriers. 2001 utilization for Southwest. but rather the price sensitive leisure traveler and small business owner that is price sensitive with their wallets. The Most Bang For Your Buck Low costs and high efficiency enable JetBlue to charge lower fares than its competitors. was 11. but does not want to compromise value.6 hours/day in 2001. As an example. JetBlue’s yields in 2001 were second in the industry. Underserved Markets and Target Customers JetBlue has capitalized on the opportunity of careering to the “under-served” or markets most airlines didn’t care about rather than the traditional metropolitan areas JetBlue’s flight model has proven that it can stimulate “high-yield” demand in the markets it has entered. the second most efficient. . This is a powerful advantage to the extent that it insulates JetBlue from future aggressive pricing by competitors in a highly competitive industry & price sensitive economy is influenced by external factors such as world events. By comparison. The company’s target market is not the business executive with the Amex Gold Card. JetBlue offers two nonstop flights per day both ways and a round trip fares are tough to beat.1 hours/day. 2002). In addition. the highest in the Sloan industry. politics and the economy.Crafting & Executing Strategy Profit Optimization JetBlue aircraft operated an average of 12. service and quality. following Southwest.
8% 4. and the airline industry’s only “Customer Bill of Rights” are just some of the key .6% l Northwest JetBlue AirTran Alaska Other 4.3% 3.4% 3. coach product.8% Southwest 13.8% 10.4% 8.0% Continenta 7. Airlines Market Share Rank Carrier 1 2 3 4 5 6 7 8 9 10 11 American Market Share 13.Crafting & Executing Strategy Sloan 2010 Top 10 U. pre-registered seating.8% Delta United US Airways 11. fuel efficient fleets with more room than any other airline. unlimited food & drinks. free in-flight entertainment.1% 19% Financial Objectives As cited by “ Rovenpor & Michel” JetBlue has emerged to be a “customer-oriented” airline that provides superb customer service primarily on direct destinations at competitive rates. Their “business key drivers” includes operating young.S.
000 per year to $250. 2009). and Human Capital Practices Jet Blue has been consistently ranked as one of the best airlines to work for. 2009).000 hours of leadership development training.Crafting & Executing Strategy Sloan elements that have led to financial success. Jet Blue’s Strategies for 2008 and Beyond JetBlue’s focus from 2008 & beyond will be to focus on rational growth. from $998 million in 2003 to $2. slow attrition and a reduced salary from $500. It’s also the only airline that currently has a “no-layoff” policy.000 resumes. but utilizing “option & swap” agreements allowed JetBlue to hedge its exposure to aircraft fuel prices. Strategic Elements of Cost Organizational Culture. Each year. JetBlue received 130.842 million in 2007. As for as training. phone interviews and a collective selection process as a team. due to the fact of their collaborative efforts of attracting and retaining the industry’s best talent. So it seems for now that the airline has grip on the unforeseeable future (Thompson & Strickland. profit-sharing and 401(k) retirement plans (Thompson & Strickland.000 qualified candidates were hired (Rovenpor & Michel. 2008). the company offers their 800+ employees more than 14. but has compensated in other area such as by offering health care coverage. They . On the other hand operating expenses & jet fuel expenses grew by 532% from 2003 to 2007 and typically when fuel-costs soar it hurts “low-cost” carriers like JetBlue significantly. Jet Blue takes a methodic & meticulous approach of selecting the best “crew members” through online applications. While all airlines have the reputation of being “risky investments”. frugal cost control and revenue optimization while managing risk in uncertain economic times & conditions. JetBlue has delivered to their stakeholders by growing revenues 185%. When it comes to compensation JetBlue has lagged behind most airlines in regards to hourly pay-rates. from which 3.000 for the 3rd & 4th quarters of 2008.
Conclusion: The Power of Blue JetBlue’s key components have collectively come to serve as the “recipe of airline success”. fun and passion. free TV entertainment. they are looking to expand other revenue opportunities. particularly from fareconscious leisure and business travelers who might otherwise have used alternate forms of transportation or would not have traveled at all” says current the CEO Dave. unlimited snacks & drinks and the most legroom that any airline has to offer. “When we enter a new market. . it’s the people that make all the difference. while continuing to provide our customers with competitive fares. The nation’s 6th largest airline will continue to strive to increase passenger revenue primarily by increasing flights to popular destinations. caring. JetBlue has cultivated a company culture centered around five distinct values: safety. and that’s what serves as the catalyst of JetBlue’s business success. Brand Power: JetBlue’s values works in harmony with building a brand of differentiating itself from the competition in terms of offering safe. JetBlue believes in attracting. which produces higher revenue per available seat mile. reliable and value-added services that’s “customer centric”. In addition. Their overall objective is to optimize our fare mix. which are: Value Power: In terms of service & quality “less means more” in regards to customers not sacrificing the quality of services that include: Exceptional customer service. hiring and retaining people that are genuinely friendly. Similar to Southwest airlines. our fares are designed to stimulate demand. People Power: Ultimately. helpful.Crafting & Executing Strategy Sloan are forecasting a slower growth trend that began in 2008 that will continue through 2011. integrity. everyday low-cost fares. JetBlue will continue to reallocate capacity in order to take advantage of present market opportunities.
www. A.cc/classes/ Thompson.Crafting & Executing Strategy Sloan team-oriented and giving customers the best overall “JetBlue experience”. which reflects from top management all the way down.jetblue. Strickland. References Carter.mcafee.com . Crafting & Executing Strategy The Quest For Competitive Advantage: Concepts and Cases.. 2010.” www. J. A. & Gamble. Grant. (2002).”Is JetBlue’s strategy conducive to sustaining profitability..
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