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Starting from Scratch

About JetBlue
American low cost airline Launched on February 2000 Main base is John F Kennedy International Airport As of December 7, 2011 JetBlue serves 71 destinations in 21 states, and twelve countries in the Caribbean, South America and Latin America. Started by following Southwest's approach of offering low-cost travel, but sought to distinguish itself by its amenities, such as in-flight entertainment, TV on every seat and Satellite radio.

David Neelemans Journey


Started Morris Air (Southwest Airlines look-alike) in 1984 Sold Morris Air to Southwest Airlines in 1993 Joins Southwest top management as executive vice president (initiated e ticket). Initiated e-tickets. Leaves South west in 1994 Developed new reservation system Open Skies Sold Open Skies to HP in 1998 Worked as consultant in Canadian West Jet Airlines Decides to start a new airline: JetBlue after end of non compete agreement

David Neelemans Focus


Improve passengers experience with technology Use technology to increase employee and aircraft productivity Aimed to be first paperless airline substituting computers and IT for everything from flight planning to aircraft maintenance to the sole use of e-tickets Reduce the number of queues passengers have to get in. Put adequate capital Adapt to change in consumer and market taste

You need to go where people want to fly See the future needs and meet the demands Reach the untouched cities Commitment to people We are a new kind of airline with deep pockets, new planes, leather seats with more legroom, great people and innovative thinking Use new airplanes Offer great personal service Fares averaging 65% less than competition All seats would be assigned, all travel would be ticketless, there would be no discount seats, all fares would be one way '

On June 13, 2012, JetBlue ranked 'Highest in Customer Satisfaction Among Low Cost Carriers in North America

*Available Seat Mile = Number of seats available multiplied by the number of miles flown

Strategies
Generic Strategy- Differentiation and Overall Low Cost. Grand Strategy- Growth, Operational excellence. Motto- High quality service to Customers at a low cost. Every move by Jetblue is focused towards their strategies and motto.

Venture Funding
Why buying aircrafts instead of leasing? Go BIG $130 million instead of $30 million. Neeleman considered VC ahead of IPO.

Critical Decisions
Home Base in New York:
Heart of under served markets JFK airport Alliance with New York States Congressional delegation for 75 landing and Take off slots Secure lock on traffic, similar to South west airlines Love field in Dallas Avoided Air Traffic congestion

Boeing Vs Airbus
Decided to own than to lease Contract to purchase 80 Airbus A320s over a period of time

Operations Strategy:
Attempt to build worlds first Paperless airline Started E-ticketing Pilots were provided with Laptops for flight operations, planning and communications Aircraft utilization of 13.5 hrs vs 10 hrs industry average Strived to achieve 30 min turnaround time.

JetBlue and its Human Resource

Building the Top Management


Roped in veterans of the industry chance o start and do it right Thomas Kelly- executive vice president and general counsel Dave Barger President and COO John Owens-CFO Ann Rhodes - EVP

Building Top Management (contd)


Barger-Creating something new, unencumbered and fun Rhoades But Im a builder not a maintainer Top management virtual team Geographically dispersed Corporate offices were split Weekly team meetings Telephone conference calls

Values
Rhodes wanted best from the industry One of her conditions for joining Core values drove all activities. Mission hot air ; Visionbedrock Two day meeting 20 members

Safety

Passion

Caring

Fun

Integrity

A Non-Union Environment
Airline Industry highly unionized 80% against national average of 15% Not having a union creates a team environment Working together - we wont need union COO positive environment to keep the place union free

Customized Human Resource Management

My goal is to always say Yes. They say you cant do it. But I say you can if you really listen to what each group wants -Ann Rhoades

Compensation
Customized pay and benefit packages that met or exceeded industry
standard Double pay for those who worked on holidays Profit sharing benefits Always paid $1 more per hour than the highest rate paid in the industry Overall equity in treatment Customization in all types of job performed

Flight Attendants( 1 to 5 years) One year employment contract for college students Job sharing offer Full time flight attendant Customer service and Ramp workers Shift differentials Pilots 20 days off per year, Stock options No central Reservation Centre 500+ reservations agents

Selecting the right people


Preferred people without previous airline experience Cultural fit More importance for values Seven weeks of pilot training($30,000)

People have to live according to their expressed commitments

Other HR practices
Initial orientation for employees
Productive ,Safe & Customer Oriented

360-degree performance management process Importance of Communication Flight clarification report Tiger teams Power of language Customer- central importance

Post 2000
One of only a few U.S. airlines that made a profit during the sharp downturn following the September 11, 2001, attacks
New Rivals: Delta Air Lines started Song, United Airlines launched Ted Rising fuel costs

2006: Attempts to unionize : IAM (International Association of Machinists) attempted to unionize JetBlue's "ramp service workers,
February 2006, JetBlue announced its first ever quarterly loss: heavy debt load, recession and high fuel prices

Return to Profitability (RTP) plan

February 2007, snowstorm hit the Northeast and Midwest: practice of never cancelling flights: $ 30 million On May 10, 2007, JetBlue announced Barger's appointment as CEO On December 13, 2007, JetBlue and Germanbased Lufthansa announced their intent to sell 19% of JetBlue to Lufthansa On October 22, 2008 JetBlue opened its new primary hub at John F. Kennedy International Airport (JFK), Terminal 5

Member of sky team Code sharing agreements Interline agreements: South African Airways, Virgin

Atlantic Airways, Jet Airways, Air China

Low cost advantage


High aircraft utilization: operated an average of 11.7 hours per day New and efficient aircraft: average age of fleet is only 6.1 years Limited fleet types: two types: Airbus A320 and the EMBRAER 190 Relatively low distribution costs Productive workforce Cost per available seat mile, excluding fuel, of 6.76 cents is among the lowest reported by all other major U.S. airlines

At December 31, 2011 consisted of 2,168 pilots, 2,326 flight attendants, 3,560 airport operations personnel, 509 technicians (whom others refer to as mechanics), 805 reservation agents, and 2,726 management and other personnel. At the end of 2011, JetBlue operated a total of 169 aircraft, including 120 Airbus A320 aircraft and 49 EMBRAER 190 aircraft

Capacity Distribution East Coast Western U.S Northeast Florida Medium haul

2011 2010 2009 32.4 34.5 34.7 32.2 31.4 32.8 3.2 3.3 3.5

Short haul
Caribbean, including Puerto Rico Total

7.5

7.6

7.7

24.7 23.2 21.3 100 100 100

Aircraft Airbus A320 EMBRAER 190 Total

Seating Capital Operating Capacity Owned Leased Leased 150 86 4 30

Total 120

Average Age 6.9

100

19 105

0 4

30 60

49 169

4.1 6.1

Challenges of the airline industry


one of the most heavily taxed industries, extremely capital and energy intensive susceptibility to economic downturns inclement weather international events, natural disasters & acts of terrorism. Profits sensitive to even slight changes in fuel costs, average fare levels and passenger demand

Fuel remains our most significant operating expense, comprising nearly 40% of the total. Fuel hedge portfolio
2011 Gallons consumed (millions) Total cost (millions) Average price per gallon 525 2010 486 2009 455 $945 $2.08

$1,664 $1,115 $3.17 $2.29

Percent of operating expenses

39.80% 32.40% 31.40%

Maintenance costs will increase as our fleet ages. Business is highly dependent on the New York metropolitan market Reduced aircraft utilization may limit the ability to achieve and maintain profitability Rely heavily on automated systems Liquidity could be adversely impacted if credit card processors were to impose material reserve requirements If we are unable to attract and retain qualified personnel or fail to maintain our company culture, our business could be harmed. Risks of having a limited number of suppliers Subject to competitive risks due to the long term nature of our fleet order book Challenges ahead