JetBlue Airways Corporation

Submitted To:

Miss Amina Talat

Submitted By:

Attiqa Aftab Mela

Faheem Riaz

Moiz Jehanzeb

Sana Rafique

SECTION N
JetBlue Airways Corporation

JetBlue Airways Corporation – 2009

Introduction

JetBlue was incorporated in Delaware in August 1998. David Neeleman founded the company in
February 1999, under the name "NewAir." Several of JetBlue's executives, including Neeleman,
are former Southwest Airlines employees. JetBlue started by following Southwest's approach of
offering low-cost travel, but sought to distinguish itself by its facilities, such as in-flight
entertainment, TV at every seat, and Sirius satellite radio. 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. Their stock price was
$20 in 2002 and peaked at $26.4 in 2005.

Vision Statement

Our vision is to provide the greatest, most affordable flight experience of any air carrier to our
passengers while providing safe flight experience and superior service.

Mission Statement

Our mission is to be the leading most affordable passenger airline offering superior quality
customer service to underserved markets and customers who are looking for the finest value in
their flight. Our viewpoint is to give customers the top price value for their ticket and
maintaining distinctive services. At JetBlue we hire highly motivated employees and train them
to reach a high level of competency to provide better experiences to customers. We have the
newest most advanced planes that are reliable, safe, fuel efficient, utilizing advanced
technologies, and unique in multimedia entertainments. We believe that our high-value, high
quality service viewpoint will lead the way to becoming the number one in the industry as a
whole.

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SWOT Analysis

Strengths

1. Recipient of Highest in Customer Satisfaction Among Low Cost Carriers in North

America Award for 8 consecutive years, thus has a very strong brand image in America
2. New and efficient aircrafts (youngest fleet amongst any major U.S. airline)
3. It was one of only few airlines which reported profit after the decline in airline industry
post 9/11 attack.
4. High customer satisfaction due to various facilities such as satellite radio, T.V set on each
seat and all this at a low fare as compares to other players in the industry
5. Serves as a popular low-cost airline across 75 destinations

Weaknesses

1. It has less international destinations. Does not have presence in Asia and other
unsaturated market
2. Higher costs linked to airline's several facilities are making the company less competitive

Opportunities

1. America is the single largest market in the world

2. Introduction of new planes has created the opportunity for new routes
3. Huge scope to expand in the Asian market

Threats

1. Most of the major airlines have undergone cost reformation to reduce the air fare
2. Rising fuel prices and problem of availability of fuel
3. Fluctuation in the demand of air travel especially after terrorists attack

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SO WO
1. Expand and offer flights to 1. Raise fares slightly so that
Europe and market their they are still the lowest
superior price value to the priced airline but can make
European market more of a profit given the
2. Set up a compare and save increasing demand for the
feature on their website so ait travel.
people can compare prices 2. Advertise on TV so that
on similar flights from JetBlue can become a better
different companies. known airline.
3. Set up TV ads about how 3. Start flying internationally
JetBlue’s planes are brand to increase profits and
new and fuel efficient for become more well known.
the environment and how 4. Start a travel website about
they have bullet proof different travel destinations
cockpit doors and security and include hotspot,
cameras on board. attractions, restaurants and
4. Advertise on popular travel hotels.
websites for travel
destinations that JetBlue
serves.
ST WT
1. Slightly raise fares on 1. Offer sharp discounts for
tickets so that they are still empty seats that are left at
the lowest priced competitor the last minute.
yet are able to make more
money in an effort to pay
for better security, more fuel
and better benefits for
employees so they are less
likely to go on strike.

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Porters 5 forces model

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Bargaining power of buyers:

 Standard product and services make it easier for the customers to switch if they are not
satisfied with the services or the prices charged for them.

 As there is a lot of competition in the industry the customers have a lot of substitutes and
choices is available which not only allow them to make comparisons but also increases
their power of bargaining due to greater knowledge and information.

 The switching costs are way to low which means that customers would not be reluctant to
switch hence the services need to be exceptionally good in order to give them a reason to
stay.

 Customers can compare the services to others which increase the competition and also
the probability of losing customers if they are not satisfied.

Bargaining power of suppliers:

 JetBlue has prescheduled flights and require certain amount of fuel and therefore fuel is
one of the most important cost factor. Hence loyalty from suppliers is required as high
dependence is there as well as the volume of fuel supplied is extremely important hence
suppliers are a critical factor therefore the bargaining power of suppliers is high.

 There are only two suppliers available, airbus and boeing hence due to the shortage of
suppliers it is not possible to switch easily.

 Fuel suppliers have a significant power as they will directly impact the amount of money
spent on fuel therefore effecting the total costs.

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Threat from substitutes:

 The threat from substitutes is high as there are numerous other airlines available which
give the power to the customers allowing them to switch easily.

 Switching costs as mentioned before are low which further increase the threat from
substitutes.

 Bankruptcy laws allow loss makers to continue operating so there are high existing
barriers which ultimately mean high substitutes available in the industry.

Threat of new entrants:

 Very high cost is required and a huge amount of capital investment is needed for entering
the industry which causes reluctance amongst many entrepreneurs as everyone is not
prepared to take the risk or everyone cannot afford to enter the market hence threat of
new entrants is relatively low.

 The profit margin is low therefore many investors do not find this market attractive
enough which again reduces the threat of new entry.

 Differentiation is a difficult job to do as the products are all standard therefore new
entries are lower as they are aware of the fact that gaining a competitive edge is difficult.

 Brand image and loyalty is very important in this industry which makes it difficult for the
new entrants to gain a position in the mind of the customers against the already existing
and well known airlines unless they are known as safe and reliable from the customers
point of view.

 Competing against the already existing large airline who do not only have a strong
positioning but also a strong customer base and brand image is a tough job and many new
airlines are not able to stand against it for long and therefore end up with huge losses and
bankruptcy.

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Competitive rivalry:

 The competitive rivalry is high as there are many other competitors like delta, united and
American therefore remaining competitive and active is a very significant factor for
success.

 The industry is extremely sensitive to economic cycles which again makes the
competition intense.

 In times of low or moderate industry growth, the competition gets fiercer because each
one tries to nab customers from the other in order to keep their capacity utilization at
acceptable levels.

PEST Analysis

Political factors:

 After the September 11 terrorist attacks the airline industry had seen a lot of troubles. The
domestic airline yields dropped almost 20% in the aftermath of the attack and remained
below pre-attack levels until 2005.

 Political stability: The Valentine's Day crisis highlighted the need to reconsider JetBlue's
long-standing operating principle of not cancelling flights. The crisis has led to the
introduction of JetBlue's Customer Bill of Rights.

 Competitive airline industry; JetBlue is often compared to Southwest Airlines due to the
emphasis on the low fares and its decisions to avoid the hub-and-spoke architecture of
legacy airlines.

 Regulatory factors

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Economic factors:

 Improved purchasing power; Customers have more choice as JetBlue served the medium-
sized cities by its E190 that were currently served by regional airlines affiliated with
legacy carriers.

 Rise in inflation; By late 2006, JetBlue face soft earning demand like other airlines.
Analysts from Barclays have warned that once the price per barrel of oil reaches $150
this would trigger inflation in both developed and developing economies. They foresee a
2.7 percent increase in inflation in developed countries and a 4.5 percent increase in
inflation in developing countries.

 Rise in oil prices; The operational is challenged by the unabated rise in fuel cost. As the
fuel price is increased, JetBlue slow its rate of growth by reducing its purchase
commitments for new planes.

Social factors:

 Greater customer awareness; When JetBlue decided to served the short-haul routes by its
E190, they are going to serve the business travellers. These groups of customer are more
concern on the on-time time schedule as compare to the leisure travellers as they serve
before in A320. It will be more challenging if the technical problems occurred while
serving these customers because if they are not satisfied at the first time, it's hard to get
them back.

 Increased entertainment level; Southwest focused on customers whose priority was low-
cost, on -time performance. JetBlue differentiate its operation by adding some comfort
features such as assigned seating, leather upholstery and satellite TV. JetBlue offered
fares are up to 65% lower than the legacy competitors.

 Security level of customers; Federal Aviation Administration (FAA) prohibited domestic

flights from take off during "ice-pellet" condition.

 Bad services and lost baggage; JetBlue's flights were heavily booked on the President's
Day weekend but the weather forecast predicted early snow turning to rain. Despite the

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fact that the snow lingered longer than expected, JetBlue continued to board flight.
Unfortunately the snow turned to freezing rain has the FAA to prohibited domestic flights
to take off. It has created havoc on the entire JetBlue system. This Valentine's Day Crisis
has prompted Neeleman to introduced JetBlue's Customer Bill of Rights.

Technological factors:

 Beginning of E-ticketing; to support its lower fares, they provide customers with
incentives to reserve and purchase ticket via company's website. To support customers
who wanted to make reservation via phone, the company set up a corps of reservation
agents who work part-time form home.

 Automated systems (cockpits);

 Advertisements

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Internal Factor Matrix

Weights Rating Weighted
Score
Strengths
Low Operating cost 0.1 4 0.4
Strong Brand 0.1 3 0.3
Efficient Employes 0.05 2 0.1
Consumer Satisfaction 0.1 3 0.3
Use of technology 0.1 3 0.3
Advertisment 0.05 1 0.05

Weakness
New company 0.15 3 0.45
Concentrated on middle class 0.1 2 0.2
Changing customer needs 0.1 3 0.3
High maintenance costs 0.15 3 0.45
Total 1 2.85

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External Factor Matrix

Weights Rating Weighted Score
Opportunities
Strong Financial Position 0.2 3 0.6
Addition of more services 0.1 4 0.4
Increase number of flights 0.1 3 0.3
Joint ventures 0.05 2 0.1
Deregulation of Air Travel 0.05 1 0.05

Threats
Strong Competiotion 0.1 3 0.3
Rise in fuel Prices 0.15 3 0.45
Employee Unions 0.05 1 0.05
Security issues 0.15 2 0.3
Global Crises 0.05 2 0.1
Total 1 2.65

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Competitive Profile Matrix

Weight JetBlue Southwest American United

Airways Airlines Airlines Airlines

Fare prices 0.1 4 3 2 3

Customer 0.1 3 2 3 2
service

Management 0.1 3 3 2 3

Financial 0.05 2 3 3 2
Position

Customer 0.15 2 2 2 1
Loyalty

Employee 0.1 2 3 3 2
retention

Free services 0.15 3 2 2 2

Marketing 0.15 4 2 1 3

E- 0.1 2 2 2 2
Commerce

Total 1.00 2.85 2.35 2.1 2.2

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Grand Strategy Matrix

Rapid Market
Growth

Weak competitive position working in a Strong competitive position working in a

rapid growth market rapid growth market

 Market Development  Forward Integration

 Market Penetration  Backward Integration

 Product Development  Related Diversification

Weak Strong
Comp. Comp.
Position Position
Weak competitive position working in a Strong competitive position working in a
slow growth market slow growth market

 Retrenchment  Diversification

 Divestiture o Related

 Unrelated Diversification o Unrelated

 Merger

 Joint Venture

Slow Market
Growth

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