Please provide an overview of JetBlue Airways (history, strategy, fleet, etc.)
JetBlue Airways was founded by David Neeleman back in 1999 after settlement his strong record in the airline industry. David Barger was initially president and COO of JetBlue but later had promoted into the position of CEO. Steven Predmore was the vice president and the chief safety officer of the company. Vicky’s scenes were the vice president of in-flight service. Tom Anderson was at the senior position known as senior vice president of Fleet Programs. The Vice president of flight operations was Scott Green. After David Barger, the new COO of JetBlue was Russ Chew. JetBlue was among the airline’s companies that had successfully adopted the model of low-cost carriers (LCC) that two models of airplanes mainly execute: E190 and A320.
Jet blue has entered into the airline market by developing a connection among northeastern U.S cities and with some warmer cities in the southwest. The company, which has started with just 10 airplanes, achieved the status of a major airline in 2004 with the extension of $1 billion in revenues annually. JetBlue has adopted the LCC model differently as it not only focuses on low-cost delivery of services but also on-time performance. It had the principle of avoiding flight cancellations at all costs.
From the start, Neeleman has put in place the strategy of growth for his airline, and goals of each year are set, and then the performance of the company is gauged against these goals. This has resulted in consistent and high profits in the first five years. It has gained success by continuing its growth strategy, and JetBlue has become the ninth largest passenger career in the United States.
In terms of the fleets of JetBlue, in 2005, it has added the E190 to its fleet that was at that time particular of 85 A320s. This was against the traditional practices of several LCCs as restriction of their fleets for one type of aircraft to streamline the operations and reduce cost. At the end of 2006, JetBlue has owned 23 E190s in its large fleet of 119 planes.
Please provide an overview of the LCC strategy and the Airline Industry?
In the year 2006 airline industry has consisted of two groups of competitors. One is known as legacy carriers, and the other one is LCCs. Many of the traditional and best-known companies like United and American Airlines were called legacy carriers as they were working in the industry for many years. One of the famous models of this legacy was a hub-and-spoke model, as this model knew the operations of these companies.
Southwest Airlines that have come into the industry in the late 1960s have worked with a different and new air transportation model. It was contrasting to the hub-and-spoke model as by using this model, Southwest took its directly between cities. Southwest Airlines has offered much-discounted fares due to its low operating cost that was low enough. This airline was capable of attracting those passengers who previously used to travel through cars and buses. Southwest airlines managed its cost so effectively by depending on a single type of plane that was Boeing 737.
The LCC model that Southwest adopted was very successful, and other airline companies had tried to copy this model. All efforts to mimic this model by competitors have failed, like People Express Airlines, Continental Airlines, Delta Air Lines, and United Airlines. Some of them had tried to create LCC subsidiaries in the year 1990s but were not successful. So by 2006, Southwest airline was the only airline that has consistently developed its position with high profits in the airline industry that was facing many problems like deregulation, fare wars, overcapacity, etc.
Compare the economics of the E190 and the A320 for Jet Blue. What are the key drivers of profitability of each type of plane?
When E190 has become part of JetBlue planes, it has increased the number of available choices to the customers of JetBlue by providing opportunities to customers to connect A320 flights at the ‘focus cities’ New York. E190 working with the combination of A320 has made the operations easier for management and presented a range of options for customers. A320s that we’re able to feed into E190 flights also resulted in a higher amount of loads and improvement in economics for JetBlue.
In the year 2005, JetBlue has added the E190 as its fleet that was particularly made up of 85 A320s. In the year 2007, JetBlue has come through some operational challenges and increased fluctuations in fuel costs. It was needed at that time to slow down its growth strategy. This can be done through with a decrease in the plane deliveries once again. It was very hard for the management of JetBlue to come out with the best way to distribute these reductions among E190s and A320s.
Both of the planes were profitable as they were promising planes. The E190 has presented interesting growth opportunities and challenges for JetBlue. With the same challenges, E320 has served as the basis of JetBlue’s operations, and the company was very comfortable with its working. It was tough to take this decision of reducing the operations among these planes. The E190 was a unique plane that JetBlue could also use for future growth as an engine. Likewise, the A320 was also an aircraft that was proven to be effective around which JetBlue has set its operations and training for many years.
How did Valentine’s Day Crisis impact their business and strategy?
Valentine’s Day in the year 2007 has altered the course of history for JetBlue Airways. An airline famous for its low fares in the whole industry has gone through an extreme catastrophe. It happened due to the winter storm that has enveloped New York City and the hub of JetBlue at the JFK international airport. Planes of JetBlue remained in the air for six or more hours. Many other customers were also waiting at the airports in the lines, and in the end, flights were canceled. This tragedy has disrupted the whole operations of an airline. JetBlue Airways had canceled almost 1200 flights in the six-day period, and the company has to bear many losses.
This crisis has exposed the company to a lot of crisis and informal and unorganized form of operating systems that were the first of its kind in its history. This crisis has also impacted the company in areas of internal operations like information systems, reservations staffing, and airport staffing. It has changed the strategy of growth for the company and diverted it towards crisis management activities. They had reconsidered its operating principles of non-cancellation of flights that was based on its long-standing procedures.
This crisis has also ruined the company’s reputation as the best customer service provider. BusinessWeek has ranked companies by their customer service delivery before the crisis and put JetBlue Airways in the fourth position. After the crisis, the name of JetBlue was scratched off from the list, and the title was “Customer Service Champs….and One Extraordinary Stumble. This crisis has also resulted in the introduction of JetBlue’s Customer Bill of Rights that was first of its nature among U.S airlines. It was across the board applied to all the companies regarding information sharing and cancellations of flights to customers.
