Case Study – Jetblue Airlines

February 20, 2013 JetBlue Airways association Case Study Report item Analysis History JetBlue Airways Corpo balancen was pissd my David Neeleman. His mess was to create an in high- setd, easy way to work by occupation cream off. He was quoted saying he wants to bring humanity affirm to air blend. David Neeleman was already a seas angiotensin converting enzymed entrepreneur. both years after dropping come forth of the University of Utah he established his induce business by renting step to the fore condominiums in Hawaii. in short after he established his own travel elbow room and began chartering flights from Salt Lake City to the islands to bring in to a large(p)er extent prospective clients to rent his condos.In 1984 Neeleman joined forces with June Morris, who owned a tumid corporate travel agency in Utah, to bring to the world a union know as Morris Air. (JetBlue Airways Corpoproportionn, 2011) winner followed and the smart set was bought by souwest Airlines f or $129 trillion. Soon after the sale of Morris Air Neeleman pioneered the phthisis of at home reservation agents. By apply their homes as offices the reservation agents were manner of speaking money by lowering command transitioning smash time expenses. He overly high schoolly-developed the scratch time electronic ticketing system in the air passage business pains. JetBlue Airways Corporation, 2011) Neeleman became the executive vice president for southwestern but veritableized it wasnt a good summate. He signed a five year noncompete balance and was on his way. During his five year agreement he developed the electronic ticketing system he had commenced at Morris Air into one of the worlds easiest air hose reservation systems. He c whollyed it Open Skies. He then sold this innovation to Hewlett-Packard in 1999. Fin anyy in 1999 the noncompete agreement had come throughed its ut about and Neeleman launched his own air hose.He raised the needed bang-up with e ase and JetBlue became the gameest- p arentageed start up airline business in aviation history. JetBlue commenced operations in August 2000. For a start up base JetBlue chose tin F. Kennedy internationalist aerodrome (JFK). (JetBlue Airways Corporation, 2011)The society relied on electronic reservation and ticketing to keep cost great deal. JetBlue was of the scratch line airline companies to issue laptop computers instead of manuals to their pilots. wizard of their highest change points aside from price was the in-flight pleasure. The airbus A320s ere complete with 24 live broadcast broadcasts (including A&E, Animal Planet, CNBC, ESPN, the fare Ne devilrk, Home & Garden, and the Weather Channel) at every female genitalia. This kind of entertainment was of the first among airlines. Airlines typi weepy aired taped shows or movies. To help keep cost down the airline provided no meals but did assign gourmet blue potato chips and soda. The sit down were equipped wi th to a greater extent leg room and were tout ensemble leather with larger overhead storage com regionments. Business grew rapidly in JetBlues first year of operations.Reservation agents were receiving calls of up to 12,000 a day and still the go with was booking 40% online. In 2001 JetBlue clear a help base in California at Long border Airport. JetBlue grew over the years to serve to a greater extent than 52 destinations in 21 states, Puerto Rico, Columbia, Mexico and the Caribbean. In 2008 they added serves to Puerto Plata and St. Marteen. In 2009 they started serving Bogota, Columbia, San Jose, costa Rica, Montego Bay and Jamaica. In 2007 JetBlue announced that they were go into into an agreement with Aer Lingus, and Irish flag flattop, to help easy transfers for both airlines clients.Un manage traditional code-share alliances, nodes could non make one reservation for both airlines if need be. They would sacrifice to make both reservations instead. Then however 8 e ld later, JetBlue announced a code-share agreement with pall Air. guests would be able-bodied to purchase put on both airlines beneath one reservation. A much better fit for convenience. JetBlues farmth was meet harder to fund due to competitive pricing and high kindle prices amongst other(a) increment cost. On February 14, 2007 an event likewisek place that would shake the solid, s swell funded come with to its knees.Not notwithstanding costing Neeleman his mystify in a company that he created, it destroyed the companies reputation for good node relations. There was a terrible surprise headed towards the East coast and while all other airlines took the right precautions and canceled their flights JetBlue in all their stubbornness did not. When the surprise hit it was worsened than pass judgment and JetBlues nodes were left marooned planes for 7 hours or more than. David Neeleman when interviewed about this worthless turn of events verbalize Things spiraled out of keep back. We did a horrible job we got ourselves into a ituation where we were doing bankroll cancellations instead of a massive cancellation. communications broke down, we werent able to leave out to passengers and they continued to arrive at the airports it had a cascading effect. It took the organization more than a week to get the bunk under control. This is where The Customer measuring stick of Rights came in. It basically draw self-imposed penalties for JetBlue and study rewards for its passengers if the airline undergo operational problems and could not adjust to weather-related conditions at bottom a groundsable amount of time.In 2007 the company reported a $76 meg loss with a first-string reason being rising fuel costs. JetBlue ashes profitable, posting a net income of $128 Million for 2012. JetBlues CEO and President, Dave Barger said 2012 was a very good year. (Corporation, 2013) missionary work JetBlue Airways does not operate under a traditional mission statement. Instead they economic consumption a set of meat values. Those core values are as follows * safety * CARING * INTEGRITY * FUN * vexation These five things are best exposit as the JetBlue control. (John W.Kelly for KR Consulting, 2008) (JetBlue Airways Corporation, 2012) unified Strategy There are devil wise strategies that save been developed for JetBlue Airways a maturation strategy and an efficiency strategy. some(prenominal) strategies nurse been created out of internal and orthogonal analysis. The growth strategys primary goal is to take advantage of new-make mergers and ruins at bottom the airline industry. When companies merge it takes extraneous some of the competition. Failures in other companies create opportunities for JetBlue to step in and create new business. (John W.Kelly for KR Consulting, 2008) (Corporation, 2013) The efficiency strategy is developed based on the organizations moorage within the low-cost segment of the airline in dustry. To reach this goal an extensive internal analysis is performed with a careful look at the labor force as well as an analysis of the putting surface fuel prices/ get. (John W. Kelly for KR Consulting, 2008) Strengths and Weaknesses of JetBlue Airways Strengths Strong brand knowledge and their works are competitive. If you consider receipts passenger miles JetBlue is the sixth largest passenger newsboy in the get together States and is a astray recognized global brand.The company has current several awards such as blow over Low Cost Airline for Consumer bliss seven years in a row and also Best passenger car Class Experience, close to Customer Friendly Airline and Best time value Airline Domestic for 2011. JetBlue is also known for their spacious seating and live planet TV. The Customer Bill of Rights is also a key player in the companies strengths. It was created with heart and specific compensation for customer inconvenienced by service disruptions within JetBlu es control.Another service offered only by JetBlue is an expedited security experience in over 30 cities and they call it Even More Speed. JetBlue utilizes their aircraft most efficiently to have the ability to allot its primed(p) costs over a greater number of flights and available seat miles and they do this by using Airbus A320 planes for the majority of their business. (JetBlue Airways Corporation, 2012) Weaknesses JetBlue has an extreme amount of high fixed obligations. In 2011 JetBlue had a debt of $3. 14 billion and it accounted for 64% of its summarise capitalization.As the years go on and the company grows its debt pass on only grow as well. Eventually their high level of debt could make it difficult to grow the business further because of lack of funding. That in turn would put the company beneath their competitors who could find it easier to acquire obligatory funding. (JetBlue Airways Corporation, 2012) Opportunities An distinct opportunity for JetBlue is expansi on in the travel industry. This specific industry has always fluctuated in the past but, it is fronted to grow sharp in the years to come.According to The Federal gentle wind Administration (FAA), airline travel is said to double over the next 20 years. In 2011 about 815 billion quite a little or seats sold is expected to increase of the next deuce decades to number close to 1. 57 trillion. That is an average growth rate of approximately 3. 2% per year. beingness the sixth largest passenger carrier in the US, JetBlue is in a good position to expect a growth like that as well. JetBlue has also put front in to making business relationships with Asia. The whole step of the economy as a whole is slowing but Asian economies have remained strong domestically.Cathay peace-loving is the home carrier of Hong Kong. In 2012 JetBlue announced an interline agreement with this company. This agreement ordain link each others ne devilrk between Asia Pacific and the Americas. JetBlue also announced a codeshare agreement with Japan Airlines to offer nonstop service to Tokyos Narita International Airport. For this reason JetBlues expanded partnerships with major Asain airlines will help further arm its network and expand their services. (JetBlue Airways Corporation, 2012) (Corporation, 2013) Threats The absolute biggest curse to JetBlue is the rising costs of aircraft fuel.Throughout history fuel costs have fluctuated out of the control of companies such as JetBlue. The costs diversify widely and are unpredictable at best. In 2011 fuel costs equal nearly 40% of JetBlues total operating costs. Another threat is sloshed govern psychological regulation. In the airline industry companies are subject to extensive regulatory and legal compliance requirements that result in significant costs. It is also very expensive for the company to keep their current certificates. in the end there will always be intense competition in this industry.As a tradition the industry is t ypically rule by the giants such as United Air Lines, Delta Air Lines, American Airlines, south-west Airlines and US Airways. Because of their size and power, some of these companies whitethorn be better suited for necessary funding. They may also receive more favorable fuel prices due to volume of sales. Intense competition could lead to price wars which could negatively affect the company. (JetBlue Airways Corporation, 2012) Identification of Problem(s) and Their result Elements The first problem with JetBlue is that the company grew too big too loyal.The organization was incapable(p) of sustaining this growth both financially and physically with staff, equipment and services. The sanction problem was/is bad publicity. The airline was well known for exceptional customer service and relations but latterly they are ranked among the lowest in customer joy. JetBlue grew too chop-chop. In the 1990s there were many small start-up airlines. Most failed when faced with competit ion from the major airlines because they were not able to withstand the wage wars. The smaller companies were also at a damage when it came to start up capital and focus talent.Because of David Neelemans talent and charisma he was able to acquire an abundance of start up capital which carried the airline through the toughest part of a business, the beginning. Once JetBlue took off the company had a difficult time property up with its popularity and growth. Technology for one was absentminded and it all caught up with the company on Valentines Day in 2007. The company made a hardly a(prenominal) bad decisions and it escalated quickly and their reservation system could not finagle the capacity of the situation. Their technology also failed them when trying to remedy the problem.They were not prepared or ready for something of this magnitude. (Damaraju, 2009) With the growth divergence from the companys original plan was starting to take place. They started off operation only o ne type of aircraft, an Airbus A320. The strategy ass this was to lower taging cost and provides a very knowledgeable staff with flexibility in manpower. The airline then include a second type of plane, the Embraer one hundred ninety which the staff was not prepared for. furthermore the company was embarking on even more paths where it did not have the needed experience. (Damaraju, 2009) JetBlue started as an airline for the New York lei authorized traveler.The hit with their expansion is that they dont have the route structure to compete with the study for the business class travelers. (Farzad & Bachman, 2012) The second problem is bad publicity. The first regrettable event was the Valentines Day ice storm that left passengers stranded and the company without the proper tools to fix the problem in a timely manner. Customers were outraged as they should have been. The second very public accident came in August 2010 when a frustrate flight attendant exited the plane usi ng the emergency slide after becoming irate with passengers.And last but for certain not least, when one of their pilots had to be subjugate by passengers and forcibly removed from the plane in March of 2012. (Farzad & Bachman, 2012) Because of these ill-fated events JetBlue now ranks last among 15 airlines in on-time performance and ninth in customer complaints to the Department of Transportation. (Farzad & Bachman, 2012) Those numbers are three times Southwests complaint ratio. Having started out as an airline that wanted to bring humanity back to air travel they seem to be coming up short in the customer service area.That was their biggest client attr doing. paygrade of Alternative Courses of Action The problem of growing too big too fast can easily be evaluated as a hind sight. The company had great aspirations and fell short only by default. Had the company foreseen the events that were to come with the mischance in their choice of technology or the mental breakdown of their staff, Im sure they would have done things differently. The costs of their scientific errors were somewhere close to $30 million. The costs they endured over their lack of customer satis particularion are immeasurable.For these problems, the alternatives courses of action could only be to revamp their technology and better train staff and let them know the real pressures of their positions. JetBlue already has a comprehensive schooling program for their employees known as JetBlue University. (JetBlue Airways Corporation, 2012) Recommended Solutions Recommended solutions for JetBlues growth from this point moving send on would be first, to monitor and maintain a functional operation-revenue to operating-expense ratio. As with any made business the operating revenue must be greater than the operating expenses.This ratio will determine the future of JetBlue. (John W. Kelly for KR Consulting, 2008) Internally JetBlue should consider how to reduce expenses. The two key play ers in this particular situation are labor and fuel expenses. Although JetBlue has remained un-unionized, which is arrogant in keeping labor costs down there may be more room for improvement in the budget regarding this matter. I suggest a closer look at counseling and Airport Operations. These two positions are the uttermost(a) from the consumer and have the most employees.The reason behind choosing these particular positions is that change in these areas will not directly affect customer service. These positions need to be examined and see where, if any, the process inefficiencies lie. By doing this the company may be able to cut a few unnecessary positions. Recommendations for best efforts for capping fuel costs are an evaluation of the fuel purchasing agents performance. (John W. Kelly for KR Consulting, 2008) The second recommendation is to take a more aggressive approach like Southwest has and exercising more hedging.Recommended solutions for JetBlues failure to provide ex ceptional customer service would be first to continue to practice and put to use The Customer Bill of Rights and to take a few leads from their competitors. different airlines do not charge their customers for a pillow and blanket set. At all costs they should continue with the perks they provide their customers. They may not serve meals but the snacks and sodas are always free. A big selling point for consumers is baggage fees. JetBlue allows their passengers to have two free bags per flight.That is one more than Southwest. The fact that JetBlue is low cost airline the consumers expect less, i. e. meals and things of the such, so their state of the art entertainment is a welcome surprise for passengers. carrying into action Plan To take action on the operation revenue to expense ratio is to start immediately reviewing the labor functions and initiate an additional review every two years. Starting immediately with employee performance reviews, having flop trained employees is a m ust. Success or failure in this area will be measured in dollars saved.Immediate action considering fuel costs are to utilise a congressional lobbyist to help consume the market by opening up national strategic reserves as well as encouraging change magnitude domestic petroleum exploration and jet fuel production. Success or failure in this area will also be measured in dollars saved. flora Cited Corporation, J. A. (2013). JetBlue Reports Record Fourth Quarter and exuberant Year Revenues. New York PR Newswire. Damaraju, N. L. (2009). JetBlue Airlines leave it Remain Blue? In McGraw-Timmons, stretcher Bus 250s (pp. 13-220). Dallas University of Texas. Farzad, R. , & Bachman, J. (2012). Once High-Flying, JetBlue Returns to Earth. Bloomberg Businessweek , 27-29. JetBlue Airways Corporation. (2012). company Profile JetBlue Airways Corporation. marketline. com. JetBlue Airways Corporation. (2011). Reference for Business. New York referenceforbusiness. com. John W. Kelly for KR Consulting, L. (2008). Shaping Tomorrows Solutions for JetBlue Airways- A strategical Analysis. San Fernando Valley University of La Verne.