Jetblue

 Jetblue Article

Ideal Report pertaining to JetBlue Air passage

Harkness Talking to

Innovation through Collaboration

Rosanna Smart Alisher Saydalikhodjayev Sayre Craig April 13, 2007

Table of Items

Executive Synopsis ……………………………………………….. 3 Company Record …………………………………. ……………….. 4 Competitive Analysis ………………………………………………7 Internal Competition …………………………………………………………. 8 Entry ………………………………………………………………………… 9 Substitutes and Suits …………………………………….. eleven Supplier Electricity ………………………………………………………….. doze Buyer Power …………………………………………………............... 13

Financial Evaluation …………………………………………………. 13 SWOT Examination ………………………………………………………23 Ideal Issues and Recommendations ………………….. 25 Referrals ……………………………………………………………30 � � � �

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Executive Synopsis

From� its� initial� flight� in� February� 2000, � JetBlue� emerged� into� the� heavily� competitive� airline� industry� as� the� little� airline� that� can. � While� legacy� carriers� declared� bankruptcy, � JetBlue� trounced its competition by offering low‐cost,  customer‐focused service.  Under the direction of� the energetic David Neeleman,  JetBlue became a major player in the airline industry.  Operating� domestic� flights� on� a� point‐to‐point� program, � JetBlue� primarily� manages� East‐West� and� Northeast‐Southeast� paths. � While� this� route� structure� initially� proved� profitable� for� the� company,  rising costs and heated price competition are currently threatening JetBlue's market� share.  The company's stock price has dropped drastically since reaching a high of over $30 in� 2004. � Currently� priced� at� less� than� half� its� 52‐week� high, � JetBlue� must� take� serious� strategic� action in order to reinvigorate its business. � � After working with low‐fare carrier Southwest,  a touch‐screen airline reservation company,  and� a� small� upstart� airline� in� Canada, � David� Neeleman� transformed� his� brainchild, � JetBlue, � into� reality. � Neeleman� based� his� airline� around� five� core� values: � safety, � caring, � fun, � integrity, � and� passion.  With the pledge to " bring humanity back to air travel, ” Neeleman wanted his business� to follow altruistic‐sounding values in order to make air travel a more pleasant experience for� customers and employees.  However,  at some point in JetBlue's operating history,  the emphasis� on customer satisfaction came at the cost of profits. � � It is very challenging for a company to remain successful in the airline industry.  A company can� achieve� profits� only� by� maintaining� low� costs� in� what� has� become� an� extremely� price� competitive� domestic� industry. � High� internal� rivalry� and� buyer� power� combine� to� drive� ticket� prices� down� to� marginally� profitable� levels. � At� the� same� period, � airlines� are� subject� to� ever‐ increasing fuel and aircraft maintenance costs.  Part of JetBlue's financial struggle in past years� results� from� the� company's� lack� of� a� sustainable� strategy� to� manage� these� expenses. � The� company� originally� had� lower� costs� than� industry� average� due� to� its� young� airplane, � young�

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aircraft� crew, � and� single‐type� aircraft� fleet. � Nevertheless , � as� their� operating� aircraft� and� crewmembers age,  JetBlue cannot maintain its previous cost advantage. � JetBlue recognizes the need for change.  Under new CEO David Barger,  the airline has recently� entered� into� a� number� of� new� ventures. � Since� 2007, � JetBlue� has� established� an� industry‐first� strategic� partnership� with� Aer� Lingus, � instituted� refundable� fares, � and� sold� a� 19%� stake� in� JetBlue� to� Lufthansa. � With� the� Open� Air� Act� bridging� the� skies� between� Europe� and� the� US, � these� ventures� offer� future� avenues� for� strategic� alliances. � However , � expansion� plans� will� not� solve the fundamental operating problems that JetBlue experiences,  and this is the area where� Harkness Consulting will focus its attention. �  � In� this� report, � Harkness� Consulting�...

References: http://www.jetblue.com�  http://www.factiva.com� 3 http://www.boeing.com� 4 http://www.faa.gov� 5 http://www.eclipseaviation.com� 6 http://world.honda.com/HondaJet/NBAA2006/video/PressConference/� 7 http://www.popularmechanics.com/science/air_space/4216980.html� 8 http://www.barclaystransport.com/g550.html� 9 Joe Sharkey,  " Major Change Foreseen in Air Travel, ” New York Times,  October 7,  2003. � 10 http://www.airlines.org/economics/fleet/� 11 JPMorgan Aviation and Transportation Conference,  18 March 2008. � 12 " Q4 2007 JetBlue Airways Earnings Conference Call”,  29 January 2008. � 13 Southwest Airlines,  10‐K Filing for 2007. � 14 http://moneycentral.msn.com/investor/invsub/analyst/recomnd.asp?symbol=JBLU� 15 http:// finance. bing. com� 16 http://www.reuters.com�

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http://www.reuters.com�  JetBlue Airways 10‐K Filing for 2007. � 19 " Airlines lighten up to cut fuel costs, ” Thomson Financial News,  28 March 2008. � � 20 David Swierenga,  former Air Transport Association of America economist and president of aviation� consulting company AeroEcon.  9 May 2006. � 21 Bureau of Transportation Statistics " Airline Data and Statistics, ” Research and Innovative Technology� Administration,  2007. �

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