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 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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