JETBLUE CASE STUDY

JetBlue Case Study



JetBlue Case Study

Introduction

JetBlue provides one-class service with routes to and from five key destinations. The company has a fleet of around 150 aircraft; the majority of which are Airbus A320s. JetBlue is known for having followed in the footsteps of South West and eventually leaving it behind in the industry. The company has a reputation for being a classic example of a profitably functioning low-cost airline.

SWOT Analysis

Strengths

Like many of its peers, JetBlue saw the virtue during these tight economic times in charging fees for extras on its flights. Adding a fees for its Even More Legroom optional upgrade and a second checked bag contributed heavily to boosting its "other revenues" category. The New York-based carrier is the largest airline at New York's JFK International Airport -- the US's biggest travel market. JetBlue's strategy has been to identify routes with high average fares and beat the competition on price, as well as to distinguish itself with service offerings such as TV and radio programming.

Weaknesses

A major weaknesses of JetBlue is that of flight delays. The insistence on low costs causes the company to function on lean management principles, creating a scenario in which there is no margin for error. The company needs to maximize returns on investment in order to remain profitable.

Opportunities

Pricing systems vary considerably among airlines. Complicated computerized pricing schemes that attempt to maximize the revenue for a particular flight by offering different prices at different times, depending on how quickly a flight is filling. In addition to selling tickets individually, airlines may sell blocks of discounted tickets to wholesalers, such as Hotwire and Priceline (Griffin, 2007). JetBlue can run aggressive loyalty programs in the form of mileage or point accumulation systems (frequent flyer programs) that entitle passengers to free tickets or upgraded service.

Threats

Record-high fuel prices paired with a sharp drop in travel demand and an economic downturn have caused a bumpy ride for the airline industry. JetBlue and its rival/role model Southwest have fared better in the recessionary climate as budget-conscious passengers seek cheaper fares (Pride, Hughes, & Kapoor, 2008). Still, to protect itself JetBlue deferred delivery of 21 A320s -- originally scheduled to join the JetBlue fleet between 2009 and 2011 -- until 2014 and 2015. It's also deferring delivery of 10 E190s until 2017.

Porter's Five Forces Analysis

Threat Of The Entry Of New Competitors

The threat of the entry of new competitors is significantly low under the current condition of the industry. This is because the recent recession has raised entry barriers and a significant volume of funds is required as start-up capital. The fact that costs for small airlines are fixed helps them engage in efficient operations. The scenario is less rewarding for larger new entrants.

Intensity Of Competitive Rivalry

The competitive rivalry in the industry is fairly intense. The US airling industry alone constitutes over 500 companies. These include passenger carriers as well as express delivery companies. The trends in the industry show a high degree of concentration (Hoyer & Macinnis, ...