Competition Strategies

Competition Strategies



Competition Strategies

JetBlue's fast development approach

We are often notified that before we can run we must discover to walk. That's sound recommendations, especially in business. But trial telling it to David G. Neeleman, the 44-year-old CEO of US allowance airline JetBlue. The airline has relished phenomenal success since its 2000 launch and now offers its passengers luxuries previously considered mutually exclusive to the fee of reduced fares.

The CEO plans for a fivefold increase in the company's fleet by 2011. In comparison, it took Southwest Airlines 27 years to amass 280 planes - 10 less than the allowance JetBlue is aspiring for. When you consider that Neeleman previously spent eight years at Morris Air running a fleet of just 22 planes, some might say that he risks being out of his depth.

Of course, there's not anything incorrect with ambition. But JetBlue ominously seems to be underestimating the cost implications of its longer-term strategies. Business is arguably sometimes being undertook on a whim. By his own admission, Neeleman is easily uninterested and soon distracted, so perhaps this is barely surprising. And portraying on impulse is perhaps second environment to someone who has fathered nine children.

The CEO has had his fingers burned before. JetBlue removed from an ill-fated project in Atlanta just seven months after Neeleman commenced on the false assumption that his airline would have comparable benefit over rivals AirTran and Delta.

But some persons can gladly shrug malfunction aside. To them, it's a “some you win, some you lose” philosophy. Neeleman is apparently of this type and remains undaunted by the Atalanta experience. He intends to press ahead with plans to purchase smaller 100-seat jets to contend in previously untapped markets. Observers acquiesce that numerous opportunities may become accessible yet stay cautious about JetBlue's prospects.

Invest now but yield later

Though coy about the cost paid, it seems that Neeleman has secured a good deal on the Embraer 190s his airline will be using. However, there are promise problems lurking in the future when upkeep costs start to bite. And even without this specter on the horizon, there is a stage of doubt as to if these smaller planes will yield their way. JetBlue needs to appeal sufficient numbers of passengers in less foremost cities in alignment to justify the investment. True to pattern, Neeleman obviously assumes it can be finished - in spite of rivals expressing their doubts.

Are some of these rivals simply envious of JetBlue's meteoric rise? Perhaps, but numerous are battling back by decreasing their own costs and fares. Some are even vying in JetBlue's own backyard - New York's John F. Kennedy International Airport. The influence of this and JetBlue's own frantic development has seen the airline's functioning margin and share cost both slump. In the awaken of the 3.5 per hundred drop (to 13.3 percent) noted in the fourth quarter of 2003, analysts forecast that profits will drop by 7 per hundred this year. Since October 2003, the lofty share cost has fell by a colossal 52 ...