JetBlue Corporate History - Research Paper Example

Background of JetBlue Airways (Nasdaq:JBLU) JetBlue Airways was founded by David Neeleman towards the latter part of the 90’s. Two months after, the new company which was initially known as “New Air” ordered 75 new A320 aircraft from Airbus Industrie and even arranged to lease additional aircraft for their operations. The newcomer in the business immediately made waves by making satellite television available for every seat. About 75 take off and landing slots have also been given by the John F. Kennedy (JFK) International Airport and before the turn of the century the company received its first unit of the Airbus 320. Finally, during the early part of the first quarter of year 2000, the company was able to gain business eligibility by completing all the necessary documentations necessary for its operations. Shortly thereafter, the first flight of JetBlue Airways took to the skies. The company then proceeded to add more routes as it expands its business operations. Before the year 2000 ended, the company reached a major milestone by reaching a million customers serviced while at the same time earning $ 100 million revenue for the year. All these have been achieved prior to the company’s first anniversary and shortly afterwards the company has flown about 2 million customers (JetBlue Corporate History 2011). The company further expanded its operations as the delivery of its Airbus units continues giving the company about 20 units of operational crafts. The company’s massive fleet continues to grow when in 2003 the company was able to receive its 50th Airbus. As such, a new hangar complex was needed and acquired at JFK International. The company grew rapidly and operations expanded extensively necessitating the additional order of 65 more airbuses and 100 more Embraer 190 aircrafts. In flight entertainment was improved further the following year and by the early half of 2004 the company already has on its laurels the honor of flying 25 million passengers. In just five years, the company was able to secure its 71st airbus and was subsequently awarded the prestigious Diamond Certificate of Excellence Award from the Federal Aviation Agency (FAA). Also, JetBlue was able to receive its Embraer 190 aircraft, the first airline to have such a unit. Furthermore, the company was able to acquire a bigger hangar and is also able to secure a partnership with American Express to integrate credit card payments with their operations. The company further improved its in house entertainment and was even able to pioneer in-flight email and even instant messaging services. In 2008, JetBlue even became the official airline of the Red Sox and the following year even became the official airline partner of the New York Jets. All the while, the company is introducing innovations of the jet liner service and is also expanding its routes. With all these achievements and despite breaching the top 50 in just half a decade, JetBlue was not yet a member of the International Air Transport Association (IATA) . After a decade, JetBlue established its office in the bustling city of New York and was officially included into the folds of the IATA. Brief Biography of Robin Hayes – EVP, Chief Commercial Officer Mr. Robin Hayes joined JetBlue last May 2008. He was appointed to the commercial side as the Chief Commercial Officer handling the airline’s marketing strategy including sales and revenues as well as the network of the airline. His appointment gave him an Executive Vice President position, a title he also had before he left his previous company (JetBlue Airways, Press Release May 2008). Prior to joining the JetBlue, Mr. Robin Hayes was with British Airways also as an EVP. JetBlue is banking on the experience Mr. Hayes had when he was with British Airways to help their company surge forward faster. No less than JetBlue’s CEO, Mr. Dave Barger, highlighted the vast capabilities of Mr. Hayes emphasizing on the years that he had in the industry as well as the knowledge that he amassed from his exposure to different facets of the business. Furthermore, he has really been around long enough having stayed with British Airways for almost two decades. Initially, his assignment was at the frontline taking care of customers in Scotland, particularly in Glosgow. He was able to climb the rungs of the corporate ladder handling various positions with heavier responsibilities (Businessweek Executive Profile 2011). These positions were also not limited to the frontlines as he also had extensive experience for the operations itself making him the perfect person for the job as he is more than qualified to help the company bring its strategies into actions and of course results. Analysis of the Interview JetBlue has positioned itself as an innovator in the US airline industry. An interview with Mr. Hayes revealed the importance of innovation for the company. In fact, the company has recently concluded a successful program which is the $599 jet all you can promo. This was meant to entice travelers and ensure that there are respectable utilization of seat capacity which drastically diminishes during the lean months of September and October. According to Mr. Hayes, various innovations are also in the pipeline such as the “trueblue” which is an innovation from the traditional miles accumulation. These programs were meant to give customers an easier way to redeem their flight rewards. Innovation has really been a very important strategy for the company. Basically, this is a very potent tool to ensure long term profitability and success especially in a tough industry such as the airline industry. Likewise, this has enabled JetBlue to gain entry hence enabling itself to guard against possible collusion of established carriers that may raise prices in the event of a new player’s entry (Orcholski 2010). As the EVP/Chief Customer Officer, Mr. Hayes is also in charge of ensuring that the customers’ part of the innovation equation is highlighted significantly. Hence, JetBlue ensures that an adequate number of customers are surveyed so that they are able to get a fairly adequate assessment of their services. These answers are crucial for their further development efforts since these dictate the needs and want of the market ensuring them that their strategies and innovations are truly appreciated by the customers they are targeting. More so, JetBlue moves further with the survey clustering respondents taking into considerations, their flights and of course the customers themselves. However, the company also recognizes that these customers will only respond well and truly appreciate their service if they are able to have the necessary manpower complement to deliver such excellent service to the customers. Hence, JetBlue takes the survey further to include their crew members. This is to ensure that they are motivated enough to give the quality of service being sold by the airline. With the success of the company, JetBlue has been able to keep its employees motivated since they are able to take pride in what they are doing as well as the company that they are working for. Furthermore, it is important to survey the employees since the working relationship that they have with each other is also key to keeping them motivated (Sirota, Mischkind, and Meltzer 2006). Still, there are the unavoidable complaints when flights get delayed due to uncontrollable factors. However, according to Mr. Hayes, probably the craziest complaint that they got was about customers that are undressing on board but he said that they have already made some steps to curtail such behaviors. As the interview progresses, the topic shifted to the problems facing the airline industry as a whole. Basically, the most pressing threat is the price of fuel. This, however, is frustratingly uncontrollable and is so hard to guard against. However, such is the fact for the whole industry and JetBlue and all the other airlines have no choice but to adapt to such an adverse development. Oil has now breached the $100/barrel mark and is threatening the recovery of the global economy. This was pushed up by speculations which have been fuelled by concerns on supply (Oil Market Report, OPEC 2011). Furthermore, airlines are also pressed with overcapacity. Problems arise when too many seats are empty since these are the bread and butter of the airline. Having respectable seat capacity utilization is critical for the profitability of these airliners. According to Mr. Hayes, aside from these challenges, JetBlue faces a very important and huge change as they shift to a new system. Through this modification, the airline hopes to improve by moving away from the traditional airport departure and reservation set-up to expedite the services they provide. Likewise, the culture remains an important component of the company’s success formula. Hence, although may be initially viewed as a challenge, Mr. Hayes looks at the task of preserving and even raising the level of their culture as a commitment. Thus, JetBlue takes it upon itself to make the improvement on their culture as a commitment to further serve their customers and in turn hopefully will ensure the long term viability of the firm. This is a very important aspect of strategy. Peters and Waterman (1982) stresses that the harmony of the culture must be integrated and not disturbed by the strategies that the company will pursue since this impacts heavily on the efficiency of the organisation. As the Chief Commercial Officer, Mr. Hayes is faced with the very daunting challenge of empty seats. This is basically an industry wide challenge and may very well be a business reality that airliners must live with. The statistics are very daunting though as estimates point to about an empty seat for about five to seven seats in each flight. However, Mr. Hayes takes this in stride since that is the very reason for their promotions since these enable them to entice travelers to take JetBlue especially on the lean season. Likewise, he further stated that this is really the reality that the industry faces since there will always be spare capacities and that there are times when passenger traffic is really low that having even a 50 percent capacity utilization can already be considered as a good flight. Diagnosis of the Business JetBlue Airways has been banking on innovation. It was instrumental in its inception and has been a part of its first decade of existence. Likewise, the airline offers direct flights that enabling lower cost air travel. This is the model being used by another successful airliner, Southwest airlines. The competitor airline focuses on routes that have a demand for at least a two way flight enabling it to offer lower prices to customers. Hence, Southwest uses only a fleet of 737’s which can sit about 120 to 150 passengers (Heskett 1994). JetBlue meanwhile ensured that it offers something more that no frills flying. Hence, it boldly announced the provision of satellite TV for every seat. This has effectively made flying more entertaining and has helped the then rookie company pierce through the competitive airline industry. The company has really banked on many more innovations and has effectively increased the number of its destinations. Through its first decade of existence, the company continuously introduced innovations to capture the interests of customers and make sure that the company is able to sustaine operations. However, JetBlue, like all the other industry players are faced with the problem of seat capacity. According to Mr. Hayes himself, there are times wherein having a 50% capacity utilization can be considered enough especially on the lean season. This problem, however, was alleviated by the “jet all you can” promo of the company showcasing a classic display of company ingenuity and innovation. In fact, this has also carried the industry after the passage of the deregulation law for the industry. This has paved the way for the entry of new players and the improvement of competition which effectively pulled prices downwards. Likewise, the entry of low cost and budget carriers further added to the improvement of the industry. Recent developments in the airline industry have been a growing concern for most players. After the terrorist attack on September 11, 2001, the airline industry as a whole experienced considerable losses. However, despite the grim picture of the airline industry, the then newcomer JetBlue Airways continually expanded its operations enabling it to further grew its operations. However, the volatile fuel prices have really ate up at the profit margins of these carriers and even Mr. Hayes believe that this is a fact that every airline must face up to. Since 2006, fuel costs have become the biggest expense for airliners. For the first time, it has edged manpower cost on the top of these companies’ costs (Global Airline Industry Program, MIT). Aside from the innovations, JetBlue ensures that they have the manpower ready to service its customers. So far, despite the challenges facing the airline industry as a whole, the company has yet to experience severe problems in labor which have plagued most of the big airliners. It seems that the companies has been able to keep their employees contented and are able to entice them to give excellent customer service. As mentioned by Mr. Hayes, they go a step further with their surveys by including their crew members. This is has proven effective for the company to ensure that it can successfully execute its strategies. This has also been instrumental in making JetBlue an airline that can offer valuem, service and style all at the same time. This is a very important distinction from other low cost providers. Probably, among the biggest setbacks of air travel is being cramped on small spaces. JetBlue has effectively solved this problem by offering options to customers to have seats with more leg rooms (JetBlue Airways, Press Release May 2008). However, JetBlue is not without problems. A couple of years back, the company’s board of directors had to send their CEO, which was also the founder, Mr. David Neeleman due to flight cancellations. This was due to weather problems but the severity of the incidents has considerably dented the previously pristine image of the company (Schmall 2008). This is a very considerable threat since reputation is key in this business. All the work that the company has and will put in to innovation will only go to waste if the company is unable to rectify such an image. Likewise, if this problem persists, the airline can lose the trust and confidence of customers that can greatly undermine their business. Already, JetBlue is faced with problems in seat capacities and escalating fuel prices. A negative perception on the company’s image will exacerbate the situation. Likewise, the economic situation in the United States remains fragile. The IMF (2010) reports that the economy of the United States is still reeling from the effects of the recession and systemic problems continue to weight down on recovery. However, it is encouraging to note that the industry as a whole did not really suffer much during the recession. The capacities have somehow held but have transferred to the low cost providers, among them was JetBlue (Centre for Asia Pacific Aviation, 2010). Looking at the graph, the low cost carriers have really helped the American people and the industry by offering value based alternatives. Considering the severity of the economic downturn, this is a huge success for JetBlue and the other budget carriers since there seem to have been a strong shift from the market towards them after the recession. Recommendations The company seemed to have been successful in its first decade. Although a budget carrier, JetBlue has diverted from the no frills strategy of Southwest airlines by offering some form of entertainment and added comfort previously unavailable to value based airlines. Also, based on the company’s ten year track record and the interview with the new EVP/Chief Commercial Officer Robin Hayes, the company has been successful with such bold innovations through the help of its manpower. It is such a bright contrast from the big players who are having labor disputes and has had to lay off their people during the recession. Hence, the company’s manpower continuously feels secured with their company. As mentioned, they seem to be proud with what they do, have good relations with their coworkers and are proud of their company (Sirota, Mischkind, and Meltzer 2006). Clearly, there are threats that are hard to guard against such as the fuel price which is now over $100/b (Oil Market Report, OPEC 2011). Likewise, severe weather disturbances will continue to delay flights. However, it is quite clear that it is the employees of the company that has greatly helped made customers feel the innovation and the marketing strategy concocted by JetBlue. Hence, it is strongly recommended that the company explore the integration of Strategic Human Resources Management into their system. This will enable the company to hire and develop the manpower necessary for the execution of their strategies by calibrating HR strategies with the overall business strategy of the company. This strong integration will enable the employees to have a better grasp of the company’s strategies equipping them with the knowledge necessary to make their respective duties and responsibilities congruent with the company’s strategy. Finally, it is recommended to Mr. Hayes that the company ought to formalize this relationship through the adaptation of the Balanced Scorecard. Through it, Kaplan and Norton (2005) teaches that having improved the manpower gives the company competent employees that can handle their business processes effectively. Thus, this will be instrumental when the company delivers its services to the customers as the improved processes and the people behind it are able to service their needs. This will hopefully translate to improvements in the company’s bottomline ensuring that JetBlue remains profitable and soaring in the sky. Works cited Businessweek Executive Profile 2011. Available at: http://investing.businessweek.com/research/stocks/people/person.asp?personId=44431670&ticker=JBLU:US. Centre for Asia Pacific Aviation, 2010 capacity did not decline much for US airline industry in recession. Available at: http://www.centreforaviation.com/news/2010/03/09/capacity-did-not-decline-much-for-us-airline-industry-in-recession/page1. Does vertical integration affect firm performance? Evidence from the airline industry Available at: http://weber.ucsd.edu/~sjanusze/www/FL_VIandPerformance.pdf. Global Airline Industry Program Massachusetts Institute of Technology, USA. Available at: http://web.mit.edu/airlines/analysis/analysis_airline_industry.html. Heskett, JL 1994 “Southwest Airlines”: 1993 (Abridged Update), Harvard Business School Case, 1994. IMF World Economic Outlook, April 2010. Available at: http://www.imf.org/external/pubs/ft/weo/2010/01/. JetBlue Airways, Press Releases May 1, 2008. Available at: http://investor.jetblue.com/phoenix.zhtml?c=131045&p=irol-newsArticle&ID=1138586&highlight. JetBlue Corporate History 2011. Available at: http://www.jetblue.com/about/ourcompany/history.asp. Kaplan, R &Norton, D 2005, Balanced Scorecard: Measures that Drive Performance, 2005. Available at: http://hbr.org/product/balanced-scorecard-measures-that-drive-performance/an/R0507Q-PDF-ENG. Neufville, R 2007 “Current Status of the Airport/Airline Industry”, Airport System Planning and Design, MIT. Available at:http://ardent.mit.edu/airports/ASP_current_lectures/ASP%2007/Current%20Status06.pdf. Oil Market Report, March 2011, Organisation of Petroleum Exporting Countries (OPEC). Available at: http://www.opec.org/opec_web/static_files_project/media/downloads/publications/MOMR_March_2011.pdf. Orcholski, T 2010, Identifying collusion in the US airline industry, UCLA, November 22, 2010. Available at: http://orcholst.bol.ucla.edu/documents/airline_collusion_11222010.pdf. Peters and Waterman, 1982 “In search of excellence”, London: Harper Collins Business Schmall, E 2008 “Next for David Neeleman: Jet Brazil?” Forbes.Com 2008 Sirota, D, Mischkind, L and Meltzer, M 2006; “Why your employees are losing Motivation”, Harvard Business School. Available at: http://hbswk.hbs.edu/archive/5289.html. Read More