Trends in the Airline Industry and Its Impact on Jet Blue Companys Strategy - Essay Example

Jet Blue History JetBlue Airways Corporation was formed in August 1998 as a low-fare, low-cost, but high service passenger airline serving select US markets. The company flew point to point service between destinations and serviced a combination of short and long haul markets. JetBlue was founded by David Neeleman, a veteran in the low-fare airline industry, who was backed by a group of private equity firms, led by Weston Presidio. The initial investors in JetBlue provided a total of $175 million in start-up equity capital. JetBlue began flying in February 2000, and in April 2002, the company completed its IPO raising an additional $158 million. The company’s shares performed well since the IPO due to JetBlue’s perceived successful business model and its strong financials results (JetBlue). -Discuss the trends in the U.S. airline industry and how these trends might impact a company’s strategy. Trends in the airline industry and its impact on company’s strategy Jet Blue has been a reputable company in the airline sector within USA since its launch in year 1998 due to being a low cost airline company; the company achieved low operating costs while offering customers a pleasant flying experience. Jet Blue has not only survived but also performed well during difficult industry period i.e. 2000-2003, this period can be deemed as a recession period for the airline sector due to the September 11, 2001 bombings. Jet Blue prepared a different response to these recessionary times in the airline industry to achieve its positive result (Rovenpor & Michel 2009) The company flew new airplanes and its flying experience included reliable on-time performance, comfortable and roomy leather seats, free 24-channel satellite TV service through TV screens installed in the back of each seat, pre-assigned seating, and friendly service by crew members. JetBlue generally chose to fly between densely populated cities and chose airports that were undeserved by existing airline carriers. The company’s markets tended to be large metropolitan areas with high average fares. Once it entered a new market, JetBlue’s comparatively low airfares stimulated new demand from passengers who may otherwise not have flown and often resulted in JetBlue capturing market share from the incumbent carrier (JetBlue, Newsweek 2001 & Rovenpor & Michel 2009) -Discuss Jet Blue’s strategic intent. Jet Blue’s strategic intent JetBlue aims on providing the customers the best possible service at a low cost. These services include point to point route to save the time of the consumers and a high quality consumer service. This high quality consumer service is maintained by their employees who are recruited only after passing tough tests. JetBlue makes sure that their service does not get affected even if they lower their price. The Human Resource Department of JetBlue is known for its strict policy on satisfying its employees and thus these employees work only for the betterment of the company. The avoidance of hub route helps them to gain a huge customer base and the maintenance of high quality also helps the company in achieving this. All these factors together help the company to adhere to their mission statement (JetBlue). Discuss Jet Blue’s financial objectives and whether or not the company has been successful in achieving this objective. Jet Blue’s financial objectives JetBlue’s financial objectives aim towards the profitability of the company and to achieve this target the company has introduced several techniques. Firstly they are trying to introduce more flight routes through which they would be able to grasp a huge consumer base, secondly they are maintaining a strict recruitment policy because of which the services provided by them are not affected, thirdly they are only buying new planes because of which their maintenance cost is low and lastly they are lowering their fare costs so that they can attract an even larger consumer base (Peterson 2004, JetBlue & Rovenpor & Michel 2009) . Flight Routes In early 2003, JetBlue, continued to see opportunities to grow by adding both new markets and new flights to existing destinations. In February, the company announced that five new flights would be added to the West Coast from New York and Washington DC. The company has also added flights between New York City (JFK Airport) and Las Vegas, San Juan, Peurto Rico and Bufallo, New York. While JetBlue had focused on large metropolitan markets to date, it believed that there were also attractive growth opportunities in the mid-sized segment. The company defined these markets destinations with 100 to 600 local passengers per day each way, compared to the much larger markets that the company was serving with its A320s. These smaller markets exhibited ideal characteristics for JetBlue’s business model: they were undeserved by existing airlines and/or displayed high average fares (Peterson 2004, JetBlue & Rovenpor & Michel 2009) Productive people JetBlue has a strategy maintained through which it maintains its recruitment policy. The employees who have great managerial skills with which they are able to retain customers is the primary requirement of the JetBlue recruitment policy. To further make this possible JetBlue has made schemes in this policy in which they check if the employees are able to handle the demanding passengers. Further they have designed such policies in their plan because of which they can attract these talented employees. This provides them to achieve a greater service and thus gives them a competitive advantage (JetBlue, Peterson 2004 & Rovenpor & Michel 2009) Productive Planes The prices of the airplanes are so high that it becomes necessary for JetBlue to make the most of the procurement prices. In achieving so JetBlue has a policy of buying only new planes which seldom need maintenance and these planes also have a warranty. Similarly the revenues generated by the aircrafts are only generated when the planes are flying and thus JetBlue maintains a very high flying time of these planes. Acquisition of the new aircraft by JetBlue is an aim of the company so that it can achieve its objectives. In doing so the company would be able to grasp an airplane which has a greater size for passengers and also has a less fare. This acquisition would help JetBlue in achieving its objectives (JetBlue, Peterson 2004 & Rovenpor & Michel 2009) . Low Costs Companies strive to reduce their costs in order to increase their revenues and hence their profits. There are many things which can help in reducing operating cost for a company e.g. Specialization, mass production, etc, but the main reasons at Jet Blue for achieving low operating costs are; Jet Blue flies’ one type of air craft mainly, this helps in reducing training costs, increases productivity and increases scheduling flexibility. Flight Attendants pursue an aggressive trash-collection policy, which allows JetBlue to turn planes around in about 35 minutes, compared with the hour or more at other airlines, giving JetBlue the opportunity to sell more flights per day, Jet Blue intends to maintain this time saving strategy in the future and indeed might work on it to reduce it further too if possible. To keep air craft operating costs low, Jet Blue purchases new planes only, this helps in reduction of major maintenance costs such as major overhauls which are usually required for plane with an ageing average life. On the other hand the aircrafts purchased have certain time warranty as well. Jet Blue have reduced there cost via availing airports which are not used by other airline companies in the densely populated areas in which they operate, this procedure helps them in availing low landing fees. All the above mentioned factors help to maintain low fares of the airlines and thus help to achieve a competitive advantage of JetBlue over the others (Nesweek 2001 & Rovenpor & Michel 2009) Discuss Jet Blue’s strategic elements of cost, organizational culture, and human resource practices and evaluate whether each elements provides the organization with a competitive advantage. Strategic Elements JetBlue is known for its policy to lower its fares in an attempt to attract customers. JetBlue not only lowers its fares but also maintains its quality so that the customers do not get dissatisfied. Low fares of JetBlue play a very important role in providing a competitive advantage to the company which further helps it to overshadow its competitors in the market (Rovenpor & Michel 2009) Similarly organizational culture of JetBlue also plays an important role in maintaining the competitive advantage of JetBlue. With the organizational culture JetBlue makes sure that its employees are provided with a safe and sound environment in which they are getting all their rights. It ensures that the employees of the company are being taken proper care of. It can be clearly cited when the employees of JetBlue had any problems after 11th September the company officials help them to survive in their hard times. It also follows the value of integrity as the company makes sure that the right thing is done on the right time. Fun is also an important part of the organizational culture so that individuals do not suffer from the psychological problem of stress or boredom. Moreover the strict policies of JetBlue regarding the organizational culture can also be seen in their mission statement (Rovenpor & Michel 2009) The human resource department of JetBlue is known for its strict policies regarding the employment of individuals. The human resource department does not pay the employees of the company well but it is responsible for the perks and benefits given to the employees to cover up for the low salaries given to the customers in comparison to their competitors. The HR department of JetBlue makes sure that its employees are able to cope up with the growing pressure on the airline company so that they are able to know if the employees are competitive enough to face every challenge. The hiring process of the human resource department is a lengthy one through which they chose the best of the individuals for the job. Training has also been a part of the human resource department through which they encourage the employees to be confident. Moreover to further satisfy the employees, JetBlue has also issued shares for its own employees. These shares help the employees to realize that they comprise an important part of the organization and in totality increase their level of performance. With the proper human resource practices the JetBlue is able to achieve competitive advantage in the industry (Bartiroma 2007 & JetBlue & Rovenpor & Michel 2009) Discuss Jet Blue’s strategies for 2008 and beyond and evaluate whether or not Jet Blue will be successful implementing these strategies. Jet Blue has discussed strategies for 2008 through which it is trying to increase its returns. It has decided to decrease its capacity and the operating costs. It basically is targeting to increase its profits and cash returns by selling its airplanes so that the money can be used elsewhere. Similarly they have also decided to delay the delivery of the new Airbus in 2009 so that they can save costs. Moreover the flying time of the airplanes is also aimed to be decreased so that the operating costs are decreased. Some routes of the service are being planned to shut down so that the more effective routes can be emphasized upon. The service is also being expanded to other routes so that it can have increasing returns as the market in other areas is needy of such a service. Similarly the company is also planning to reduce the costs that it incurs when it comes to the increasing price of fuel. The company intends to target customers and increase its fares for the future. Customers will be charged for things like booking flights on the phone, headphones on the flight, seat arrangement, and checking of bags. All these intentions of JetBlue are intended to bring about huge profits to the company so that it can increase its share prices from a record low and avoid a takeover (Rovenpor & Michel 2009). Bibliography JetBlue Airways: A cadre of New Managers Take Control. Janet Rovenpor & Mary Michel. 2009 Jet Blue Top of Form "JetBlue, Upstart Start-Up Airline." NEWSWEEK -AMERICAN EDITION-. 137 (2001): 40. Bottom of Form Top of Form Top of Form Peterson, B. S. (2004). Bluestreak: Inside JetBlue, the upstart that rocked an industry. New York: Portfolio. Bottom of Form Top of Form Bartiromo, M. (2007). JetBlues David Neeleman explains himself. BUSINESS WEEK -NEW YORK-. (4024), 90-90. Bottom of Form Read More