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Jetblue Airways Corporation: Company Analysis Case Study

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Updated: Dec 5th, 2020

JetBlue is a US-based airline that operates among companies that strive to provide customer-friendly service at a relatively low price. Launched by June Morris and David Neeleman in 1984, the airline encountered and addressed various challenges associated with fuel increases, weather conditions, and other environmental factors. This paper focuses on examining JetBlue based on the given case study to provide valuable recommendations to help the company succeed in the future.

Understanding General and Industry Environments

JetBlue’s general environment is determined by a range of economic, social, and geographic factors. The fluctuations in fuel costs, weather conditions, and the public opinion regarding airlines and traveling by air identify profits and losses of the companies operating in the given field. For instance, after the attack on the Pentagon and the World Trade Center in 2001, the revenues of airlines in the US significantly dropped (Damaraju, 2017).

Another characteristic feature of the general environment of JetBlue is that it is highly dependent on adverse weather-related issues. In case ice storms or other events blockade the work of airports and aircraft, customers have difficulties with canceling and changing their flights. At the same time, the mentioned situation causes a lot of delays and, accordingly, customer dissatisfaction. From the economic point of view, customer segmentation allows targeting various groups of clients, offering them the products they need, beginning with the cheapest flights, and ending with artisan dinners on board.

The review of the airline industry in the US demonstrates that there are three key categories, including major, regional, and low-fare airlines. It should be emphasized that the annual revenue of major airlines is over $ 1 billion and they operate according to a –hub-and-spoke system that implies the existence of several airports that are routed through. Currently, there are 18 major airlines in the US, which primarily connect large cities in terms of scheduled flights.

The regional airlines have lower volume routes and carry customers on the “spoke”, having no independent route paradigm. Besides, low-fare companies provide point to point flights and work mainly to connect smaller cities or small and large ones. There are 8 low-cost airlines in the US, each of which has its specific route system and target passengers that seek alternatives to their traveling options. Both business and leisure are targeted by the mentioned companies to cover as many customers as possible.

To better comprehend the airline industry environment, it seems appropriate to employ Porter’s five forces model that focuses on vertical and horizontal competition analysis. In particular, the following aspects may be discussed: the threat of new entrants, the threat of substitute products or services, the threat of established rivals, the bargaining power of customers, and the bargaining power of suppliers. Although the regulatory mechanisms protected the industry, the reconsideration of policies allowed new companies to enter the market.

Nevertheless, the threat of new entrants remains low due to the requirements to have an essential capital, diversified services, as well as robust security and safety methods. The fact that this industry is extensively regulated by the government also makes the market entrance rather challenging.

Speaking of the threat of substitute products or services, one should pay attention that potential and loyal customers select from a variety of traveling variants. Trains, ships, cars, and buses may be noted among the substitutes passengers may prefer. Since aircraft present such critical factors as the speed of achieving the target destination, which cannot be offered by no other means of transportation, the mentioned threat may be assessed as moderate. On the contrary, the threat of established rivals in the industry is high as all the airlines develop constantly to come up with innovative solutions. More to the point, these companies compete for passengers, attractive airport spaces, as well as acquisitions and mergers.

The bargaining power of customers is high and increases steadily: more and more people discover new places and develop their businesses. The global organizations work through airlines to deliver their products to other countries and expand further. Low-cost airlines seem to be especially important for clients who want fare-wise flights. As for the bargaining power of suppliers, it should be stressed that they are controlled by a few airlines, which makes it high and concentrated. Embraer, Boeing, and Airbus are the key suppliers that may set high prices due to a lack of differentiation in the industry, while airlines may be involved in price wars.

JetBlue’s choice of strategy is affected by such forces as the bargaining power of customers, the bargaining power of suppliers, and the threat of established rivals. The given airline strives to select the strategies that would reach underserved customers and fulfill this niche, thus addressing the last threat. In other words, it focuses on customers that cannot handle high prices yet want to travel. JetBlue sets its pricing strategies following the bargaining power of suppliers. The recent approach shows that it renovated the system of fare options. The company understands that its aircraft should be environmentally-friendly by producing fewer gas emissions and consuming less fuel, which is affected by the bargaining power of suppliers.

The case study analysis illustrates that JetBlue possesses some relevant internal resources and assets that are used to create a competitive advantage. First, the core resource of the company is its codesharing and interline agreements with other airlines instead of merging that would fully integrate them. This provides JetBlue with independence regarding almost all issues, including decision-making and implementation processes.

Second, the culture created by this airline values customers provides loyalty bonuses, and reflects that it is committed to passengers. Integrity, passion, safety, and continuous development are the core cultural assists of the company. Besides, there is JetBlue Technology Ventures LLC that focuses on modern technologies and invests in their research and introduction. For example, paperless cockpits, onboard entertainment opportunities, and Wi-Fi were implemented.

Exploring JetBlue’s Business-Level and Corporate-Level Strategies

Business-level strategies are associated with gaining customer interest and positioning products. By comparing itself with competitors, JetBlue identifies how to operate in the airline industry and raise operational profits. To incorporate business-level strategies, the company combines cost-leadership and differentiation. JetBlue uses a differentiation strategy to reach its customers and win their attention, proposing a customer-first attitude.

In particular, it minimized the time aircraft spent on the ground and offered no food to clean the cabin more rapidly. Another strategy that allowed the company to thrive is related to purchasing new aircraft with more seats, space for legs, and roomy leather seats. The mentioned strategies allow the company to stay competitive and aware of the recent market trends. In its turn, modest pricing seems to be another critical business-level issue that is beneficial to keep customers dedicated. Despite the growing fuel costs, JetBlue manages to preserve its prices through cabin restyling, credit cards, Mint services, et cetera.

The corporate-level strategies are aimed at exploring the company’s performance at a higher level. In other words, the corporate level refers to connecting many stakeholders, shareholders, as well as the board of directors while resolving one or another situation. Strategic management in JetBlue is regarded as the most important tool for determining and implementing the corporate-level strategies. The entire history along with the current operation is based on strategic decisions and innovative suggestions, which contributed to the company’s survival from the severest conditions.

For example, when the ice storm hit the aircraft operation on Valentine’s Day in 2007 and paralyzed the whole company, Neeleman almost lost his job. To facilitate the storm consequences, he designed a Customer Bill of Rights that declared reimbursement of costs to passengers and rewards. Even though it caused additional costs for the company, its brand and customer perceived value were preserved as the management responded immediately and appropriately.

The integrity of JetBlue’s corporate-level strategies may be observed through the given case study. Although there were three CEOs, their efforts were directed at the same goals of creating a robust company portfolio and enhancing its efficiency. It seems that all CEOs understood that the development of distinctive core competencies or competitive advantages is essential for creating a successful company.

Key competencies are unique actions or abilities that the company uses to offer services that are better than those of another company. Examples of this corporate-level strategy may include the acquisition of economic sources at lower costs than other companies and original services that are not duplicated by other airlines. The internal relationships of JetBlue also seem to be elaborated as, for example, innovations produced by its IT and technical department are often integrated into the company’s operation and supported by PR, customer support service, and directly by the crew members.

The enhancement of efficiency refers to the growth strategy that includes the introduction of new products or the addition of new functions to the existing services. Sometimes, a small company may be forced to modify or increase its product line to compete with rivals as otherwise, customers may start using new technology from a competitive company. In this case, JetBlue constantly adds new features and discovers innovative technologies since they could hardly meet consumer demand and stay in business for a long period. Perhaps, the most successful innovation of recent years is that JetBlue decided to initiate a fleet modernization program by 2020-2022. The company announced that it would purchase Airbus A 321 aircraft as more fuel-efficient variants of aircraft.

The interline agreements compose one more strategy at the corporate level. While other airlines create alliances to act in cooperation, JetBlue has its path to connecting various destinations and allowing customers to plan their trips. Alliances are largely controlled by major airlines, while the given company has independence from the common rules even though it has to comply with the industry’s common regulations. It is representative that JetBlue signed interline agreements with Etihad and Azul Brazilian Airlines. The collaboration with these companies is an important step towards covering more cities.

The competitive advantage of the given company consists of such components as low-cost services, customer-first attitude, corporate culture, interline agreements, and technology use. JetBlue has a dedicated corporate culture that always strives to ensure that customers have the best service possible regardless of weather conditions and economic fluctuations. This is also incorporated in the customer-first approach that implies considering customer perspective while making solutions.

The utilization of technology seems to be an integral part of the company’s competitive advantage as it contributes to its long-term sustainability. E-tickets, online registrations, and onboard TV channels were first adopted by JetBlue, and they remain its distinctive features. In combination, the identified components create strong brand awareness and promote further company development.

To claim that a company’s competitive advantage is sustainable, it is possible to evaluate it concerning such criteria as uniqueness, substitutability, evaluability, and imitation costs. From the case study, it is evident that JetBlue’s competitive advantage is valuable, relatively unique, costly to imitate, and substitutable. Thus, uniqueness and substitutability issues should be adjusted to improve the competitive advantage in the given field.

It should be stressed that the current competitive advantage of JetBlue is insufficient given the competition in the US aviation market. It should be noted that other low-cost, low-fare airlines also elaborate on their technical equipment and customer service to succeed. Therefore, JetBlue needs to advance its strategies by anticipating customer needs and expectations and responding accordingly.

Constructing Recommendations

In the view of the analysis provided earlier in this paper, it is significant to formulate pertinent recommendations. There is a range of development options that are likely to help JetBlue to succeed and become even more valued by passengers. One should state that the use of the hybrid management approach based on differentiation and low costs seems to be relevant and effective to continue operating in terms of the organization’s mission. It will allow customers to select this airline for their trips and enjoy fights as customer service is comprehensive. In this connection, the company should maintain its current approach to customers and leading the business.

Based on the opportunity of the global expansion and the recent steps taken towards the cooperation with other airlines, one may recommend signing more interline and codesharing agreements. For example, the expansion to South America and the Eastern countries such as India, Vietnam, Singapore, and others seems to be feasible and beneficial. Due to the current successes in creating a specific system of routes, the company’s leadership and management are well aware of how to expand to new markets. More to the point, the increase in the number of flying destinations would provide passengers with the opportunity to reach more places.

Along with the expansion, it is critical to develop value-added service and consider fuel hedging. It may be challenging to maintain high-quality customer service when fuel prices rise significantly, and creative solutions are essential. In particular, one should recommend lowering operational costs by focusing on innovative technologies. Taking into account that the company has its center for designing and testing new strategies related to technology, it should invest more in this department.

At the same time, technology should be assigned a top priority to advance such areas as e-business and m-business, which can be used to connect to the customers via the Internet. The online systems of JetBlue involve check-in services, Facebook application, and TrueBlue points that are given for fights. However, the modern world dictates its rules to the field of air traveling, stating that customers always want new offers, discounts, and actions.

The case review shows that little attention is paid by the company to marketing issues. Therefore, the increase in national and global marketing can be recommended as one of the options to notify customers of upcoming events and advantageous deals. The use of social media seems to be the best solution to market JetBlue’s ideas among all the target populations, especially those who seek fare-conscious flights. Numerous factors would identify the company’s performance in the future, yet the discussed recommendations are likely to assist in responding properly to the social and economic issues, both general and the industry-related ones.

Within 3-5 years, the identified recommendations should be implemented and evaluated accordingly. The timetable should be designed to ensure that all the suggestions are implemented in time (Table 1). It seems essential to pinpoint the fact that the identification of milestones and specific actions is critical for a company that strives to achieve sustainability in a long-term period. Also, JetBlue’s organizational culture should emphasize the role of continuous evaluation so that its strategies may be improved timely.

Years Action / Task
1-3 Vision. Research the market and competitors to create awareness of the trends, threats, and opportunities
3 Identify priorities and goals, develop a plan
4 Introduce global expansion and technology advancements in various sectors of the company in terms of pilot change experiments
5 Improve and implement all the recommendations and ensure ongoing evaluation

Table 1. A timetable of recommendations for JetBlue.

Speaking of the resources that are required to use the abovementioned recommendations, one should note JetBlue Technology Ventures that is the main technological basis of the company. Even though it may seem that the initial simple model of success is complicated by a range of supplemental services, they do not overload or worsen it. Indeed, the more there the factors that make the airline diverse, the more the customers’ loyalty is likely to increase.

Strong management and leadership is the second resource that is responsible for sustainability in such areas as climate affairs, tourism, operations, and reporting. The third source of the company’s development is associated with partnerships, investments, and donations to support the community and sustain a positive image.

Conclusion

To conclude, it should be emphasized that JetBlue is the organization that identifies itself as a low-cost and low-fare airline that seeks to focus on underserved customers. The majority of passengers consist of people who want to travel for leisure and business purposes by comfortable flights at relatively low prices, which is regarded by JetBlue as its mission. It was found that to satisfy the needs of its customers, the company employs differentiation and leadership strategies that are driven by the competition in the industry, suppliers, and customers’ attitudes.

Among the key specific features of JetBlue, there are interline agreements, new aircraft, and e-business implementation. Based on the analysis of the case study, it was recommended to continue developing technological innovations, reducing operational costs, and applying a customer-centered approach.

Reference

Damaraju, N. L. (2017). Case 28. JetBlue airways corporation: Getting over the “blues”?.

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