July 15th, 2013

Report: JetBlue Airways: A cadre of new managers takes control

Group N1 - Bryan Ascencio - Carlos Chusan - Sandra Delgado

Current Situation
JetBlue is focused to be the best regional air carrier by providing low fares, enjoyable and safe flight experiences to their passengers; also JetBlue has the newest advanced planes. Although use information technology to keep cots down. It operated Open Skies software to handle electronic ticketing, internet bookings, and revenue management. JetBlue always pays attention to the little details that customers found special. It is partnered with Oasis Day Spa to offer private massages to travelers at JFK terminal 6; a childrens play area, entered a partnership with google maps to offer a tracked live on the airlines web site and via the in seat satellite tv system on its aircraft. Entered a partnership with Carbonfund.org so that passengers could offset the carbon dioxide emissions generated by their flight. JetBlue operate more than 550 flights per day and serve 53 destinations in 21 states, Puerto Rico, and the Caribbean. JetBlue is one of the few airlines in the U.S. that does not have a unionized workforce. Employees are called crewmembers and top management focuses to construct a family-like atmosphere.

Corporate Governance
David Neeleman founder

David Barger president and Coo Governance Thomas Kelly vice president and secretary Ann Rhoades human resources manager

External Environment
Political Rising security rules and obligations.

Economic

Rising jet fuel prices. Rise in Inflation. Start up cost, Buying plans & Employees. High demand for air travel, increase in labor wages. Bad services & lost baggage.

Social

Technological

Uses information technology to keep costs down. Beginning of e-ticketing for sales.

Porters Five Forces

Threat of Substitute Products (HIGH) Threat is high: numerous other airlines Switching costs among other transportation option are high for everything but short distance High existing barriers Threat of New Entrants (LOW) Very high cost or capital required for entry. Brand image and loyalty are important. New airlines must be seen as safe and reliable. Customers are loyal to their brand. Bargaining Power of Buyers (HIGH) Several options available to customers with what airline they choose to fly. Customer can research easily using the internet.

 Bargaining Power of Suppliers ( HIGH) Fuel suppliers have a considerable amount of power. No chance to bargain with suppliers. Competitive Rivalry (HIGH) Numerous competitors like Delta, United and American Airlines. In times of low or moderate industry growth, the competition gets fiercer as each one tries to nab customers from the other in order to keep their capacity utilizations at acceptable levels. The industry is extremely sensitive to economic cycles.

Analysis and Matrixes

SWOT
STRENGTH Strong brand Low operating costs. Airline staff is highly trained and experienced More efficient planes. and reliable WEAKNESS High fuel prices. operating inefficiency Concentration on Middle class. Low fares could mean less money being made, less profits.

Only airline to offer live TV inflight OPPORTUNITIES THREATS fleet of Low costs competitors. from the others

Maintains aircrafts.

new

Offers exceptional training physical resources to company employees. Offers in flight entertainment. Hires the best crew un terms of skills and employees. Has a clear strategy in terms of leadership.

JetBlue reported a high Peg ratio (3.90) compared to industry (0.93). Also reported a declined from 80.4% in 2007 to 78.2% in the first quarter in 2008.

TOWS

STRENGHTS

WEAKNESSES

SO Strategies:

WO Strategies:

OPPORTUNITIES

ST Strategies

WT Strategies:

THREATS

EFE Matrix

Market Share

IFE Matrix

Market Position

SPACE Matrix

Strategic Alternatives
Create aggressive advertisement. Fly internationally; extend flights to major hubs in Europe to start off, then as that takes off, offer flights to Asia, Australia, etc. Build a website where users can look up information about different travel destinations, find hotels, restaurants, hot spots, etc, and book a flight through JetBlue all while comparing.

Strategy Recommendation

Strategy Implementation

Control Strategy

Financial Analysis
Despite its early promise and strong organizational culture, JetBlue did not deliver value to its stockholders over the five year period ending December 31, 2007. None of the major airlines did. Shareholders of another low fare airline, Southwest, lost less than JetBlue's shareholders over the same period. Revenues grew 185 percent, from $998 million in 2003 to $2842 million in 2007. The growth in operating revenues reflected both the increase in revenue passenger miles flown and a modest increase in the average fare. The 2007 common size balance sheets, JetBlue had a strikingly lower percentage of cash to total assets than Southwest. JetBlue's long-term debt comprised 46.2 percent of total assets versus 12.2 percent for Southwest JetBlue maintained strong liquidity through the first quarter of 2008 given by a conservative financial strategy. It listed cash and cash equivalents of $713 million on march 31, 2008, in its 10-Q report. The position was within its target range of 20-25 percent of trailing 12-month revenues. JetBlue had one of the highest liquidity coverage ratios of the major airlines..