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Crafting & Executing Strategy Sloan
Introduction
Since its conception in 1999, Jet Blue Airways has emerged as one of the airline industry’s
leaders as a “low cost” carrier with high levels of customer service. Jet Blue currently is the
nation’s 6th largest airline operating 650 flights daily (www.jetblue.com). This paper will
examine and discuss the key strategic factors regarding Jet Blue’s success that will reach and
extend far beyond what the text book offers, (to stay updated with the latest and current events
with Jet Blue and the ever-changing airline industry) that will focus on the following: The trends
in the U.S. airline industry, Jet Blue’s strategic intent, Jet Blue’s financial objectives, Jet Blue’s
strategic elements of cost organizational culture, and human resource practices and Jet Blue’s
strategies for 2008 and beyond to sustaining their competitive advantage, while anticipating the
For “low-cost” airlines like JetBlue to remain successful they must stay ahead of the curve,
which simply means positioning themselves upon capitalizing on the current and future market
trends and conditions and in the “roller-coaster” airlines industry; it’s the early bird that wins.
• Constantly revising and creating new route systems to maximize profit optimization.
• Focusing on “mid-size communities” versus the major metropolitan areas that are having
substantial growth due to key industry and manufacturing investments by major foreign
companies like Mercedes & Kia in Alabama, BMW in South Carolina and etc…
Crafting & Executing Strategy Sloan
• Gorilla Marketing “Key business drivers”, such as unlimited snacks and candy, offering
the most leg room, free TV & digital entertainment, exceptional customer service in
JetBlue’s case
• Focusing on the “business traveler” allows low-cost carriers like JetBlue and AirTran, to
generate the most revenue & profit by promoting “value-added” complimentary services.
• Partnering with hotels and rental car companies with special promotions and incentives.
• Catering to the “last second flyer” with strategic partnerships with third-party online
booking sites like Expedia, Hotwire, Orbitz and Travelocity to secure last minute sales.
JetBlue has succeeded as both a low-cost and a high quality carrier. Traditionally, such a
strategy would be considered “stuck in the middle". However, JetBlue’s low cost structure
results from operating one type of aircraft, offering one class of service, and supporting a
ticketless reservation system (Carter, 2002). A primary operating challenge for JetBlue moving
forward will be to continue growing while maintaining both high quality service and its
Offering a single type of aircraft model increases the ROI & efficiency of operations. Major
benefits to operating one type of aircraft include lower costs through simplified maintenance,
reduced spare parts inventory, more efficient scheduling, lower training costs and reduced
aircraft acquisition costs through a volume discount. JetBlue’s strategy of only supporting the
Profit Optimization
JetBlue aircraft operated an average of 12.6 hours/day in 2001, the highest in the
industry. By comparison, 2001 utilization for Southwest, the second most efficient, was 11.1
hours/day. In addition, JetBlue’s yields in 2001 were second in the industry, following
Southwest. Utilization and high yields are key to generating revenues (Carter, 2002).
Low costs and high efficiency enable JetBlue to charge lower fares than its competitors.
As an example, JetBlue’s New Orleans to New York round trip fare is significantly cheaper than
that of alternative carriers. JetBlue offers two nonstop flights per day both ways and a round trip
fares are tough to beat. This is a powerful advantage to the extent that it insulates JetBlue from
future aggressive pricing by competitors in a highly competitive industry & price sensitive
economy is influenced by external factors such as world events, politics and the economy.
JetBlue has capitalized on the opportunity of careering to the “under-served” or markets most
airlines didn’t care about rather than the traditional metropolitan areas JetBlue’s flight model
has proven that it can stimulate “high-yield” demand in the markets it has entered. A key
element of the company’s growth strategy is not only to establish a presence in underserved
markets, but introduce service offerings of low fares, and differentiated product that are designed
to stimulate demand. The company’s target market is not the business executive with the Amex
Gold Card, but rather the price sensitive leisure traveler and small business owner that is price
sensitive with their wallets, but does not want to compromise value, service and quality.
Crafting & Executing Strategy Sloan
Financial Objectives
that provides superb customer service primarily on direct destinations at competitive rates. Their
“business key drivers” includes operating young, fuel efficient fleets with more room than any
other airline, coach product, free in-flight entertainment, pre-registered seating, unlimited food &
drinks, and the airline industry’s only “Customer Bill of Rights” are just some of the key
Crafting & Executing Strategy Sloan
elements that have led to financial success. While all airlines have the reputation of being “risky
investments”; JetBlue has delivered to their stakeholders by growing revenues 185%, from $998
million in 2003 to $2,842 million in 2007. On the other hand operating expenses & jet fuel
expenses grew by 532% from 2003 to 2007 and typically when fuel-costs soar it hurts “low-cost”
carriers like JetBlue significantly, but utilizing “option & swap” agreements allowed JetBlue to
hedge its exposure to aircraft fuel prices. So it seems for now that the airline has grip on the
Jet Blue has been consistently ranked as one of the best airlines to work for, due to the fact
of their collaborative efforts of attracting and retaining the industry’s best talent. Jet Blue takes a
methodic & meticulous approach of selecting the best “crew members” through online
applications, phone interviews and a collective selection process as a team. Each year, JetBlue
received 130,000 resumes, from which 3,000 qualified candidates were hired (Rovenpor &
Michel, 2008). As for as training; the company offers their 800+ employees more than 14,000
hours of leadership development training. When it comes to compensation JetBlue has lagged
behind most airlines in regards to hourly pay-rates, but has compensated in other area such as by
offering health care coverage, profit-sharing and 401(k) retirement plans (Thompson &
Strickland, 2009). It’s also the only airline that currently has a “no-layoff” policy, slow attrition
and a reduced salary from $500,000 per year to $250,000 for the 3rd & 4th quarters of 2008.
JetBlue’s focus from 2008 & beyond will be to focus on rational growth, frugal cost control
and revenue optimization while managing risk in uncertain economic times & conditions. They
Crafting & Executing Strategy Sloan
are forecasting a slower growth trend that began in 2008 that will continue through 2011. JetBlue
will continue to reallocate capacity in order to take advantage of present market opportunities. In
addition, they are looking to expand other revenue opportunities. The nation’s 6th largest airline
will continue to strive to increase passenger revenue primarily by increasing flights to popular
destinations, which produces higher revenue per available seat mile, Their overall objective is to
optimize our fare mix, while continuing to provide our customers with competitive fares. “When
we enter a new market, our fares are designed to stimulate demand, particularly from fare-
conscious leisure and business travelers who might otherwise have used alternate forms of
transportation or would not have traveled at all” says current the CEO Dave.
JetBlue’s key components have collectively come to serve as the “recipe of airline success”,
which are: Value Power: In terms of service & quality “less means more” in regards to
customers not sacrificing the quality of services that include: Exceptional customer service, free
TV entertainment, everyday low-cost fares, unlimited snacks & drinks and the most legroom that
any airline has to offer. Brand Power: JetBlue’s values works in harmony with building a brand
of differentiating itself from the competition in terms of offering safe, reliable and value-added
People Power: Ultimately, it’s the people that make all the difference, and that’s what serves as
the catalyst of JetBlue’s business success. Similar to Southwest airlines; JetBlue has cultivated a
company culture centered around five distinct values: safety, caring, integrity, fun and passion.
JetBlue believes in attracting, hiring and retaining people that are genuinely friendly, helpful,
Crafting & Executing Strategy Sloan
team-oriented and giving customers the best overall “JetBlue experience”, which reflects from
References
www.mcafee.cc/classes/
Thompson, A., Strickland, A., & Gamble, J. 2010. Crafting & Executing Strategy The Quest For
www.jetblue.com
Crafting & Executing Strategy Sloan