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Monica Ceasar
Monica Ceasar

The document provides an analysis of JetBlue Airlines. It discusses JetBlue's founding, competitive strategy, strengths and weaknesses. Key points include: - JetBlue was founded in 2000 and had significant financial success in its early years, achieving profits while other airlines lost billions. - It differentiates itself from competitors like Southwest by offering amenities like seat-back TVs and leather seats. - JetBlue keeps costs low through efficiencies like operating a standardized fleet and selling tickets exclusively online. - While it faces threats from larger competitors, its low-cost structure and customer-focused approach have contributed to its strong financial performance compared to other airlines.

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JETBLUE AIRLINES MONICA AGRIPPA MARCH 18, 2013 JETBLUE CASE STUDY ANALYSIS
JETBLUE AIRLINES
JETBLUE AIRLINES The primary subject matter of this business policy case concerns the competitive strategy and background of a new, very successful airline- jetBlue Airways (jetBlue). The time frame of the case is from the firms inception to the end of fiscal year 2002.
JETBLUE AIRLINES . The case has a difficulty level of four-five, appropriate for senior level undergraduates or for first year MA students. The case is designed to be taught in one seventy minute class and will require two to three hours of outside preparation by the students.
SYNOPSIS JetBlue is a new, very successful low cost airline. In their first year of operations (2001) they achieved a $32 million net profit on revenues of approximately $320 million. This particularly notable in that the entire industry lost approximately $10 billion during the same year. JetBlue flies point-to-point routes- much like Southwest Airlines and offers distinctive service features- reserved seating, leather seats, seat back TVs with twenty-four channels, and very customer oriented personnel.
SYNOPSIS JetBlue, at least sperficially, appears to be an example of a Low Cost Leader. In their initial foray into the New York to Florida market they offered ticket prices about half of the existing competitors ticket prices and a serious focus on customer convenience- including such things as no mandatory Saturday night stay to get the lowest ticket price. All tickets are sold online or though a unique Salt Lake City reservation system.
SYNOPSIS They were the first airline to introduce electronic ticketing and their use of Information Technology is extensive. JetBlues founder, David Neeleman, is a young, forty-three year old career entrepreneur with dyslexia. He is a practicing Mormon with nine children and prior to founding JetBlue had experience with two other airline startups.
THE FIVE FORCE INDUSTRY COMPETITION One might infer that jetBlue is forcing American and other major carriers into a price war. One of the points that should come out in this discussion is the relative ability of other airlines to match jetBlues fare schedule. One of the most important metrics to assess operating performance of airlines is cost per seat mile and jetBlue has a real advantage in this area. Their cost per seat mile, in 2002, is about 2/3 of the industry average!
THE FIVE FORCE INDUSTRY COMPETITION
THE FIVE FORCE INDUSTRY COMPETITION JetBlue has significantly outperformed the industry in most important financial ratios. In terms of valuation ratios, PE is thirty-one. Twelve for the most recent month compared to an industry average of 38.43. One ratio that needs careful assessment is the Debt Equity (D/E) ratio. By comparison, jet Blue carries a fairly high D/E ratio. This can have an effect on future borrowing for new aircraft.
THE FIVE FORCE INDUSTRY COMPETITION Growth rates in earnings per share and sales are far above its competitors. The implication is that jetBlue is growing rapidly while many of its competitors are declining. The most significant ratio differences are in profitability and management effectiveness. In every category, JetBlue is out performing the competition significantly.
JETBLUE AIRLINES
JETBLUE AIRLINES Strengths: Management, Costs, Utilization, Profitability, and Focus. Customer-driven Mission Statement, Appeals to high class people who want low fares,Customer Bill of Rights, and Leather seats, Individual TV sets (Direct TV), and extra leg room.
JETBLUE AIRLINES Weaknesses: A significant weakness would be size as it is possible that larger competitors could overwhelm JetBlue in some markets. Low Brand Awareness, Less Experience, Low Budget, Small Airline, Less Planes, and Less People.
JETBLUE AIRLINES Opportunities: expansion to additional markets- particularly underserved markets and regional markets. International alliances, Capitalize on domestic Hubs, and several coastal destinations.
JETBLUE AIRLINES other Threats: Competition (particularly low cost airlines), the price of fuel, and unions. Major aircraft carriers with large budgets, Negativity surrounding the current views of the airline industry, extremely High Crude and Oil Prices, and Similar Objectives and strategies as other low-cost airlines.
CORPORATE STRATEGY
CORPORATE STRATEGY JetBlue is following strategy but interestingly they are differentiating themselves from Southwest in several ways such as assigned seating, leather seats, and in particular, seat back TV. This notion that a firm can both be a differentiator and low cost leader files in the face of Michael Porters conventional wisdom.
FIVE FORCE ANALYSIS OF THE AIR LINE INDUSTRY The degree of competitiveness, power, and strength is indicative of the five-force analysis. Michael Porters Five Force Analysis Model indicate the factors that directly influence the firm and its competitive actions and responses are: The threat of new entrants The power of new suppliers The power of buyers The threat of new substitutes The intensity of the rivalry between competitors
THE THREAT OF NEW ENTRANTS: LOW
THE THREAT OF NEW ENTRANTS: LOW Potential and existing competitors influence average industry profitability. In JetBlues case, the threat is from existing competitors already in the market. This is mainly due to the current economic state we are in which greatly affects the market entry barriers. The cost of entry consists of extremely high costs and massive capital requirements.
THE THREAT OF NEW ENTRANTS: LOW . In this economy, it would be nearly impossible to find funding with the excessive risk, lower buyer confidence, and debt to asset ratio of the airline industry. Major competitors of JetBlue are already decreasing flights and merging with one another in order to consolidate debt and stay in business since fixed costs are extremely high.
THE THREAT OF NEW SUBSTITUTES: LOW The bargaining power of suppliers, particularly aircraft manufactures and employee groups, is fairly high. JetBlue is able to offset the bargaining power of fuel suppliers, which is a very important cost area, with a successful fuel- hedging program.
THE THREAT OF NEW SUBSTITUTES: LOW
The cabins have only one class of seats which combined an overall first class experience. There has little or no threat to closing as the airline industry offers entry with little no no appeal.
The cabins have only one class of seats which combined an overall first class experience. There has little or no threat to closing as the airline industry offers entry with little no no appeal.
JETBLUE AIRLINES
POWERS OF SUPPLIERS: HIGH The key inputs in the airline industry are the jet fuel and the aircraft suppliers. The airplane manufacturing industry is dominated by Boeing and an JetBlues Airbus supplying the majority of airplanes for the me large airline companies. For this reason, the suppliers have most of the bargaining powering leverage and increasing prices when costs rise.
On the bright side, since JetBlue's fleet consists of only two types of aircrafts it keeps the cost of the airplanes lower than if they had a fleet of vastly different types ofairplanes.
Nevertheless, most airline companies have very LITTLEBARGIN powergiventhatthereisamarketpricefor jetfuelandmostairline companies pay exactly or close to that price.
In addition, the volume of fuel supplied to the airlines isextremelyimportantbecausejetBluehas prescheduled flights that require a certain amount of fuel. As a result, the bargaining powers of suppliers is high.
In addition, the volume of fuel supplied to the airlines isextremelyimportantbecausejetBluehas prescheduled flights that require a certain amount of fuel. As a result, the bargaining powers of suppliers is high. Never the less, most airline companies have very littlebargaining powergiventhatthereisamarketpriceforjetfuelandmostairline companies pay exactly or close to that price. Nevertheless, most airline companies have very LITTLEBARGIN powergiventhatthereisamarketpricefor jetfuelandmostairline companies pay exactly or close to that price. In addition, the volume of fuel supplied to the airlines isextremelyimportantbecausejetBluehas prescheduled flights that require a certain amount of fuel. As a result, the bargaining powers of suppliers is high. Never the less, most airline companies have very littlebargaining powergiventhatthereisamarketpriceforjetfuelandmostairline companies pay exactly or close to that price.
JETBLUE AIRLINES Never the less, most airline companies have very littlebargaining powergiventhatthereisamarketpriceforjetfuelandmostairline companies pay exactly or close to that price. Nevertheless, most airline companies have very LITTLEBARGIN powergiventhatthereisamarketpricefor jetfuelandmostairline companies pay exactly or close to that price. In addition, the volume of fuel supplied to the airlines isextremelyimportantbecausejetBluehas prescheduled flights that require a certain amount of fuel. As a result, the bargaining powers of suppliers is high. Never the less, most airline companies have very littlebargaining powergiventhatthereisamarketpriceforjetfuelandmostairline companies pay exactly or close to that price.
JETBLUE LITTLEBARGIN AIRLINES powergiventhatthereisamarketpricefor jetfuelandmostairline companies pay exactly or close to that price. In addition, the volume of fuel supplied to the airlines isextremelyimportantbecausejetBluehas prescheduled flights that require a certain amount of fuel. As a result, the bargaining powers of suppliers is high. Never the less, most airline companies have very littlebargaining powergiventhatthereisamarketpriceforjetfuelandmo stairline companies pay exactly or close to that price
INTENSITY OF RIVALRY AMONG COMPETITORS: High
INTENSITY OF RIVALRY AMONG COMPETITORS: High The intensity of rivalry among competitors in the industry is very high. Thisisduetothenumerouscompaniesthat striveforthe dominant market share in the industry. Airlines typically try their hardest to differentiate themselves to gain a competitive advantage yet some of these failed attempts typically derive unhealthy, negative reactions from the others. Additional factors that may contributetorivalryincludehighinterest rates and debt, feeling a generalized sense of deprivation asthe industry growth slowly decreases along with the diminishing in disposable income necessary to have in order to make a living.
Power of Buyers: High
Power of Buyers: High There are several options available to customers withwhat airline they choosetofly.Sinceproductsandservicesareessentiallystandard,custo mersofthisindustryarepriceconsciousundertheirbeliefthatall airline companieswill getthem totheir destination but would prefer to fly withtheonethatcangetthemtherecheaper. with websites such as www.cheaptickets.com universalbookingandticketingon-line,itseasily accessible for customers to research the bestprice.The recession and overall increase in fixed costs has hit the industry limited airlines with not flying at full capacity and many seats were left empty. Highbargaining power for the buyers is a product ofthis condition because itkeepsthe average flight costlower than what it should be. Providing the given current industry conditions were much more prosperous, it would be far more feasible for promoted competition for the title and position of price leader of the air lines.
THREAT OF SUBSTITUTE PRODUCTS: HIGH
AIRLINE INDUSTRY ON THE DECLINE FOR MOST
AIRLINE INDUSTRY ON THE DECLINE FOR MOST
AIRLINE INDUSTRY ON THE DECLINE FOR MOST Of course, the internet is a double edged sword, readily available information and prices at the click of a touch pad. With all things considered, it is clear that the airline industry and its employees are under extreme duress. Despite the deflating economic circumstances of the airline industry, several major carriers have announced that currently new subsidiaries are to compete against the low cost providers. Thus the threat of new entrants in the low cost sector of the airline industry is substantial. However, initially, on June10, 2003, jetBlue announced an order for one hundred new EMBAER 190 AIRCRAFTS. THE EMBAER 190, of course, is the regional jet that seats one hundred passengers. However, initially, on June10, 2003, jetBlue announced an order for one hundred new EMBAER 190 AIRCRAFTS. THE EMBAER 190, of course, is the regional jet that seats one hundred passengers.
However, initially, on June10, 2003, jetBlue announced an order for one hundred new EMBAER 190 AIRCRAFTS. THE EMBAER 190, ofcourse, is the regional jet that seats one hundred passengers.
Thus it seems that JetBlue was already prepared and was announcing intentions to enter the regional airline business. Leading the industry with a brand new business model, in that they had previously standardized Airbus A 320s to have already served major airports. Achieved by the rationale for standardizing A 320s in efforts to minimize parts inventories and personal training.
JETBLUE AIRLINES JetBlue has managed to accomplish this during these last decades of our darkest hours following the September 11 attacks. In reporting an astonishing net income of $28.3 million of total revenues on $224.9 million To report a profit in the third quarter while most of our industry is reporting unprecedented losses is a great tribute to the dedication and hard work of the entire jetBlue team," said David Neeleman, CEO of jetBlue. JetBlue has managed to accomplish this during these last decades of our darkest hours following the September 11 attacks. In reporting an astonishing net income of $28.3 million of total revenues on $224.9 million
JETBLUE AIRLINES
JETBLUE AIRLINES
Jetblue airways ppt presentation

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Jetblue airways ppt presentation

  • 1. JETBLUE AIRLINES MONICA AGRIPPA MARCH 18, 2013 JETBLUE CASE STUDY ANALYSIS
  • 3. JETBLUE AIRLINES The primary subject matter of this business policy case concerns the competitive strategy and background of a new, very successful airline- jetBlue Airways (jetBlue). The time frame of the case is from the firms inception to the end of fiscal year 2002.
  • 4. JETBLUE AIRLINES . The case has a difficulty level of four-five, appropriate for senior level undergraduates or for first year MA students. The case is designed to be taught in one seventy minute class and will require two to three hours of outside preparation by the students.
  • 5. SYNOPSIS JetBlue is a new, very successful low cost airline. In their first year of operations (2001) they achieved a $32 million net profit on revenues of approximately $320 million. This particularly notable in that the entire industry lost approximately $10 billion during the same year. JetBlue flies point-to-point routes- much like Southwest Airlines and offers distinctive service features- reserved seating, leather seats, seat back TVs with twenty-four channels, and very customer oriented personnel.
  • 6. SYNOPSIS JetBlue, at least sperficially, appears to be an example of a Low Cost Leader. In their initial foray into the New York to Florida market they offered ticket prices about half of the existing competitors ticket prices and a serious focus on customer convenience- including such things as no mandatory Saturday night stay to get the lowest ticket price. All tickets are sold online or though a unique Salt Lake City reservation system.
  • 7. SYNOPSIS They were the first airline to introduce electronic ticketing and their use of Information Technology is extensive. JetBlues founder, David Neeleman, is a young, forty-three year old career entrepreneur with dyslexia. He is a practicing Mormon with nine children and prior to founding JetBlue had experience with two other airline startups.
  • 8. THE FIVE FORCE INDUSTRY COMPETITION One might infer that jetBlue is forcing American and other major carriers into a price war. One of the points that should come out in this discussion is the relative ability of other airlines to match jetBlues fare schedule. One of the most important metrics to assess operating performance of airlines is cost per seat mile and jetBlue has a real advantage in this area. Their cost per seat mile, in 2002, is about 2/3 of the industry average!
  • 9. THE FIVE FORCE INDUSTRY COMPETITION
  • 10. THE FIVE FORCE INDUSTRY COMPETITION JetBlue has significantly outperformed the industry in most important financial ratios. In terms of valuation ratios, PE is thirty-one. Twelve for the most recent month compared to an industry average of 38.43. One ratio that needs careful assessment is the Debt Equity (D/E) ratio. By comparison, jet Blue carries a fairly high D/E ratio. This can have an effect on future borrowing for new aircraft.
  • 11. THE FIVE FORCE INDUSTRY COMPETITION Growth rates in earnings per share and sales are far above its competitors. The implication is that jetBlue is growing rapidly while many of its competitors are declining. The most significant ratio differences are in profitability and management effectiveness. In every category, JetBlue is out performing the competition significantly.
  • 13. JETBLUE AIRLINES Strengths: Management, Costs, Utilization, Profitability, and Focus. Customer-driven Mission Statement, Appeals to high class people who want low fares,Customer Bill of Rights, and Leather seats, Individual TV sets (Direct TV), and extra leg room.
  • 14. JETBLUE AIRLINES Weaknesses: A significant weakness would be size as it is possible that larger competitors could overwhelm JetBlue in some markets. Low Brand Awareness, Less Experience, Low Budget, Small Airline, Less Planes, and Less People.
  • 15. JETBLUE AIRLINES Opportunities: expansion to additional markets- particularly underserved markets and regional markets. International alliances, Capitalize on domestic Hubs, and several coastal destinations.
  • 16. JETBLUE AIRLINES other Threats: Competition (particularly low cost airlines), the price of fuel, and unions. Major aircraft carriers with large budgets, Negativity surrounding the current views of the airline industry, extremely High Crude and Oil Prices, and Similar Objectives and strategies as other low-cost airlines.
  • 18. CORPORATE STRATEGY JetBlue is following strategy but interestingly they are differentiating themselves from Southwest in several ways such as assigned seating, leather seats, and in particular, seat back TV. This notion that a firm can both be a differentiator and low cost leader files in the face of Michael Porters conventional wisdom.
  • 19. FIVE FORCE ANALYSIS OF THE AIR LINE INDUSTRY The degree of competitiveness, power, and strength is indicative of the five-force analysis. Michael Porters Five Force Analysis Model indicate the factors that directly influence the firm and its competitive actions and responses are: The threat of new entrants The power of new suppliers The power of buyers The threat of new substitutes The intensity of the rivalry between competitors
  • 20. THE THREAT OF NEW ENTRANTS: LOW
  • 21. THE THREAT OF NEW ENTRANTS: LOW Potential and existing competitors influence average industry profitability. In JetBlues case, the threat is from existing competitors already in the market. This is mainly due to the current economic state we are in which greatly affects the market entry barriers. The cost of entry consists of extremely high costs and massive capital requirements.
  • 22. THE THREAT OF NEW ENTRANTS: LOW . In this economy, it would be nearly impossible to find funding with the excessive risk, lower buyer confidence, and debt to asset ratio of the airline industry. Major competitors of JetBlue are already decreasing flights and merging with one another in order to consolidate debt and stay in business since fixed costs are extremely high.
  • 23. THE THREAT OF NEW SUBSTITUTES: LOW The bargaining power of suppliers, particularly aircraft manufactures and employee groups, is fairly high. JetBlue is able to offset the bargaining power of fuel suppliers, which is a very important cost area, with a successful fuel- hedging program.
  • 24. THE THREAT OF NEW SUBSTITUTES: LOW
  • 25. The cabins have only one class of seats which combined an overall first class experience. There has little or no threat to closing as the airline industry offers entry with little no no appeal.
  • 26. The cabins have only one class of seats which combined an overall first class experience. There has little or no threat to closing as the airline industry offers entry with little no no appeal.
  • 28. POWERS OF SUPPLIERS: HIGH The key inputs in the airline industry are the jet fuel and the aircraft suppliers. The airplane manufacturing industry is dominated by Boeing and an JetBlues Airbus supplying the majority of airplanes for the me large airline companies. For this reason, the suppliers have most of the bargaining powering leverage and increasing prices when costs rise.
  • 29. On the bright side, since JetBlue's fleet consists of only two types of aircrafts it keeps the cost of the airplanes lower than if they had a fleet of vastly different types ofairplanes.
  • 30. Nevertheless, most airline companies have very LITTLEBARGIN powergiventhatthereisamarketpricefor jetfuelandmostairline companies pay exactly or close to that price.
  • 31. In addition, the volume of fuel supplied to the airlines isextremelyimportantbecausejetBluehas prescheduled flights that require a certain amount of fuel. As a result, the bargaining powers of suppliers is high.
  • 32. In addition, the volume of fuel supplied to the airlines isextremelyimportantbecausejetBluehas prescheduled flights that require a certain amount of fuel. As a result, the bargaining powers of suppliers is high. Never the less, most airline companies have very littlebargaining powergiventhatthereisamarketpriceforjetfuelandmostairline companies pay exactly or close to that price. Nevertheless, most airline companies have very LITTLEBARGIN powergiventhatthereisamarketpricefor jetfuelandmostairline companies pay exactly or close to that price. In addition, the volume of fuel supplied to the airlines isextremelyimportantbecausejetBluehas prescheduled flights that require a certain amount of fuel. As a result, the bargaining powers of suppliers is high. Never the less, most airline companies have very littlebargaining powergiventhatthereisamarketpriceforjetfuelandmostairline companies pay exactly or close to that price.
  • 33. JETBLUE AIRLINES Never the less, most airline companies have very littlebargaining powergiventhatthereisamarketpriceforjetfuelandmostairline companies pay exactly or close to that price. Nevertheless, most airline companies have very LITTLEBARGIN powergiventhatthereisamarketpricefor jetfuelandmostairline companies pay exactly or close to that price. In addition, the volume of fuel supplied to the airlines isextremelyimportantbecausejetBluehas prescheduled flights that require a certain amount of fuel. As a result, the bargaining powers of suppliers is high. Never the less, most airline companies have very littlebargaining powergiventhatthereisamarketpriceforjetfuelandmostairline companies pay exactly or close to that price.
  • 34. JETBLUE LITTLEBARGIN AIRLINES powergiventhatthereisamarketpricefor jetfuelandmostairline companies pay exactly or close to that price. In addition, the volume of fuel supplied to the airlines isextremelyimportantbecausejetBluehas prescheduled flights that require a certain amount of fuel. As a result, the bargaining powers of suppliers is high. Never the less, most airline companies have very littlebargaining powergiventhatthereisamarketpriceforjetfuelandmo stairline companies pay exactly or close to that price
  • 35. INTENSITY OF RIVALRY AMONG COMPETITORS: High
  • 36. INTENSITY OF RIVALRY AMONG COMPETITORS: High The intensity of rivalry among competitors in the industry is very high. Thisisduetothenumerouscompaniesthat striveforthe dominant market share in the industry. Airlines typically try their hardest to differentiate themselves to gain a competitive advantage yet some of these failed attempts typically derive unhealthy, negative reactions from the others. Additional factors that may contributetorivalryincludehighinterest rates and debt, feeling a generalized sense of deprivation asthe industry growth slowly decreases along with the diminishing in disposable income necessary to have in order to make a living.
  • 38. Power of Buyers: High There are several options available to customers withwhat airline they choosetofly.Sinceproductsandservicesareessentiallystandard,custo mersofthisindustryarepriceconsciousundertheirbeliefthatall airline companieswill getthem totheir destination but would prefer to fly withtheonethatcangetthemtherecheaper. with websites such as www.cheaptickets.com universalbookingandticketingon-line,itseasily accessible for customers to research the bestprice.The recession and overall increase in fixed costs has hit the industry limited airlines with not flying at full capacity and many seats were left empty. Highbargaining power for the buyers is a product ofthis condition because itkeepsthe average flight costlower than what it should be. Providing the given current industry conditions were much more prosperous, it would be far more feasible for promoted competition for the title and position of price leader of the air lines.
  • 39. THREAT OF SUBSTITUTE PRODUCTS: HIGH
  • 40. AIRLINE INDUSTRY ON THE DECLINE FOR MOST
  • 41. AIRLINE INDUSTRY ON THE DECLINE FOR MOST
  • 42. AIRLINE INDUSTRY ON THE DECLINE FOR MOST Of course, the internet is a double edged sword, readily available information and prices at the click of a touch pad. With all things considered, it is clear that the airline industry and its employees are under extreme duress. Despite the deflating economic circumstances of the airline industry, several major carriers have announced that currently new subsidiaries are to compete against the low cost providers. Thus the threat of new entrants in the low cost sector of the airline industry is substantial. However, initially, on June10, 2003, jetBlue announced an order for one hundred new EMBAER 190 AIRCRAFTS. THE EMBAER 190, of course, is the regional jet that seats one hundred passengers. However, initially, on June10, 2003, jetBlue announced an order for one hundred new EMBAER 190 AIRCRAFTS. THE EMBAER 190, of course, is the regional jet that seats one hundred passengers.
  • 43. However, initially, on June10, 2003, jetBlue announced an order for one hundred new EMBAER 190 AIRCRAFTS. THE EMBAER 190, ofcourse, is the regional jet that seats one hundred passengers.
  • 44. Thus it seems that JetBlue was already prepared and was announcing intentions to enter the regional airline business. Leading the industry with a brand new business model, in that they had previously standardized Airbus A 320s to have already served major airports. Achieved by the rationale for standardizing A 320s in efforts to minimize parts inventories and personal training.
  • 45. JETBLUE AIRLINES JetBlue has managed to accomplish this during these last decades of our darkest hours following the September 11 attacks. In reporting an astonishing net income of $28.3 million of total revenues on $224.9 million To report a profit in the third quarter while most of our industry is reporting unprecedented losses is a great tribute to the dedication and hard work of the entire jetBlue team," said David Neeleman, CEO of jetBlue. JetBlue has managed to accomplish this during these last decades of our darkest hours following the September 11 attacks. In reporting an astonishing net income of $28.3 million of total revenues on $224.9 million