JetBlue Airways Corporation
What is JetBlue‘s strategy for success in the marketplace?
JetBlue is geared towards the provision of low cost and low fare for its services. It does this through the provision of differentiated products and customer service which is of very high quality. JetBlue strives to provide consumers with low fares that stimulates market demand and at the same time contains operating efficiencies and costs. It has been noted that since their entry into the market there has been an increase in the number of passengers that ply the San Diego – New York route (jetBlue, 2004). The number increased by 55%.
The fares for the aforementioned flights were also seen to decrease by 28%. JetBlue has maintained low operating costs by thoroughly utilizing its aircraft, making use of advanced technology, utilizing a single aircraft with one service class and making use of an incentivized productive workforce.It also strives to benefit from economies of scale from its future expansion. They also strive to ply certain routes more frequently and edge out their competitors. For instance they have ventured into New York, Boston, Las Angeles among others which were previously over priced.
JetBlue offers differentiated service and products for instance they make use of new aircrafts, LiveTV at every seat, leather seats, reliable performance and pre-assigned seating. They also strive to capitalize on their competitive strengths which include: low operating costs, strong company brand, New Aircraft fleet, strong company culture, proven management team and strategic positioning in New York.The low operating costs is achieved by the effective utilization of the aircraft which ensures that the fixed costs are spread over a large number of flights. It has been noted that the planes spent an average of 13.4 hours airborne per day.
It is also achieved by hiring well trained staff, the providing lucrative compensation and flexible work hours which ensures that employees are happy and enthusiastic (jetBlue, 2004). The airline also enjoys low distribution costs by customers making direct bookings. They further make use of one type of aircraft which has one class of service and thus they experience low running costs. Low operating costs are due to low maintenance and training costs.JetBlue has managed to develop a strong brand since it is associated with reliability, safety and is focused on top notch customer service.
This resulted in their being voted the best airline in the Conde Nast Traveler’s Reader’s Choice Awards. They also have a strong culture that is based on the following values; passion, safety, fun, integrity and caring. The culture also involves high emphasis on employee training.Does the company rely primarily on a customer intimacy, operational excellence, or product leadership customer value proposition? What evidence supports your conclusion?The company mainly relies on operational excellence. It has laid emphasis on the absorption of top notch management and the evolution of strategies that are geared towards excellence.
Their management is composed of experienced managers who have a wealth of knowledge in the running of low cost and customer focused airlines (jetBlue, 2004). David Neelman, the Chief Executive Officer was one of the founders and president of Morris Airline. JetBlue’s Chief Operating Officer was the vice president who was in-charge of the Continental Airlines‘ Newark hub.Apart from management, the company’s strategy lays emphasis on operational excellence. Its strategy that is geared towards the achievement of low operating costs is realize by the effective utilization of the aircraft which ensures that the fixed costs are spread over a large number of flights.
Further operational excellence is achieved by hiring well trained staff. It also ensures that the employees are well compensated and that they work flexible hours which ensures that employees are happy and enthusiastic and thus operate the airline at their best. The airline also enjoys low distribution costs by customers making direct bookings. They further make use of one type of aircraft which has one class of service and thus they experience low running costs (jetBlue, 2004). Low operating costs are due to low maintenance and training costs.
It is thus evident that the airline focuses mostly on its operational excellence than anything else.
What business risks does JetBlue face that may threaten the company’s ability to satisfy stockholder expectations?
JetBlue is faced by a large number of risks. Market competition is experienced when the airline is prevented from achieving high traffic level that would enable it to maintain profitable operations and hence prevent any growth strategy. Price competition affects JetBlue since it translates to high fixed costs and low profit margins. The risk of failure in the implementation of growth strategy will also reflect in the lack of economies of scale and thus low profits.
The proposed expansion of the company is also a risk since it lays a toll on services and markets and thus a strain in management resources, management information systems and operational systems. The company’s fixed obligation is also a great risk since it could hinder the successful implementation of JetBlue’s growth strategy (jetBlue, 2004). The company has long term debts of the tune of $ 1.54 billion which makes up 67.1% of the total capitalization.It projects an operating base of $502M for the period 2005 – 2009.
The debts could also prevent JetBlue from getting more working capital. Increased maintenance cost due to an increase in the number of aircrafts. The failure of the company’s automated systems and technology would cripple the airline. The company relies on maintaining a high aircraft utilization rate which reflects on their low costs and hence makes them vulnerable to delays. JetBlue’s operation is mostly dependent on New York City’s market and an increase in competition would reflect negatively on its market share and thus its business. In the event that the company lacks skills in the attraction and retention of qualified personnel then it has the impending risk of failing to maintain its company culture and thus it lays a toll on its business.
The failure of JetBlue to take delivery, place it into work and integrate the operation of E90 would render its growth strategy null and void.
Examples of control activities used to reduce risks
The aforementioned risks will surely put the airline out of service if they manifest. In light of this, the company has put up a number of control activities. It has invested in customer service of very high quality. It does this by ensuring that they hire and train only efficient employees who treat customers very well.
They also have procedures and policies that ensure the good treatment of employees for instance ticketless travelling, pre-assigned seats, low fares (change fees are only $25 per head) and no overbooking of flights. The airline has invested in top notch safety and security measures (jetBlue, 2004). The employees are well trained, there are safety measures installed in the work area, maintenance of flights, dispatch and customer service. Environmental safety measures aree also adhered to. JetBlue has also laid emphasis of marketing and distribution.
It does marketing through promotions and advertising in newspapers, television, magazines and outdoor billboards.The company also strives to keep its customers by putting customer loyalty programs in place such as True Blue Flight gratitude which recognizes and rewards its most loyal customers. They also offer incentives to their most loyal customers with the accumulation of True Blue points. JetBlue strives to have competitive pricing due to its low cost structure for example its 14 day, 7 day and 3 day advance purchase of fares up to its “walkup” fare. It works by reducing fares the earlier the purchase of tickets is made. It has also invested in yield management which happens to be an integrated set of a number of business processes that provides the management with the ability to have an understanding of markets respond to customer behavior appropriately and also respond very fast to opportunities.
JetBlue has also invested on top notch employees who work especially hard in maintaining their client base. The company has also gone an extra mile in protecting itself from the fluctuation of fuel prices by putting hedging programs in place. The company buys its fuel from a third party fuel management company therefore limits its exposure to the market risks (jetBlue, 2004).
How can the concept of unit-level activities be applies to an airline?
Unit level activities are those which occur each time a service is done or products are produced. These activities yield costs such as machine maintenance, direct materials and direct labor. This concept is applied to airlines since airlines incur costs which are needed to be accounted for in books of accounts and their service entails the integration of a series of processes.
Airlines have unit level costs such as crew member costs, ticketing costs and aircraft maintenance.More specifically, what are two examples of unit-level activities for JetBlue?JetBlue runs ticket processing machines and the maintenance of aircrafts.What steps has JetBlue taken to manage these unit-level activities more efficiently?JetBlue has ensured that it purchases aircrafts only from suppliers who provide warranties to them. Ticket processing is facilitated in advance and double booking is not made possible.How can the concept of batch-level activities be applied to an airline?This concept refers to the cost incurred when units are manufactured in groups.
For instance quality tests, purchase orders and machine setup. Airlines make use of this concept when they have inspections from government bodies and other safety and environmental bodies.What are two examples of batch-level activities for JetBlue?Safety tests and purchase of E90 aircraft.What steps has JetBlue taken to manage these batch-level activities more efficiently?It has complied with safety issues and thus makes inspection take shorter and hence reduces its delay time. The acquisition of E90 is stretched through a span of time and hence does not lay a toll on its day to day activities.
What is one example of a customer-level activity and an organization-sustaining activity for JetBlue?Customer level activity involves the purchase of tickets through the utilization low fare schemes and also the participation in customer loyalty programs. The utilization of yield management initiatives is an example of an organization sustaining activity.
