1. travel
2. transports
3. air travel
4. airlines

Jetblue Airways
By: Brian Fitzgerald
Company Overview
•
•
•
•
Founded by David Neeleman in 1998
Reported revenue of 3.8 billion dollars in 2010
Reported a profit of 97 million dollars in 2010
Has 4.4 percent of the United States market
share for regional domestic airlines
• Headquarters are located in Forest Hills, New
York
• Delivers service daily to 60 destinations in 20
states
• April 11, 2002- Initial Public Offering (IPO)
Company Overview Continued
• Publicly listed (JBLU) Nasdaq
• Fly’s two types of aircrafts (Airbus A320) and
(Embraer 190)
• JetBlue flies to smaller underserved markets and
airports, opposed to larger major hubs
• JetBlue is categorized as a focused national
carrier with a few international destinations
Airline Industry Explained
• Commercial passenger air travel has 4 different
segments according to the US department of
Transportation (DOT)
• International
• National
• Regional
• Cargo
PEST Analysis
Factor
Trend
Evaluation
Impact
(1=Low,
5= High
Rank in terms
of importance
Political
Government Stimulus to Rail
Unionization
Antitrust laws affecting
acquisitions
Threat
Threat
Threat
5
2
Economic
Price of Oil
Economic Recession
Threat
Threat
5
5
1
Social
Lost Baggage
Increases in In-flight
Entertainment (TV, Magazines,
Movies)
Increased fear of safety due to
Sept 11 terrorist attacks
Threat
Opportunity
4
4
4
Threat
4
Increased use of internet booking
Increased fuel efficiency of
aircraft providers (Boeing,
Airbus)
Internet check in
Internet Web conferencing
Threat
4
Opportunity
3
Opportunity
Threat
3
4
Technological
2
3
3
Political
• Unionization affecting cost structure and
freedom of companies
• Large Government funded stimulus plan to
bring high speed rail travel to the United States
• Political unrest in the middle east (major source
of oil)
• Safety regulations
• Customer bill of rights to protect consumers
Economic
• Price of a barrel of oil
continues to rise
• Profitability of airline
companies in the
industry
• Decreased disposable
income of many
families through the
recession.
• Low economic growth
rate
Social
• Customer fear about flying and
terrorist attacks
• In-flight entertainment and
media devices are becoming
expected by customers who
like to travel comfortably
• Baggage loss blamed on
airlines by customers
• On time arrival percentage
• Internet blogging on social
media sites about
unsatisfactory travel and
delays
Technological
• Increased usage of internet
ticket booking
• Increased usage of lowest price
travel agency websites
(Travelocity, Orbitz, Expedia,
Priceline)
• Technology used to cut labor
and check guests in at a quicker
pace
• Increased fuel efficiency of
newer aircrafts by aircraft
manufacturers
• Technology such as Cisco telepresence and internet meetings
hurting business travel
Porters Five Forces
•
•
•
•
•
Bargaining Power of Buyer- High
Threat from Substitutes- High
Bargaining Power of Suppliers- High
Threat of New Entrants- Moderate
Competitive Rivalry- High
Bargaining Power of Buyers (High)
• Several airlines for consumers to choose from
• Various travel sites to book the lowest fares (
Orbitz, Priceline, Travelocity)
• Frequent flier programs keep customers loyal to
airlines by giving them incentives and rewards to
continue flying on a certain airline
Threat From Substitutes (High)
• High level of threat as costs can push consumers
to use alternative modes of transportation if the
cost is high enough
• Convenience of other travel such as wait times
and security check points at airports can push
people to other forms of travel
• Car, Rail, Bus, boat etc.
• Many business travelers are using technology
instead of travel Ex: (Conference calls, Cisco
Telepresence, etc.)
Bargaining Power of Suppliers (High)
• Only a few major producers of Airplanes,
Boeing, Airbus, Embraer
• Fuel Suppliers have a high level of power
because they control the price per gallon of jet
fuel
• Economies of scale lowers the cost per airplane
ordered when orders are large enough
• Switching costs are high for many airlines who
only fly one type of aircraft
Threat of New Entrants (Moderate)
• High capital start up costs
• Very low rates of return on investment
• Hard to differentiate your product from the
existing competition
• To much competition on price from larger legacy
carriers
• Deregulation of the airline industry has made it
hard for airlines to become profitable
• High congestion of major airports
Competitive Rivalry (High)
• Many other existing airlines
• High Fixed Costs
• Pricing wars between airlines exist at many large
hubs.
• When industry growth is slow it attracts low
margins as competitors fight for market share.
• The price of oil has a significant impact on travel
because the higher oil is, the higher an airline
charges for tickets to try and recoup their
business operation costs.
Conclusions
• Continue to only fly two types of aircrafts to avoid
high switching costs
• Continue to utilize economies of scale when placing
orders with Airbus and Embraer for contracts of
new aircraft purchases
• Continue to serve smaller secondary airports that
are underserved (Ex: Long Beach instead of L.A.)
• Continue to keep your product differentiated by
offering entertainment and continually adding to the
customer experience
• Continue to avoid internet middlemen to sell empty
seat’s that have not been sold
Thank You!
By: Brian Fitzgerald
Southwest Airlines
 American Airlines
 United Airlines
 Delta Airlines

Southwest
American
United
Delta
Founded
1967
1934
1934
1924
Headquarters
Dallas, Texas
Fort Worth,
Texas
Chicago, Illinois
Atlanta, Georgia
Domestic
Presence
Domestic
International
International
International
Generic Strategy
Overall Cost
Leadership
Differentiation
Differentiation
Differentiation
Annual Revenue
12.1 billion
22.17 billion
23.23 billion
31.8 billion
Market Share %
14.1
13.6
10.2
16.6
Profitable ?
Yes
No
Yes
Yes
Business
Strategy Group
Low cost Airline
Legacy Carrier
Legacy Carrier
Legacy Carrier
Core Brands
Southwest
American
Airlines,
American Eagle
United Airlines
United Express
Continental
Delta
Comair
Number of
Aircrafts
537
900
Merger Data not
complete
700
Low Cost Airlines
Legacy Carriers
Low cost airlines typically fly one
type of aircraft and enlist a labor
force which is non union.
Furthermore low cost airlines
attract customers who are willing
to sacrifice some comfort and
convenience in search of the
lowest priced ticket. Often times
seating is not assigned, rather it is
based on a first come first serve
basis. Low cost airlines compete
on a domestic level and typically
do not compete internationally.
Legacy carriers tend to offer more
convenience and service to fliers.
Amenities that legacy carriers have
include meal service, first class,
and many international and non
stop destinations. Also the size of
the legacy carrier impacts the
smaller markets it may serve in
addition to the large markets the
legacy carrier may serve. Legacy
carriers fly many different model
aircrafts





Identical target market for United, American,
Delta
Frequent Business Travelers
Wealthy upper middle class
International Travelers
Travelers who need to make it to certain
destinations that low cost carriers do not
serve




Cost conscious
consumers
Occasional business
travelers
Internet/
technology savvy
customers
Last minute
travelers
Airfare
Destinations
Web
•Offering travelers the lowest fair to attract customers
•Price is the most important aspect to travelers
•Rewards programs and frequent flier programs help customers to stay
loyal to programs that save customers money and reward loyalty
•Route maps and destinations available are what play into the reason why
people chose to fly an airline
• If an airline doesn’t serve a market that a customer wants to fly to, than
the customer will chose another airline
•Use of internet middlemen such as Priceline, Orbitz Expedia
•Use of company internet websites to book travel
Additional
Charges
Alliances
Entertainment
• Baggage fees are charged to recoup operating costs on
flights, they also decrease the weight on airplanes which
lowers the cost of flying
• Fuel surcharges are implemented when jet fuel becomes
costly
• Meals, snacks, pillows, alcoholic beverages, and Magazines
are all luxuries that most airlines charge for now
• Alliances between competitors exist to help customers reach
a destination that the airline company may not serve
• Alliances include (Oneworld, Star, Sky Team)
• In flight movies, beverages, magazines, and internet usage
are all used to entertain customers and to add to the comfort
of customers on flights. Some of these luxuries are charged
for depending on the airline
JetBlue
Southwest American United
Delta
Customer
Experience
9
7
8
8
8
Route System
6
8
9
9
9
Price
8
10
7
6
6
Financial
Resources
7
9
5
7
6
Airline
Profitability
8
9
0
6
6
Airline Growth
9
9
6
7
6
Employee
Satisfaction
8
9
7
7
7
Total
55
61
42
50
48
Southwest
Flying one type of aircraft, empowering employees to make
decisions, Promoting a casual laid back atmosphere for
employees which promotes a strong loyalty to the company
and a commitment to customer satisfaction. furthermore
Southwest does not charge baggage fees
 United, Delta, And American
Offering customers nonstop flights to destinations all over
the United States and internationally, offering a wide variety
of fares and classes on flights. first, business, economy plus,
and economy. These airlines use technology and customer
rewards programs to keep customers loyal. All three
companies use alliances and partners to fly all over the globe



19341978
19782000
2000Present
•Large Growth in industry
• Focus on Customer Experience
•Deregulation and increases in
Competition and Price Wars
• Trouble with Differentiation
and remaining profitable with
the threat of startup airlines
•Focused on switching to an
adapted cost leadership model
• Cost cutting to remain profitable
•Attempted cost leadership with the
introduction of TED airlines a
subsidiary of United which was
discontinued in 2008
United Airlines
19341978
19782000
2000Present
•Large growth and increases in travel
• Customer focus, offering the best
product and service
• Deregulation and completion from
new airlines
• Differentiation and offering more
amenities such as “ more room in
economy class”
•Adding seats back to economy class
to increase revenue
• Attempting cost leadership by
attempting to imitate low cost rivals
American Airlines
19241978
19782000
2000Present
•Large Growth in industry
• Acquisitions of other airline
companies
•Bankruptcy filings by many
airlines including Delta due to
post deregulation competition
•Trouble with differentiation and
remaining profitable with the
threat of startup airlines
•Attempt at switching to a cost
leadership platform, with the
introduction of their low cost
subsidiary Song Airlines.
• Focusing on more international
flights and emerging markets for
growth
Delta Airlines
(Song Airlines) a failed attempt
at cost Leadership by Delta





Southwest has always incorporated the low cost low
frills, and no assigned seating method to conserve
costs
Their method of only flying one type of airplane
(Boeing 737) has helped them to keep costs low and
offer customers the lowest fares possible while
remaining profitable
Cost leadership has always remained their model with
37 straight years of profitability
Deregulation made it lucrative for Southwest to stay
profitable, while their competitors were filing
bankruptcy Southwest was expanding operations and
continuing to stay profitable
Their low cost model has inspired other low cost
startups following deregulation of the airline industry




Over 300 Million United States citizens
Over 703 million passengers flown in 2009
Growth in the industry has averaged 7% a
year in the past decade
Over 6 billion eligible customers across the
globe





Increasing Oil prices causing increased
variable costs to all airlines
The switch to more efficient aircrafts, while
retiring older less fuel efficient aircrafts
Cutting flights to increase capacity on
existing flights
Alliances and mergers are becoming more
common
Union wage concessions and decreased
power of collective bargaining





Cost cutting efforts to increase efficiency
Charging customers for baggage to reduce
weight on flights, and to increase revenue
Fuel Hedging
Charging for Meal Services that were
previously free
Using Internet Middlemen to sell unsold seats





Middle class to upper
middle class families
Vacation Seekers
Business Travelers
Consumers with
disposable income to
afford travel
Students
Target Market
Product type of airlines
can be broken down
into three classes
1. First Class Travelers
2. Business Class
3. Economy Class travel


Certain companies
only offer one type of
class which is
economy Class
Product Type
Characteristics
of people
People who fly are usually of any age from infant to senior
citizen. Income is usually of people who come from a
middleclass to upper middle class background. Family size
can range from small to large. Location of cold weather
climates inspires many Users of airline services to vacation in
warmer climates when weather becomes unfavorable. The
lifestyle of consumers that fly are Vacation seekers, and
business travelers. Furthermore holiday travel to visit relatives
also factors into lifestyle.
Purchase Use/
situation
Cost of Airline ticket depends on destination/Time of year and
season. The purpose of flying is to arrive somewhere quicker
than the alternative of driving or taking a bus, train, or boat.
Brand loyalty exists with frequent flier programs, However the
recent trends suggest consumers make decisions on price not
brand loyalty.
Users needs
and
preferences
Users desire quick transportation, They desire aircrafts that
have more room, and entertainment. The price preference is
the lowest price available. An airline ticket is expensive and
consumers do not liking paying more than they have to
• Recovery in passenger traffic from all time highs in 2007 will continue
• 5.9% percent increase in passenger volume in 2011, carriers are practicing capacity control
to keep flying affordable
United states
• Emerging Countries and European countries will see steady growth in the next decade
International
• Worldwide passenger air travel will see an average of 5.3% a year for the next 20 years
• 44 % of new aircrafts produced will be delivered to Asia
Asia/ Pacific
Rim
• Projected Growth rate of 7.1 % a year for the next 20 years



Free source of marketing
and promoting The
brand
Satisfied customers offer
free word of mouth
advertising one these
sights
Dissatisfied customers
can ruin your reputation
ex: ( united breaking a
musicians instruments
and the artist making a
song called “ united
breaks guitars”) This
song received millions of
hits on Youtube






Airline Industry will see small growth
domestically in the coming years
Major growth will be in Asian countries for the
next couple of decades
Mergers and alliances will continue to dominate
the industry
Without an aggressive switch to a cost leadership
platform it may continue to be impossible to
achieve profitability
Cost cutting will continue
Customer service is crucial to preserve reputation
and avoid negative publicity from the media and
social media
Flying High With JetBlue
An Internal Analysis
By: Brian Fitzgerald
The JetBlue Mission
 JetBlue's goal is to be the
leading low cost passenger
airline through offering
customers a high quality
product and exceptional
customer service
JetBlue's Core Values
 Safety
 Caring
 Integrity
 Passion
 Fun
JetBlue's Business Model
Keeping Costs Low
• Flying only two types of aircrafts
Keeping Customers Happy
• Offering in-flight entertainment to customers such
as complimentary DIRECTV programming
Keeping Employees Happy
• Happy employees perform at higher levels and
serve customers better
Maintaining a High Level
of Customer Satisfaction
• Happy customers are customers that are more
likely to fly JetBlue again
Avoiding Unionization
Using Feedback
• Non union airline companies have lower costs and
better relations with employees
• Feedback from customers allows JetBlue to
continually improve operations and customer
satisfaction
Passenger Growth
15.2 %
26.0 %
25.0 %
30.7 %
56.7 %
84.3%
273.6 %
2.4 %
2.4 %
JetBlue’s destination and fleet growth
Year
Number of
Destinations
% Growth
Number of
Aircrafts
% Growth
2002
19
N/A
37
N/A
2003
20
5.2%
50
35.1%
2004
28
40.0%
66
32.0%
2005
32
14.3%
71
7.6%
2006
45
40.6%
103
45.1%
2007
50
11.1%
121
17.5%
2008
52
4.0%
138
14.0%
2009
56
7.7%
151
9.4%
Current
63
12.5%
160
6.0%
JetBlue's Route Map
Financial Information
Year
2010
Sales
3.78 Billion
Net Income
97 Million
EPS
.31
2009
2008
2007
3.29 Billion
3.39 Billion
2.84 Billion
58 Million
(85 Million)
(12 Million)
.22
-.37
.06
2006
2005
2.36 Billion
1.7 Billion
(7 Million)
(25 Million)
-.04
-.16
JetBlue has been one of the most profitable airlines in the United States,
however during the 2005-2008 period, rapid expansion and high fuel prices
increased costs and hurt profitability. JetBlue's slowing growth model has
helped the airline return to profitability as of 2008
Change In Distribution/ Sales
 Increased growth in Latin America
 Growth of the airline has spread to several new locations
 Increased usage of travel booking on their website
www.jetblue.com
 The implementation of a two aircraft model system opposed
to one in the past
 Increased usage of the JetBlue “True-blue” rewards program
JetBlue’s Resources
 Airplanes
 Employees
 Airports
 Alliances
 Capital
JetBlue's Assets
 Airplanes
 Intellectual capital
 Brand
 Property/Plant/Equipment
 Fuel
 Gate Contracts
 Capital
BCG Matrix
JetBlue would be
categorized as a star
because of its higher
than industry average
growth rate, and a large
amount of market share
JetBlue’s value Chain
Source
Inbound Logistics
Primary location is the hub at New York's JFK airport which provides
a market of potentially 21 million customers in the area
Outbound Logistics Serving their west coast hub at Long Beach Municipal airport which is
a secondary airport to Los Angels market. Each aircraft in JetBlue's
fleet averaged a flying time of 12.6 hours a day, which is better than
any other major airline
Operations
650 daily flights to 63 destinations in 21 states, and 10 countries in
the Caribbean and Latin America. Furthermore JetBlue has a strong
corporate culture and well developed management team that is
committed to keeping costs low and service high
Marketing and sales JetBlue markets their services on the radio, television, newspaper,
social media, they also rely heavily on word of mouth advertising by
satisfied customers.
Service
JetBlue offers DIRECTV in-flight entertainment to better satisfy the
customer. JetBlue also schedules minimal ground time on their flights
to better utilize the fleet
JetBlue's Value Chain support activities
Technological
Development
Human
Resource
Management
General
Administration
• Each Airbus A320 is equipped with 162 all leather seats in a one class layout
• The A320 is fuel efficient and reliable and sports a wider cabin than many
competitors who fly the Boeing 737 aircraft
• All of JetBlue's ticketing is ticketless and they heavily advertise booking on
their website Jetblue.com
• JetBlue takes great pride in their corporate culture and trains and
equips all employees to serve customers at the highest level
• Many employees who work for JetBlue are part time employees
who work from home and are offered work flexibility and
customization in their scheduling
• JetBlue's management team and engineers are dedicated to cutting costs while
keeping service high
• They fly only two types of aircrafts to keep maintenance and service costs low.
This also allows them to save on training costs
SWOT analysis
Strengths
•Utilization of technology to eliminate tickets which has saved
in paper costs and allowed customers greater convenience when
flying
•Motivated and happy workforce, many employees at JetBlue
take lower pay in favor of better work conditions and happiness
•Having the best accommodations and entertainment as a lowcost airline, usage of in-flight DIRECTV and free snacks and
beverages
• Superior cost structure which allows for low competitive
ticket pricing
Weaknesses
•Weak Frequent Flier program that doesn’t reward as well as other
competitors in the industry
• Small route system, while JetBlue has added many destination since
opening many potential customers choose other airlines because JetBlue
does not fly to their destination
SWOT Analysis
Opportunities
• Many competitors cannot match the cost structure that
JetBlue has, this should be seen as an opportunity to
expand to new markets and to continue to compete
heavily on price with other carriers. This can lead to
stealing more market share from competitors
• Expanding the frequent flier program to keep
customers loyal
• Large Hispanic population growth within the United
States
Threats
• Expansion could start to show new growing pains for JetBlue,
such as an increase in operating costs and decreases in corporate
culture, as running a larger airline could cause
• Unionization
• Competitive reaction; Price wars could ensue if JetBlue keeps
undercutting larger airlines
JetBlue's Generic Strategy
Low Cost
Differentiation
•
•
•
•
Low fares and flying only newer fuel efficient aircrafts
Flying airplanes for an average of 12.9 hours a day
Flying point to point instead of hub and spoke
Low distribution costs because they only offer
ticketless travel
•
•
•
•
•
Extra wide leather seats
Pre assigned seating
Exceptional customer service
Free 36 channels of DIRECTV on every flight
Customer loyalty program
Why Low cost differentiation?
Differentiation
 Keeps JetBlue's
product distinguishable
 Too many competitors
who are an extreme in
either direction
 Mixing low cost and
differentiation gives
customers the best of
both worlds offering
high quality at a low
affordable price
Low
Cost
JetBlue
Southwest
American
United
Delta
Grand Strategy
Organic
Growth
JetBlue is still dedicated to growing the airline by adding
more aircrafts and flights every year, their focus over the
past decade has been growing without the help of mergers
or acquisitions however there are talks about this changing.
Overall JetBlue dedicates their high quality product and
customer following to their success
Acquisitions and
Mergers
JetBlue has explored several opportunities of possibly buying out a key
competitor to grow the airline
International Markets
 Currently Serves 10 cities in Latin America and Mexico
 JetBlue has seen large success serving these markets from
their hub in New York which has a large population of Latin
American citizens who wish to visit friends and family
 Although JetBlue has seen success serving these destinations,
they do not see any immediate expansion plans further than
Latin America
Future Plans/ Opportunity
 Continuing to grow at a steady pace to meet customer




demand
Possibility of growth into more foreign markets
Acquisition of another low cost carrier to increase the
company size and market share
Continued focus on serving customers and adding to the
JetBlue Experience
Adding more flights to the high growth market of Latin
America
Conclusions
 JetBlue has remained one of the only profitable airlines in the





past decade
JetBlue has seen tremendous success as a low-cost
differentiated airline
Further expansion could add more cost to the airlines low
cost model
High quality service, and customer service has helped the
airline grow and prosper
Word of mouth marketing will continue to help the airline
Keeping costs low are key to the profitability of JetBlue
Thank You for flying
with us