JetBlue Airways: Managing Growth case study looks into the actions of the management of the airline corporation and presents recommendations regarding the plan of action that should be followed through by the airline carrier to attain greater heights.
Robert S. Huckman and Gary P. Pisano
Harvard Business Review (609046-PDF-ENG)
October 10, 2008
Case questions answered:
- Conduct financial analysis and develop implications on a firm’s strategy. Specifically, what trends do you see in the expenses of JetBlue? What are the social, political, and economic forces influencing JetBlue’s performance, and what challenges would you foresee in JetBlue’s striving to reposition its brand identity?
- Develop a recommendations(s) strategy. Provide an overview of estimated time and required resources.
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JetBlue Airways: Managing Growth Case Answers
Abstract – JetBlue Airways: Managing Growth Case Study Report
This report aims to examine and analyze the low-cost carrier (LCC) JetBlue Airways’ business. Taking a time frame of the past three years, i.e., 2017-19, this report will examine the financial standings, airline business factors, and marketing strategy of the brand.
Towards the end, it will include recommendations regarding the plan of action that should be followed through by the airline carrier to attain greater heights.
Introduction – JetBlue Airways Corporation
JetBlue Airways Corporation, better known as JetBlue, is the 5th largest airline in the United States. As of 2019, it serves 101 destinations in the US, Central America, Latin America, the Caribbean, and Mexico.
To present the immense popularity and profits the airline carrier has enjoyed, it should draw your attention to the fact that JetBlue was one of the only airlines to remain profitable after the market drop after 9/11.
Other brands began to target their supreme market presence by launching mini-rival carriers. Delta launched Song and Ted, both of which soon dissipated and were reabsorbed. Not only is JetBlue good at what it does, but it remains profitable despite the several free offerings it makes.
In 2005, JetBlue suffered losses of up to $20 million. However, the next year, it cut those losses to $1 million and was even able to show a profitable next quarter.
Airline business factors
Strong Brand Identity
JetBlue Airways has maintained a strong brand identity with its customers by regularly offering them insight via pictures and mini-tales on their Instagram blog ‘Out of the Blue.’ It has been able to engineer a fun, easygoing persona that resonates with its customers (SWOT & PESTLE.com, 2018).
Though JetBlue is a low-cost airline, it has made every effort to ensure that it does not come across as cheap. It provides several free services, such as free luggage, change fees, & cancellation. Complimentary beverages & snacks are also provided to their customers.
Furthermore, it had proved itself to be a tool for the people as the few days of the calm before Hurricane Irma struck, several flights hiked prices to take advantage of the upcoming disaster. However, JetBlue dropped its prices to as cheap as $99 to aid people in evacuation.
New and Efficient Aircraft
JetBlue’s founder purchased 60 A220-300 aircraft in 2019, allowing the airline to serve thinner routes sans compromise on cost. This led to the addition of 5 new routes pan-US.
JetBlue Airways also said that they would be adding nearly two dozen more flights to existing routes to improve existing network performances and build up key markets.
Less International Destinations
The airline currently serves 101 destinations & all of them focus on the Caribbean & North American destinations. The airline has never leaped to go to Europe because international routes are longer. The argument posed by them is that pursuing it would increase complexity, cost, and additional challenges to current routes.
High Cost of Operation
JetBlue Airways has set ambitious cost targets to emerge as a winner in terms of accommodating climate change without the business suffering. The target cost growth is only 1% or less from 2018-20. By using this tactic, the company aims to save $250-300 million on an annual savings basis by 2020.
However, this target has been difficult to achieve as pilots push the market to increase their pay-raise, maintenance & marketing costs rise, along with the airline’s tactic of reducing capacity to save a larger amount.
The CEO has hinted at expansion with “New possibilities with the A321LR option” seen as a part of its recent advertisements. He also believes that there are opportunities around the northern rim of Latin & Central America.
Introduction of New Planes
The brand is open to expanding its services in the European sky. JetBlue Airways will have the option to convert A321 neo orders into long-range A321-LR (long-range) soon.
The company stated that its agreement with Airbus would result in the addition of 30 more A321s to its fleet over the next seven years. A further 15 A321neo aircraft will begin to arrive in 2020. A new long-range variant of the A321 could be the first to fly across the Atlantic.
Rising Fuel Prices
The brand recently announced a fare hike due to rising fuel prices and travel demand. Its fees now match those of its competitors, which may bring down its sales as customers are increasingly dissatisfied with the new fares.
Additionally, the company has been aggressively amassing more aircraft to its fleet since 2016. This is in preparation for the assumption that JetBlue’s growth curve over the next eight years will be massive. The company has 127 aircraft & 10 engines on order through 2023. Its current fleet has 203 aircraft & these orders point to a ramp-up of its fleet numbers by a stunning 60%.
Political factors influencing the decisions made by JetBlue Airways are:
- Political stability and the importance of the Regional airline sector.
- Risk of invasion by the military
- Level of corruption in the Services sector.
- Bureaucracy and interference in the Regional Airlines industry by the government.
- Legal framework for contract enforcement
- Intellectual property protection
- Trade regulations & tariffs related to Services
- Favored trading partners
- Anti-trust laws related to Regional Airlines
- Pricing regulations
- Taxation rates
- Wage laws on minimum wage and overtime rates
- Labor laws on workweek regulations and benefits of employees
- Services sector industrial safety regulations
These must be taken into consideration by JetBlue Airways…
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