Jet Blue Case 10 (10)

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Pace University *

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490

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Management

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Feb 20, 2024

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docx

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2

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The competitive advantages of JetBlue are low cost, good customer experience, and adaptability. JetBlue at one point had been rated as a top low cost airline. That offered premium services and near luxury, for low costs. JetBlue also had the advantage of a good customer experience, offering free Wifi, a TV at every seat, and premium branded snacks. JetBlue was also adaptable, when in response to high fuel costs they gave passengers more legroom which made the plane lighter, saving fuel, improving customer experience, and lowering the amount of necessary cabin crew. The merits of these advantages are clear, but the demerits are harder to ascertain. One issue that comes about is JetBlue having a low cost, premium service which becomes difficult to maintain during periods of economic downturn and uncertainty.  Key forces in the general and industry environments that affect JetBlue are fuel costs, the COVID-19 pandemic, staffing issues and the competitive pricing environment. In 2022, fuel costs had gone up for JetBlue 14% from 2019. The prices were expected to increase, and JetBlue had no hedging contracts to protect their exposure to rising fuel costs. The COVID-19 pandemic slowed down air travel dramatically(60%). Even as recent as 2022, only 70% of passengers returned. Staffing issues are another problem plaguing JetBlue. 83% of airlines were having trouble recruiting enough workers to meet their pre-pandemic numbers, and a pilot shortage brought about concerns of overworked employees and safety issues. This would go on to cause flight cancellations across carriers. In 2014, JetBlue’s pilots voted to join a union, having historically not belonged to one. Further concerns of employee retention and costs would be brought about because by 2022, 46% of JetBlue employees were represented by unions. Some of these unions were engaged in contract negotiations. Finally the competitive pricing environment makes it hard for JetBlue to maintain its low cost, luxury services. An airline like Spirit has fares 50% lower than JetBlue, making them more attractive to price conscious customers. JetBlue became less of a low cost carrier through the years, trying to attract “The premium leisure traveler” Resources and assets that JetBlue has to give it a competitive advantage are its fleet of planes and leadership. At one point the company exclusively used a fleet of A320 and A3212. These planes allowed for more efficient routes, maintenance, and scheduling. These planes also had leather seats with more overhead storage space and leg room. They would eventually expand their fleet to include more of their current planes, and under Dave Barger would purchase Embraer E-190 planes which would allow them to serve smaller airports. JetBlue also had good leadership, namely in David Neeleman and Dave Barger. Under Neeleman, JetBlue was set aside from competitors by luxury services and low costs. Neeleman also pioneered electronic ticket sales and in 2001 the company’s profits were among the industry’s highest. Under Barger, JetBlue expanded to servicing many other destinations and in 2012 JetBlue ranked highest in consumer satisfaction among low cost carriers in North America. I don’t believe the competitive advantage of JetBlue is sustainable. With such competitive pricing in the industry, JetBlue has something of an identity crisis.
JetBlue tries to be both luxurious and low cost, which is not sustainable at times of downturn. Looking at Spirit which is far cheaper than JetBlue, they are the airline which would attract the most budget conscious fliers. JetBlue is not luxurious enough to compete with luxury airliners but not cheap enough to compete with budget airlines. With more and more workers unionizing making talent difficult and expensive to maintain JetBlue faces a problem. Fuel costs are also predicted to rise making matters more difficult. Finally, once known for never canceling flights, JetBlue was one of the worst offenders in the post-pandemic. The company as of 2022 was down 11% from their public debut, and this is a canary in the coal mine for what is to come of JetBlue if they cannot innovate and maintain a competitive advantage.
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