Jetblue Is A Low Cost, High Service Airline

Given the fierce competition in the airlines industry and the additional competition being offered by the new ultra-low cost carriers, it has become imperative for Southwest Airlines to find a solution that will be sustainable and insulate them verses these and any other future threats. Southwest has initiated a merger proposal with JetBlue that will result in the newly formed SouthwestBlue being much larger and able to compete for control of the North American Continent as the number one provider for customers concerned with both low-cost and excellent customer service. Because both Southwest and JetBlue have similar core values, customer service policies, and business models, it will be an easier merger than it would be for two carriers with drastically different layouts.

JetBlue Airways, the latest entrant in the airlines industry has gone through the initial stages (entrepreneurial and collectivity) of the organizational life cycle rapidly under the successful leadership of David Neelman. JetBlue Airways is currently in the formalization stage of the life cycle where in it needs to create procedures and control systems to effectively manage its growth. Also as it proceeds to grow further to reach the elaboration stage, JetBlue needs to continue to align itself with the environment in order to maintain its sustained growth.

JetBlue is a pro at utilizing its resources and structure. As such, JetBlue has proven to be efficient in its internal environment. Out of the physical and human aspects of the internal environment JetBlue focuses on human as the key factor. JetBlue views its employees and their skills as the key to a successful structure by emphasizing elements of loyalty, satisfaction, service quality, productivity, capability, and output quality. JetBlue reflects a culture of employees that understand how to retain customers and can perform under various situations with an equally varied consumer base. In addition to human capital, JetBlue uses physical assets to set them apart from the rest. The airline fleet of JetBlue is very precisely selected. From its new Airbus A321 to its Airbus 320, JetBlue prides itself on comfort and luxury. Other perks offered by JetBlue include lower priced airfare compared to that of its competitors and in-flight entertainment options that succeed its competition. Internal weaknesses include a

This section details the history of JetBlue, focusing on the activities of founder, David Neeleman.

The key external factors like the growth in the economy, disposable income, and fuel prices have negatively affected JetBlue. It was compelled to change its strategy several times and in 2011 had an income of $86 million down from $97 million in 2010. The growing consumer interest in leisure travel has positively affected JetBlue. The success of JetBlue has been attributed to growing consumer interest in leisure travel.

1. There are a few trends in the US airline industry. One is consolidation, wherein existing players merge in an attempt to lower their costs and generate operating synergies. The most recent major merger was the United Continental merger, which is still an ongoing affair, but has created the largest airline in the United States by market share (Martin, 2012). Another trend is towards low-cost carriers. In the US, Southwest has been a long-running success and JetBlue a strong new competitor, but in other countries this business model has proven exceptionally successful. The third major trend is the upward trend in jet fuel prices, and the increasing importance that this puts on hedging fuel prices and capacity management (Hinton, 2011).

Based on the results gathered from the Telegraph and A – Z Airline Reviews it shows that Jet Star has the lowest customer rating based on passenger reviews. The rating from the same data gathered shows that Iberia is the top rated passenger review airlines. Jet Star was the lowest airline with 15.1 percent negative reviews and 20 percent satisfaction. Compared to Iberia airlines who was the highest airline with 12.8 percent negative reviews and 60 percent customer satisfaction (A-Z Airline) (Smith). These are two airlines that focus on two different things Jet Star focuses on being a low cost airline and is a no frills airline. Whereas Iberia focuses on customer service and providing the best experience for its customers. Bigger airline

David Neeleman, CEO of JetBlue Airways and his management team have realized that JetBlue is still making profit despite the many challenges facing the airline industry after the September 11th 2001 terrorist attacks. Despite these positive returns; JetBlue plans on raising capital through an Initial Public Offering (IPO) to support its aggressive growth and to also offset portfolio losses to their venture capital

JetBlue Airlines, a low-fare commercial airline, has planned to go public towards the end of 2001. During the process the firm had restructured their initial price from $22- 24 per share to $26 – 28 per share.

JetBlue has been one of the most successful airlines since it first entered the industry in December of 1999. Founder, David Neeleman, set out to succeed by offering low-cost air travel in hopes of perpetuating his services to as many people as he could across the US. He was very adamant about having a very customer oriented business that catered to the needs of all. In doing so he wanted to emphatically promote his obligation to safety, caring, integrity, passion, while allowing the customers to have fun while traveling. There motto helps portray Neeleman’s belief stating “You Above All”. His primary goals had been to follow Southwest’s objectives of offering low rates to customers, focusing on customer’s needs and comforts while distinguishing itself with their amenities. Neeleman’s other goal was to establish his low-cost leadership strategy by concentrating his airline in a large popular metropolitan area that already is already correlated with high airfare (Peterson, 2004). He then began operating based out of the New York metropolitan area at John F. Kennedy International airport with his secondary locations in Washington D.C., Boston and Los Angeles.

The financing decision which is aimed at securing the purchase of the new 100-seat Embraer E190 aircraft would allow JetBlue to enter smaller markets while maintaining low operating costs, and increase flight frequency on existing routes. The low fares offered by JetBlue would allow it to attract new passengers who might otherwise not fly. Earnings from this market segment is expected to contribute to the profitability and positive financial performance of the company

1. JetBlue's strategy for success in the marketplace is based on the cost leadership strategy, as outlined by Michael Porter (QuickMBA, 2010). This strategy relies on delivering products or services at a lower price than competitors, and using that cost leadership as the basis by which to attract customers. JetBlue essentially built their business model after Southwest Airlines, and the company's founders had experience with Southwest that helped them learn about the business. The JetBlue approach to cost leadership is focused on the mass market.

Jet Blue decided its IPO price should be in the range of $22-$24 per share and communicated this to the investment community. The underwriting team at Morgan Stanley forecasted excess demand from investors for the 5.5 million shares of the Jet Blue IPO, and subsequently filed for an increase in the share price to a new range of $25 to $26 per share. After raising the stock price, Jet Blue and Morgan Stanley felt that there was still tremendous demand and became worried of that the share price was still too low. Management became concerned and fragmented opinions surfaced on how to proceed. The US economy remained stagnant and the airline industry was especially hit hard; failing to offer the share price at an equilibrium price could potentially hamper Jet Blue’s access to the capital markets in the future and affect the market value of the company.

•Neeleman offered passengers a unique flying experience by providing new aircrafts, simple and low fares, leather seats, free Live TV at every seat, pre-assigned seating, reliable performance, and high-quality customer service. JetBlue focused on point-to-point service to large metropolitan areas with high average fares or highly traveled markets that were underserved. JetBlue’s operating strategy had produced the lowest cost per available seat mile of any of the major U.S. airlines in 2001—6.98 cents vs. 10.08 cents.

JetBlue was established in 1999, and was the third airline start-up for founder and CEO David Neeleman. Neeleman managed to gather $130 million, the most ever raised for a start-up airline, from investors that included Chase Capital and financier George Soros. With the large start-up capital he purchased new Airbus A320 jets equipped with satellite TV, a first in the industry. In 2004 the company ordered an additional 30 new A320 aircrafts from Airbus. The airlines first flight was from New York to Fort Lauderdale in 2000. During the year, the airline added nine more destinations in California, Florida, New York, Utah, and