Bringing humanity back to air travel jet blue


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Strategic look on JetBlue in 2010. Written for Business Strategy Course at FSU.

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Bringing humanity back to air travel jet blue

  1. 1.  A free baggage allowance (under 50 pounds) JetPaws- for your pet travel needs TRUE Blue loyalty program Access to low cost, luxury flights Wifi and Inflight Entertainment Gift Cards
  2. 2.  Later in this PowerPoint you will find a Matrix with all of the positions; the reasons will be in the meat of this PowerPoint. The BCG Growth-Share Matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970s. It is based on the observation that a companys business units can be classified into four categories based on combinations of market growth and market share relative to the largest competitor, hence the name "growth-share". Market growth serves as a proxy for industry attractiveness, and relative market share serves as a proxy for competitive advantage. The growth- share matrix thus maps the business unit positions within these two important determinants of profitability. ◦ (
  3. 3.  American Airlines Southwest Airlines United/Continental Airline Merger, now called United Continental Holdings
  4. 4. 2008 figures JetBLue Southwest United Contine- American True Blue Program Rapid Rewards ntal% of 3.7% 6.4% 8.3% 8.5% Almost 10%passengersthat flew onptsNumber of 297,000 2.8m 2.3m 1.6m 3.1 mtravel awardsissuedPoints earned 6 Points for 2 Points per 25 every dollar, any round-trip miles (booked per online) dollarMiles/Points 10,000 points 16 credits 25000 25000needed to miles milesredeem around-tripflight in NorthAmerica Sources: sec fillings and
  5. 5.  1- American Airlines 2- Continental Airlines 3- United airlines 4- Southwest Airlines 5- JetBlue Airlines
  6. 6.  OPERATIONS COSTS FFPs are big operations, employing hundreds of marketing, customer service and technical staff. Other significant costs: facilities, computer hardware and software, phone systems. COMMUNICATIONS COSTS Member communications: enrollment materials, program brochures, newsletters, postage, etc. TRAVEL AWARDS COSTS Travel award costs depend on whether the member uses a free award ticket on the host airline, or an award on one of the program partners. 1. When a member uses a free ticket on the host airline, the costs include... (a) Direct costs (extra costs of meals, fuel, etc. required to carry an incremental passenger) (b) Displacement costs (where a non-paying passenger occupies a seat which would otherwise be occupied by a paying passenger) (c) Diversion costs (where a customer uses an award instead of buying a ticket) Whereas (a) will always be a cost, (b) and (c) may or may not apply, depending on how full the flight is, and whether the member would have traveled even if hed had to pay for the ticket. 2. When a member uses an award on a program partner... The host pays the partner company, in essence buying the award for the member. Typically the rate would be between 1-2 cents per redeemed mile. Example: A free trip to London on AAdvantage partner British Airways (available for 50,000 miles) would "cost" AA between $500 and $1000, depending on the per-mile rate negotiated between AA and BA. Assuming the member earned those 50,000 miles flying on AA, and AA earned on average 10 cents per-flown-mile, the award would amount to a 10-20% rebate to the member (simply the members revenue contribution to AA, versus the cost to AA of the award ticket purchased from BA).
  7. 7.  PARTNER REVENUES Because FFPs are such effective marketing programs, many companies are willing to pay for the privilege of participating in them as program partners. (Such partnering also benefits the FFP host company, which wants its FFP to boast a wide array of high-quality partners.) Typically, a partner company pays the host company 1-2 cents per mile earned when a member uses the partners product. (These expenses are counted against the advertising or sales promotion budget, and can be significant. A hotel giving 500 FFP miles (@$.01 = $5) for a $100/night room stay suffers a 5% yield dilution, right off the top.) ADVERTISING SAVINGS Also counted on the revenue side of the ledger are the savings FFP marketing affords over mass-market advertising. Because FFPs allow targeted communications with the airlines proven customers, it is not necessary to spend as much on expensive (and inefficient) print and broadcast advertising to maintain the interest and loyalty of current customers. The dollars "earned" through these savings run into the millions.
  8. 8.  American Airlines has issued the most rewards, which means that they have had people accumulate the most points, which means more people are using the program. ◦ AA was one of the first to implement a rewards program AA has the highest percentage of passengers using its program JetBlue has the lowest percentage and the lowest number of awards issued ◦ JetBlue is also one of the newest airlines and has one of the newest loyalty programs, so they have a lot of room for growth, a lot of potential, especially considering how well they have done in other areas.
  9. 9. SuggestionsIn order for JetBlue to increase their market share they shouldcontinue to expand and remain profitable. Things look positivefor this relatively new airline, but they must remain competitivethrough the things that have allowed them to be competitive–their marketing, comfortable flights, pet friendliness, low costand entertainment.Another suggestion is that JetBlue could better promote theprogram through Viral Videos over the internet.A third suggestion is to create a forum where answers can befound for questions about loyalty programs. They do have a FAQ;however, I had many questions that I had to search diligently for–the average consumer would most likely give up
  10. 10. Because they matter Pet Programs
  11. 11.  P.A.W.S, stands for ―Pets are welcome at Southwest‖- Southwest JetPaws- JetBlue United Airlines, no pet program, just a pet policy Continental Airlines, no pet program, just a pet policy American Airlines, no pet program, just a pet policy
  12. 12.  JetPaws is JetBlues exclusive program designed to provide pets and their owners the tips and tools they need for a smooth trip from start to finish. Were simply committed to each and every one of our customers—including the four-legged ones. Theres no charge and the program provides: Pet carrier bag tag - a bag tag will be attached to your pet carrier at check in to let everyone know your pet is ready to jet. Travel Petiquette™ - a handy list of JetBlues social graces of pet travel. TrueBlue® points - youll earn 300 TrueBlue points each way when traveling with your pet. If youre not a TrueBlue member, sign up now, its free! JetPaws welcome email - once you book your pet, you will receive a welcome email with useful information such as next steps, Petiquette and travel tips. Free Pet Travel Guide - a useful, downloadable e-booklet featuring: The ins and outs of jetting with your pet from the moment you book your flight to your arrival at your final destination. Travel Petiquette Pet-friendly hotels, restaurants and parks plus animal hospitals in some of JetBlues major cities Accepts small dogs and cats $100 dollar one way fee per pet Travelers earn 300 TrueBlue points if they travel with a pet. 
  13. 13.  $75 dollar charge each way Only for small cats and dogs Pets must be accompanied by owner Not as developed of a program- marketing wise. ◦ JetBlue has a more focused website whereas southwest still seems like others that appear to just have a pet policy.
  14. 14.  Only Cats and dogs allowed Allowed Travel Destinations ◦ Flights within the 48 contiguous United States, Alaska, Puerto Rico, St. Thomas and St. Croix. ◦ From the U.S. to Canada, Mexico and the Caribbean provided the country of arrival permits entry. Free within US, 100 dollar charge outside of US Pets can travel alone
  15. 15.  Accepts birds, dogs, rabbits, guinea pigs, and other animals Unaccompanied pets are allowed Charge between 175 and 250 dollars per flight
  16. 16.  125 dollars to transfer a pet one way Can earn miles through Petpass program
  17. 17.  American Airlines has the least cost, but JetBlue has the best marketing. United Airlines accepts more animals, but charges substantially more JetBlue also appears to have the most user- friendly website, the appearance of empathy for the desire that customers have for their pets to be safe.
  18. 18.  JetBlue is doing a great job at promoting the ―new‖ policy; however, they should concentrate a percentage of their efforts on viral videos and social media– something they are doing well with the overall company. They have a Facebook, but it may be even more helpful if they connect a PetPaws Facebook page with the JetBlue one– a page where pet owners can create a community. The JetBlue page has 430,557 likes. That is great!
  19. 19.  JetBlue (domestic, economy) ◦ First bag free, and carry on.  All checked bags must not exceed 50 pounds  $30* fee for checking a second bag and a $75 fee for a third bag American Airlines (domestic, economy) ◦ 25 dollars for first checked In bag  Bags must not exceed 50 pounds  $35* fee for checking a second bag, $100 dollars for a 3rd bag. Southwest Airlines (domestic, economy) ◦ First two bags are included in ticket  Bags must not exceed 50 pounds  $50 dollar fee for a 3rd through 9th bag. Continental Airlines (domestic, economy) ◦ First two bags are free if you are part of their elite/first class loyalty program, or if you are in the military; otherwise first and second bag check ins are 23 and 32 (online) and 25 and 35at the airport. United Airlines (domestic, economy) ◦ First bag is 25 dollars, second bag is 35 dollars.
  20. 20.  Based on customer cost, two bags, online purchase, and the average flyer (someone that is not part of a loyalty program):Tied-4- AmericanTied-4- United3- Continental2- JetBlue1- Southwest Airlines
  21. 21.  Not much to suggest here: JetBlue has an advantage to its other competitors when it comes to price for luggage- and that is a huge competitive advantage. The main concern is southwest, which happens to be one of its biggest rivals in the Low cost carrier market. It is necessary for JetBlue to ensure that it does not get beaten due to lower prices by its competitors. Factors that would allow them to lower prices would include changes in oil prices and other operational costs.
  22. 22.  Major differences: ◦ United Airlines promotes their cards as selling miles and not gift cards ◦ Southwest has the greatest amount you can purchase, $25,000 ◦ All other airlines provide gift cards ◦ Gift cards are nothing new ◦ All these gift cards rank similarly Conclusion: all companies are doing a great job.
  23. 23.  One flight, five airlines, who offers the best price? JetBlue- $183- 3rd Place Continetal- $163- Tied American Airlines- $158- 1st Place United Airlines- $163- Tied Southwest- does not offer flights to Newark A Comparison for fun Side By Side Comparison of Flight based on ticket details: Departure: December 12, 2010 One Way ticket from Fort Lauderdale Airport to Newark, New Jersey Departing before Noon Based on the lowest price
  24. 24.  I found it interesting that JetBlue didn’t have the greatest deal, considering that they are an LCC. However, it might put things into perspective to remember that JetBlue offers things that other Airlines do not: ◦ A lot more leg room and comfort ◦ Free Wifi, TV per seat, and movies ◦ And, according to JD Power and Associates, great service. The airline industry is not a new industry; however, JetBlue has managed to be one of the top airlines in an industry that is known for entry barriers and extreme competition, so I would still classify them as question marks due to their high growth over the last ten years, but small market share (see next slide). JetBlue should continue being competitive and find ways to continue cutting cost so they can compete in their niche of low cost, luxury travel.
  25. 25. 2010 Top 10 U.S. Airlines Market Share based on Revenue Passenger Miles[29]Rank Carrier Market Share1 American 13.8%2 Southwest 13.8%3 Delta 11.8%4 United 10.4%5 US Airways 8.0%6 Continental 7.6%7 Northwest 4.8%8 JetBlue 4.3%9 AirTran 3.4%10 Alaska 3.1%11 Other 19%
  26. 26.  American Airlines: flights over 3 hours are 12.95 or 30 day subscription of $29.95 United Airlines: ranges from from $8-$13 Southwest Airlines: 5 dollars JetBlue: free wifi access Continental Airlines: no wifi  Rankings based on likelihood to attract customers:  1- Jetblue  2- Southwest  3-Tied for United and American Airlines  4- Continental Airlines
  27. 27.  JetBlue has done a great job of promoting there free Wi-Fi, even though carriers that offer Wi-Fi at a charge usually don’t ask for more than 13 dollars– I find that interesting considering that people will make a huge deal out of this, but, alas, it’s psychology. JetBlue probably loses money doing this, but makes up for it in the attention it receives. I recommend that JetBlue continue promoting their Wi-Fi; however, it may be a competitive parity because other companies, like continental are already talking about installing wireless internet. Also, they should always be conscious of Southwestern because they are one of their most similar/dangerous competitors .
  28. 28. JetPaws TrueBlue Wireless Internet FLightsGift Cards Baggage
  29. 29. One of the largest independent regional airlines in the United States.According to, Now JetBlue customers can enjoy smooth,simple connections from Bostons Logan International Airport to Nantucket(ACK), Marthas Vineyard (MVY), Provincetown (PVC), Hyannis (HYA) andRutland, Vermont (RUT) on Cape Air. Customers can book connectingflights between Cape Air’s New England cities and JetBlue cities online Related Diversification
  30. 30. On February 14, 2007, JetBlue entered into its first codeshareagreement, it happened with Cape Air. Codesharing: the practice of multiple airlines selling space on the same flights, so Aer Lingus, Lufthansa, and Cape Air can fly on JetBlue planes, and the other way around, allowing customers more freedom and less hassle JetBlue Airways announced, that it had ―entered into a marketing partnership with Cape Air, an airline based in Hyannis, MA, to provide easy connecting service beyond JetBlues Boston focus city to four new destinations served by Cape Air: Nantucket, Marthas Vineyard, Provincetown, and Hyannis, MA.‖
  31. 31. JetBlue customers can now easily connect to Ireland’s Dublin and Shannonairports through our partnership with Aer Lingus, Ireland’s airlineproviding true Irish hospitality, low fares and access to great destinations. Related Diversification
  32. 32.  On February 6th 2007, USA today reported JetBlues plans to develop an alliance with Aer Lingus. On February 1st 2008, JetBlue announced details about this alliance On April 30th 2008, JetBlue and Aer Lingus ―celebrated their partnership by welcoming the first customers connecting between the two airlines at New Yorks John F. Kennedy International Airport. The innovative partnership enables Irish and U.S. customers to book a single reservation between Ireland and more than 25 U.S. destinations, connecting through JetBlues home base at JFK.‖ 
  33. 33.  One of the world’s largest airlines, Lufthansa flies from 21 North American cities to over 200 destinations in nearly 80 countries, through its Frankfurt and Munich hubs. Together with its partners, Lufthansa serves 915 destinations in 160 countries.  An industry innovator, Lufthansa has long been committed to environmental care and sustainability, operating the most technically- advanced and fuel-efficient fleet in the world. Lufthansa will be the largest European operator of the Airbus A380 and is the launch customer for the new Boeing 747-8. For more information please visit  /lufthansa/  Lufthansa currently owns a 19 percentLufthansa stake in JetBlue. Related Diversification
  34. 34. On January 22, 2008, Lufthansa and JetBlue completed their stock purchase transactionthat established a 19 percent ownership of JetBlue by LufthansaOn March 12, 2008, Financial Times reported Lufthansa’s plan for an alliance with JetBlue.On August 31, 2009, Lufthansa signed a codeshare agreement with JetBlueOn November 11, 2009, began their codeshare agreement via Boston and NewYork, expanding customer choices for both airlines, and allowing JetBlue customers withnew access to Europe, Africa, the Middle East, and AsiaOn October 1st 2009, ―Travelers flying JetBlue from these cities will be able to connect viaNew York/JFK or Boston onto Lufthansa flights bound for Germany and beyond, includingtop cities like Delhi, Madrid, Rome, Tel Aviv and Zurich.‖ Austin, Texas Buffalo, NY Fort Lauderdale, FL. Fort Myers, FL New Orleans, LA Pittsburgh, PA Raleigh/Durham, NC Rochester, NY San Juan, Puerto Rico Syracuse, NY Tampa, FL West Palm Beach, FL newsArticle&ID=1337578&highlight=
  35. 35.  JetBlue struck a deal to provide connecting flights with them when they are flying into the United States. ‖JetBlue will provide connecting flights from its destinations in the US and Caribbean and Emirates will handle the long haul routes to the Middle East from New York’s JFK. This deal comes on the heels of a similar interlining agreement between JetBlue and American Airlines.‖  2010/11/17/jetblue-and- emirates-airlines-alliance/Related Diversification
  36. 36. On November 15, 2010, JetBlue Airways and Emirates (one of theworlds largest international carriers) partnered to create newglobal connectionsThis partnership will allow JetBlue to ―connect to cities as diverseas Auckland, Bangkok, Hong Kong, KualaLumpur, Nairobi, Singapore and Sydney plus ten cities inIndia, points throughout the Middle East, and a host of exoticisland getaways including the Maldives, Mauritius, and theSeychelles,‖ greatly enhancing JetBlue’s scale and ability tocompete with other Airlines. =
  37. 37. JetBlue and South African Airways (SAA) Africa’s most awarded airline havepartnered to offer easy connections and seamless travel through New York’s JFKairport to over 40 destinations in southern Africa and beyond.JetBlue customers are now able to book travel to all SAA destinations worldwide:South Africa, Kenya, Mauritius, Tanzania and Zimbabwe are now all within easyreach with the convenience of a single ticket and automatic bag transfer at NewYork’s most convenient hub. Visit to start your journey right now. Related Diversification
  38. 38. On May 12, 2010, an agreement took place with South AfricanAirways that allowed travelers to fly on both carriers with onesingle ticket.
  39. 39.  JetBlue and American Airlines have teamed up to offer convenient connections between 26 domestic JetBlue markets and 15 international destinations served by American from New Yorks JFK and Bostons Logan airports. The interline service can be booked through (coming in early 2011), travel agencies, American Airlines website, American Airlines ticket counters and American Airlines Reservations. Additionally, JetBlues TrueBlue members may earn TrueBlue points when they fly on American flights in the select markets listed above. Enjoy the convenience of interline service with seamless check-in and baggage transfers when connecting between JetBlue and American within any of our included markets.  American Airlines Related Diversification
  40. 40. On March 31, 2010, it was announced that American Airlines andJetblue had arranged an allianceOn November 17, 2010, JetBlue and American Airlines announceda reciprocal frequent fler agreement, which allows members ofthe American Airlines loyalty program and the JetBlue loyaltyProgram to earn points on select routes
  41. 41.  Now a wholly owned subsidiary of JetBlue. LiveTV provides televisions for the back of headsets and LiveTv channels that customers can watch while inflight. Jetblue provides this service for free, all other Airlines do not. It is interesting to note that LiveTV also provides services to Continental, Virgin Blue, Frontier, WestJet, Airtr an, Expressjet, Air One, and Blue WingsJetBLue LiveTV Unrelated diversification
  42. 42.  JetBlue has done an incredible job of expanding. It can be easy to forget that JetBlue, as a company, has barely existed ten years-it is in credible that it is considered one of the top Airlines of the United States. They know what they are doing. The decisions made by the Executives to expand alliances with partners worldwide is a smart decision considering that they are mostly a domestic airline. I believe these partnerships are only the beginning and that JetBlue will continue to acquire partnerships in various strategic locations. JetBlue is one of the fastest growing airlines, and one of the few that are consistently profitable; I have no doubt that their profitability is largely influenced by their related and unrelated diversification strategies. The fact that their subsidiary, LiveTV, is in the Airplanes of many other well known Airlines is a great indicator that the Airline is using that partnership to create value in their company (others must charge customers, but they don’t have to- so customers will be more inclined to go with JetBlue).
  43. 43.  The next 3 years will belong to JetBlue. It is highly unlikely that the Airline will surpass giants like American Airlines; however, I see JetBlue becoming an even stronger player in the industry; possibly surpassing Southwest- though that may take longer than JetBlue. The next 3 years will consist of reduced cost for JetBlue because of the savings that occur when airlines participate in codesharing (almost no expenses are incurred by JetBlue when another airline’s customer travels on the Airplane, because that airline pays for the cost per seat). The next 3 years will bring more destinations for JetBlue customers to connect to with all of their current partners, as well as new partnerships. The next three years will show an increase in customer loyalty to JetBlue because of their marketing efforts toward their TrueBlue frequent flyer program. Their loyalty program is still relatively new, and I do not doubt that JetBlue’s excellent marketing will lead to a greater awareness of the programs benefits. The next three years will bring lower costs as a result of economies of scope from all of their partners working together, but most especially Lufthansa. The next 3 years will consist of more competition from other Airlines developing possible partnerships with other companies similar to LiveTV; possibly leading to more perks for customers, or a struggle for JetBlue to diversify itself- though, given their track record, JetBlue, will do just that in order to deliver value, style, and service.
  44. 44.  1. The purchase of a subsidiary oil company that would allow JetBlue to purchase part of their oil at a discount. In an industry where cost of oil is one of the greatest determining factors of success, reducing oil prices would boost JetBlue to a whole new level. 2. A partnership with Amazon where Amazon provides Kindles that JetBlue can have on their airplanes, exclusively with JetBlue, could help continue the ―cool‖ vibe surrounding JetBlue’s brand, while providing a benefit to customers that enjoy reading and inflight entertainment- some people prefer to read. JetBlue could charge a minimal fee, or provide it for free depending on whether JetBlue would be able to afford that.