Strategic Analysis of JetBlue Airways Kshitij M.Shrivastava
Who are we?• Jet Blue Airways is a low-cost passenger airline which provides high quality traveling experience through innovative technology and personal service.
Where are we now?• Fleet - Airbus A320:105, Embraer:33• Avg. fleet age: 3.4 years• Destinations serviced: 54• Ranks 1st in terms of ‘Customer satisfaction’• Ranks 10th in terms of ‘No.of passengers’• Strong Culture & Values (Cost culture & HR policies)• Strong capital base (Fleet size & geographical reach)• Innovative use of technology (E-ticket, Inflight entertainment)
Market share (Low-cost segment)Rank = 5th, in low-cost segment
Values & CultureValues• Safety, Caring, Integrity, Fun and PassionCompany Culture• ‘5-values’ Rule• Values are foundation for the culture• Hiring policy to ensure ‘Strategic-fit’• Above par salary & benefits
Services offered (‘Frills’ in addition to Low airfare) Leather cushioned seats
Where do we want to go?• Fleet - Airbus A320:177, Embraer:101 (by 2012)• Vision: ‘Bring humanity back to air travel and to make flying more enjoyable.’• Increase geographical reach• Manage revenue and operation targets• Retain Organizational culture & ‘small company’ feel
PEST Analysis (Environmental Scan)(+) Enabling factors POLITICAL(-) Disabling factors •Deregulation (+) •Bankruptcy laws (+) •International travel restrictions (-) ECONOMIC TECHNOLOGY •Rising Aviation Fuel cost (-) •ICT – Information & Communication (-) •Economic downturn (-) e.g.- Internet, Mobiles (+) •Sub-prime crisis (-) •Aircraft technology (+) •High insurance & other costs (-) •Air-traffic management system enabled •Globalization and outsourcing (+) low TAT (+) •Tourism & Education sectors (+) SOCIAL •Security issuers and terrorism (-) •Diseases such as Anthrax (-)
SummaryOf External Analysis: Environment• Factors such as Tourism & Global trade create new opportunities for Airlines industry but Terrorism and Financial crisis signal challenging times ahead.
Porter’s 5 forces analysis Overall attractiveness of the Airlines industry ‘Moderate to Low’.•Ease of Govt. regulation onAviation Threat from New Entrants•Low entry-barriers HIGH•Lack of brand-loyalty in customers•Capital availability • Limited no. of suppliers •High switch-over cost •No substitutes Threat from Threat from Buyers Threat from Competitors Suppliers MEDIUM MEDIUM to HIGH HIGH to HIGH •Large number of players •Presence of substitutes •Falling margins intensifies price competitions •Low brand loyalty •High exit-barriers •Low switching cost Threat from Substitutes Medium (overall) HIGH (for short distances) • Alternate modes of transportation LOW (for long distances) • Technological innovations e.g.- Video Conf.
Target MarketsPTM• Low-cost travelers (1 time travelers, ‘surface transport’ travelers.) strategy’ st ‘Dual‘Cool, convenient, cost-effective.’STM• Business travelers to NY, Washington, etc.‘Travel quickly, safely & comfortably.’ ‘Frills’ in addition to ‘Low airfare’ is in accordance with the ‘Dual strategy’.
Competitive analysisCompetitors in ‘Low-cost’ category Primary competitors• Southwest, US Air, AirTran, ExpressJetCompetitors in ‘Full-service’ category• Continental, Delta, United Airlines, Northwest, American AirlinesOther competitors• Roadways, Rail and Sea transport• Internet based services like Video conference
Strategy Map # 1High Airlines distinguished based on Airfare and level of ‘frills’. Jet Blue is a Low airfare medium frill airline Airfare Low High No Frills Frills Full Service
Strategy Map # 2High Jet Blue services least number of destination. However it has a very penetration on the East coast. Airfare Low High Number of destinations
Strategy Map # 3High As a part of its ‘Dual strategy’, Jet Blue offers innovative services along with low airfares. This distinguishes JetBlue from other low-cost airlines. Airfare Low High Service innovation (Use of technology)