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Jetblue Midterm Project_sgay.Pdf Jetblue Midterm Project_sgay.Pdf Presentation Transcript

  • jetBlue Above all else, JetBlue Airways is dedicated to bringing humanity back to air travel. We strive to make every part of your experience as simple and as pleasant as possible.
  • jetBLUE History I Feb-1999: Founder David Neeleman announces plan for his new airline. Jul-1999: JetBlue announces that all seats will have live satellite TV. 11-Feb-2000: First inaugural flight from JFK to Ft. Lauderdale, FL. 21-Dec-2000: Flies its one millionth customer & reports $100 million in flown revenue for 2000. 09-Nov-2001: Installation of bullet-proof, dead-bolted cockpit doors across its fleet 11-Apr-2002: Announcement of initial public offering of its common stock.
  • jetBLUE History II 13-Jun-2002: Launch of the TrueBlue customer appreciation program. 13-Nov-2003: JetBlue adds two inches more legroom for most customers on all aircraft 16-Mar-2004: JetBlue launches online flight check-in 4-Mar-2005: JetBlue receives FAA's highly coveted Diamond Certificate of Excellence Award 6-Jun-2005: JetBlue opens state-of-the-art training and support campus at Orlando International Airport 24-Jan-2006: JetBlue begins offering Dunkin' Donuts coffee onboard all flights
  • jetBLUE History III 23-March-2007: JetBlue celebrates the arrival of its 100th Airbus A320 aircraft 11-December-2007: Complimentary in-flight e-mail and instant messaging services are introduced on aircraft BetaBlue, a first among U.S. domestic airlines 28-January-2008: Refundable fares are introduced 8-April-2008: Goodbye flying…hello jetting! 20-May-2008: Jetting to Green introduces carbon offsetting and an alternative fuel partnership 8-September-2008: Flights and vacation packages are successfully auctioned on eBay – an airline first
  • Spotting Opportunities and Threats using a PEST Analysis (1990-2005) Political Economic Social Technological
  • Political 1993 : As a response to the current recession of 1991, President Clinton appointed the National Commission to Ensure a Strong Competitive Airline Industry (Because in 1978 : Deregulation of the airline industry) 1994: NAFTA is implemented to increase trade to Mexico and Canada 1999 : President Clinton’s Impeachment Trial 2000 : George W. Bush is elected to the President of the United States 2001 : September 11 terrorist attacks Hundreds of new flying rules and regulations are enacted.
  • Economic DJIA 1991: The Persian Gulf War and rising inflation combined to cause a recession. (Led to National Commission-described on next slide) Economy began to boom due to low levels of inflation 1999: Led to record low levels of unemployment - 4.2% Increase in minimum wage from $3.80 in 1990 to $5.15 an hour in 1997 Use of the internet helped lead to all-time high for stock market 2001: Tech bubble burst and Sept. 11 terror attacks lead to 2001 recession.
  • Social 1998: Television graced 98% of the households in the US The average home had 2.4 television sets The average viewer watched 7 hours a day 74% of US households had cable 1999: 83 1/2% of population had completed 4 years of high school (compared to only 41% in 1960) U.S. Census Bureau, Statistical Abstract of the United States: 2000, page 5
  • Technological 1992: Invention of the World Wide Web Adoption of standardized software - Windows Huge increase in available memory for computer systems Rapid proliferation of internet to homes, schools, offices, etc. 1994 : Beginning of e-ticketing Summer 1999: Over half the airlines tickets purchased are e-tickets
  • PEST ANALYSIS - OPPORTUNITIES AND THREATS Potential Impact Opportunity or Strategic Nature of Change of Change Threat Response People are afraid to Major political fly and are Threat that people changes with 9/11 spending/saving will top flying Focus on safety Political and the presidential differently with a because of fear and and low prices. election. new economic economic reasons. policy. People have larger Advertise low discretionary Opportunity to gain Economic Economic boom. prices and extra incomes and are customers. amenities. looking to travel Consumer needs TV has become an and preferences are Opportunity to add Offer TV Social everyday part of changing and to jetBLUE’s programming on people’s lives. becoming more offerings onboard. board. technology friendly. The internet is Online jetBLUE Data is being Opportunity to becoming an reward system and Technological transfered and introduce services everyday online e-ticketing/ stored online. using the web. occurrence. check in
  • Airline Industry NAICS Code: 481111 Scheduled Passenger Air Transportation This U.S. industry comprises establishments primarily engaged in providing air transportation of passengers or passengers and freight over regular routes and on regular schedules. Establishments in this industry operate flights even if partially loaded. Scheduled air passenger carriers including commuter and helicopter carriers (except scenic and sightseeing) are included in this industry.
  • HHI for the Airline Industry Total Revenue ($ Billions) % Market Share American Airlines 23.8 19.14 Delta Airlines 22.7 18.26 United Airlines 20.2 16.25 Continental 15.2 12.22 US Airways 12.1 9.73 Southwest 11 8.85 Lan Airlines 4.5 3.62 TAM S.A. (Brazilian Airlines) 4.2 3.79 Alaska Air Group 3.7 2.98 Skywest 3.5 2.82 JetBlue 3.4 2.74 • THE HHI OF A MARKET IS CALCULATED BY SUMMING THE SQUARES OF THE PERCENTAGE MARKET SHARES HELD BY THE RESPECTIVE FIRMS. • HHI = 1335.62 • WHICH REGARDS THE AIRLINE INDUSTRY AS A MODERATELY CONCENTRATED INDUSTRY
  • Industry Supply Chain Raw Materials Airplane Manufacturer PLANES Maintenance & Storage Airline TICKETS Travel Agent Consumer HTTP://WWW.ATWONLINE.COM/CHANNELS/AIRLINEPROCUREMENT/ARTICLE.HTML?ARTICLEID=2067
  • Value Chain Inbound Logistics Strong internet presence (, TrueBlue, Facebook, Twitter) Web-based ticketing Operations Crew-scheduling software Automated baggage handling No meals : efficient turnaround time and reduced costs Outbound Logistics Airports are chosen carefully Less congested airports
  • Value Chain Marketing & Sales Call Center employees all work out of their homes in and around Salt Lake City, Utah No office rentals, cubicle space, etc. Specific market segment is identified and targeted Effective and attractive pricing Service Emphasis on customer service - Customer Bill of Rights Focus on “We encourage you to use the Call Button” Constant interaction and communication from CEO
  • ACTIVITY SYSTEM Eschews hub airports in favor of point-to-point Able to make a profit in flights Frequent Flyer Alliance with Air the sharp decline of air Program “TrueBlue” Lingus, Cape Air and travel after 9/11 Lufthansa Customers Bill of Rights Focus on Focus on Low Prices Customer Service - Removal of 6 seats Customers are Even More encouraged to use Legroom Seats No union policy keeps the “call button” unions from forming Call center operators work out of their homes “Bring Humanity Back to Keep employees happy Travel” - “Jetting Happy” Partnership with RIM to Employees are allow wireless access on encouraged to submit flights names for the new planes Personal - winners win trips Advertisements with “Dear New York” & “Sincerely JetBlue” Cutting Edge Eco-friendly pillow and blankets Keeping up with Free snacks Purchase of current culture: Official and Dunkin Donuts Live TV airlines in The Simpsons’ coffee Free satellite Movie, Manny Ramirez television and radio special, AmEx credit Leather Seats DirecTV on all seats card programming HTTP://KNOWLEDGE.WHARTON.UPENN.EDU/ARTICLE.CFM?ARTICLEID=1342
  • jetBlue Destinations & Website
  • Sources of Value (Competitive Advantage) Positioning (jetBlue looks quot;to bring humanity back to air travel.quot;) Brand: Jetting Happy (and the color Blue) Not “flying”, but “Jetting” - a new experience Green and socially conscious Geography: Looking for markets with fewer competitors - not at all the large airports Point-to-point operations, not a hub airport Purchased smaller jets to facilitate smaller airports Covers domestic flights and is moving international HTTP://EN.WIKIPEDIA.ORG/WIKI/JETBLUE_AIRWAYS
  • Sources of Value (Competitive Advantage) Capabilities Products/services: Extra amenities Sleep kit, leather seats, TV’s at each seat, additional leg room Low cost airfare Technology: High on technology TrueBlue rewards service is all online Facebook and Twitter accounts DirectTV and Satellite television/radio on all seats on all flights HTTP://EN.WIKIPEDIA.ORG/WIKI/JETBLUE_AIRWAYS
  • Sources of Value (Competitive Advantage) Capabilities Processes: majority of ticketing and paperwork is done online - streamlines the process Business Model: Low Price flights No airport hub - avoiding areas with lots of competition Point to point destinations Keep the employees happy - no-layoff policy No unions have been formed - during one attempt, only 35% of machinists wanted to join a union Profit sharing Highly regarded training process HTTP://WWW.SFGATE.COM/CGI-BIN/ARTICLE.CGI?FILE=/CHRONICLE/ARCHIVE/2004/09/12/BUGVS8LL121.DTL HTTP://EN.WIKIPEDIA.ORG/WIKI/JETBLUE_AIRWAYS HTTP://KNOWLEDGE.WHARTON.UPENN.EDU/ARTICLE.CFM?ARTICLEID=1342
  • Adding Value while Differentiating and Reducing Costs Removed 6 seats from the A320 fleet Net savings of $30 million over five years Additionally plan to reduce the inflight crew to 3 Reduces the weight of the aircraft by 904 pounds Marketed to customers “more inches of legroom than any other U.S. airlines' coach cabin” HTTP://WWW.GLOBENEWSWIRE.COM/NEWSROOM/NEWS.HTML?D=110427
  • Bargaining Power of Customers To reduce the bargaining power of consumers: Customer incentives such as TrueBlue, which allows customers to earn rewards, book flights in an easier/faster manner, and stay on top of upcoming events/sales. Partnered with AmEx for a jetBlue a credit card Reward miles are used only on jetBlue Customer Loyalty: Flying round trip across the US two times will earn you a free reward Points are earned relatively quickly Customers can research easily using the internet No switching costs - customers need a reason to stay HTTP://WWW.ASSOCIATEDCONTENT.COM/ARTICLE/547961/JET_BLUE_THE_BEST_FLIERS_REWARDS_PROGRAM.HTML
  • Threat from Substitutes Threat is high : numerous other airlines Switching costs among airlines are low Switching costs among other transportation options are high for everything but short distances Trains, boat and car travel are time intensive Additional partnership with Aer Lingus, Lufthansa, and Cape Air to keep customers flying within the partnership High exit barriers - bankruptcy laws allow loss makers to continue operating
  • Bargaining Power of Suppliers Very little threat from suppliers Only two suppliers: Boeing and Airbus Little/no chance of cooperation between suppliers
  • Threat of New Entrants Deregulation made it possible for new entrants Very high cost of entry Hundreds have gone defunct trying to compete against the larger airlines Competition among airlines at airports : must get a certain amount of “slots” at an airport Brand image and loyalty is important New airline must be seen as safe and reliable
  • Competitive Rivalry Keeping Employees: No-layoff policy with their employees Led to pilots deciding not to form a union in 2008 Very friendly and nurturing training process Keeping Consumers: Product is differentiated through free food, tv, extra leg room, rewards system, etc. Focus on different customer segments: those looking for more than just a low price HTTP://WWW.SFGATE.COM/CGI-BIN/ARTICLE.CGI?FILE=/CHRONICLE/ARCHIVE/2004/09/12/BUGVS8LL121.DTL HTTP://WWW.THESTREET.COM/STORY/10463924/1/JETBLUE-MATURING-AS-AIRLINE.HTML
  • Porter’s 5 Forces and the Impact on Profitability AIRLINE INDUSTRY
  • To be continued..