JETBLUE
SARAH GAY MARCH 7, 2009

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)
http://kclibrary.lonestar.edu/decade90.html
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

INDUSTRY ANALYSIS
INDUSTRY STRUCTURE AND INDUSTRY VALUE CHAIN

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

Life Cycle Chart
AIRLINE INDUSTRY
THE AIRLINE INDUSTRY IS IN A LATE MATURITY/EARLY DECLINE STAGE, DUE TO:
•DECLINING PROFITS
•STANDARDIZED FEATURES
•SMALL SCALE PLAYERS AREN’T SURVIVING (ALOHA, SKYBUS AIRLINES, SOUTHEAST AIRLINES,
ETC.)
•CUSTOMER LOYALTY IS KEY (FREQUENT FLYER PROGRAMS, CREDIT CARDS WITH MILEAGE
REWARDS)

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 (jetblue.com, 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

JETBLUE PERCEPTUAL MAP & ACTIVITY SYSTEM

PRICE
HIGH
AMENITIES
LOW HIGH
LOW

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 \"to bring humanity back to air
travel.\")
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

PORTERS FIVE FORCES ANALYSIS

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..