JetBlue Airways announces a new leadership structure in May 2007. David Barger becomes CEO, replacing founder David Neeleman who becomes non-executive chairman. This comes after service issues in February 2007 left thousands stranded, harming JetBlue's reputation. Analysts view the change positively. JetBlue had early success challenging Southwest but began facing problems in 2005-2006 from fast growth proving unsustainable. The document then outlines JetBlue's low-cost business model which included choosing efficient planes, uniform fleets, point-to-point routes, and automation to reduce costs and prices 30-40% lower than competitors.

1. Case 17 JetBlue Airways
Growing Pains
In May 2007, JetBlue Airways Inc. (JetBlue) a low cost carrier
(LCC) based in Newyork, announces a new leadership structure for
the company. David Barger president and chief operation officer
(COO) of the air line, replace David Neeleman as CEO. Neeleman,
who founded JetBlue in 1999, had been its CEO ever since. Under the
new leadership structure, Neeleman was designated as the non –
executive chairman of the board. Russell Chew, a former Federal
Aviation Administration (FAA) executive, took over as the COO; Berger
retained his position as the president of the company. Neeleman said
at the time that the board’s suggestion that he step down had nothing
to do with the service breakdown that JetBlue had experienced in
February 2007, when the northeast region of the United State had
been hit by severe snowstorm. The airline’s slow reaction to the
adverse weather had left thousands of passengers stranded at airport.
In addition to have serious financial repercussions, this fiasco harmed
JetBlue’s image as a customer friendly airline and tarnished its
reliability record.
Analysts greeted the leadership change positively. For several
years after it was se up, JetBlue had been one of the most successful
airline in the United States, rivaling Southwest Airlines (Southwest) in
profitability and growth. However, it began facing various problems,
both international and external, in 2005 – 2006. Several analysts were
of the opinion that JetBlue, growth in its early years had been too fast
and unsustainable in the longer them, and that it was because of this
thinks started to come undone at the airline when the business
environment changed.Plans for setting up JetBlue were developed by
Neeleman, along with lawyer Tom Kelly, in 1998. Neeleman raised $

2. 160 million in capital from top investors such as Weston Presidio
Capital, J.P. Morgan Partner, and Soros Private Equity Partner, and
founded the airline in February 1999,
JetBlue’s business was guided by five key value – safety, caring,
integrity, fun and passion. From its inception, it was “anti –
establishment” and went against many of the accepted norms of the
aviation industry. Most domestic operators avoided JFK, as it mainly
served international flights, and was also farther from Manhattan than
the other two airports. Neeleman, however, reasoned that because
JFK handled mostly international flight, JetBlue would face very little
competition from domestic flights at that airport.
JetBlue’s operation were the key to its low costs.. The Airbus A
– 320s were chosen over the more popular Boeing – 737s (which
Southwest used) because although they cost more initially, they
would be easier to maintain and were more fuel – efficient. The
planes also came with a five year warranty. Operating a uniform fleet
of planes was also economical, as it reduced costs significantly in the
areas of pilot training, maintenance, and spare parts. All the aircraft
were configured in a single class, with an uniform level of service.
This also allowed JetBlue to put in the maximum number of seats
possible in its planes. Initially JetBlue did not try to fly too many
routes, concentrating instead on the northeast, the West Coast, and
Florida – routes for which demand was high, and it was easy to
undercut the fares of rivals. In addition, JetBlue also flew to
secondary cities that were neglected by major carriers. Jet Blue flew
mainly to secondary airports that did not handle too much air traffic.
In this way, the airline was able to avoid congestion to a great extent
and to establish a good on – time record. Beside, airports offer better
business term than the main ones. JetBlue tried to operate the

3. maximum possible number of flights per day. Its average turn around
time 35 minutes., which was comparable to Southwest and much
lower than that of full service airlines (FSAs), which took an hour to
turn around. JetBlue also operated several “red-eye” flights. JetBlue
flew only point – to – point flights, avoiding the hub – and - spoke
model used by major carriers. This helped it avoid the complications
that resulted from connecting flights and passenger transfers, and the
airline was also able to operate with far fewer airport staff. JetBlue
use electronic ticketing extensively. Typically more than 70 percent of
the tickets were booked thought the airline’s Web site. JetBlue also
cut down on the cost back – end operation by allowing its call –
center operators and customer service executive to work from home
using voice – over – internet protocol. Automation and the effective
harnessing of technology further cut cost . JetBlue was the first air
line to introduction paperless cockpits, were the pilots were equipped
with laptops to access flight manual and make the requisite
calculation before takeoff . This saved between 15 and 20 minutes in
takeoff. JetBlue was also one of the first air lines in the United State
to allow automatic check – in and electronic baggage tagging.
Automation helped JetBlue maintain a lean workforce (labor cost were
historically the highest component of on airline’s operation costs). In
2002, JetBlue’ cost peravailable seat mile 7 cent which was 25 percent
less than the average of the major carriers. JetBlue was thus able to
offer fares that were typically 30 to 40 percent lower than other
airline.