Solution to jet Blue Managing Growth case

1. Managing Growth

2. Question 1
How would you describe JetBlue's
operations strategy prior to the
November 2005 adoption of the E190?

3.  Offer low fares (65% lower than legacy competitor) and point-
to-point model.
 Connecting Large, typically northeastern, US cities and more
long haul flights.
 Single type of plane, its fleet consisted entirely of A320.
 Reservation policy – tickets to be purchased via company’s
website or through part-time employed reservation agents.
 Differentiation to other LCC: Comfort features such as
assigned seats, leather upholstery, and satellite TV on individual
screens in every seat.
 Key operating principle was that flight cancellations should be
avoided at all cost.

4. Question 2
Compare the economics of the E190
and A320 for JetBlue.
What are the key drivers of
profitability for each type of plane?

5. • Compare CASM, E190 is 12% higher than
A320, 34% less than typical RJ. Compare
revenue available seat mile (RASM), E190 is
higher than A320. From Exhibit 9, we could
calculate E190 RASM is about 30% higher than
A320.

6. Key drivers of profitability of
E190
 Cost per available mile (CASM) for E-190 is 34% less than that for a
typical Regional Jet (RJ).
 Owing to greater range and seating capacity relative to RJ’s E-190 could
target wider range of profitable destinations.
 Higher utilisation of 10 to 11 hours a day compared to an average of 8
hours per day for RJs.
 Higher RASM, easy to get breakeven point because of the low capacity of
passenger. (break even load of 75% to 80% was much lower on E-190 than
A320).
 Lower acquisition costs. ($30-40 Million).
 Increase the range of choices available to JetBlue passengers by feeding
customers to connecting A320 flights.
 Transfers at focus cities would also improve the utilization of existing
airport facilities, increasing productivity and reducing downtime for airport
crew members.

7. Key drivers of profitability of
A320
 Lower CASM. (E-190 operated at 12% higher CASM).
 Larger capacity. (150 against 100 of E-190).
 High fuel efficiency.
 Medium & Long-haul routes.
 Standardized training & Servicing Processes: A320 was a
proven plane that had served as basis for JetBlue’s operations.
The company had developed a high level of comfort with it.

8. Do you agree with JetBlue’s decision
to add the E190 to its fleet?
Be prepared to state the rational for
your decision.
Question 3

9. Yes, We agree
 Since E190 feed customers to connecting A320 flights, it resulted in
higher loads and improved economics for JetBlue.
 Transfers at focus cities would also improve the utilization of existing
airport facilities, increasing productivity and reducing downtime for
airport crew members.
 This synergy between the E190 and A320 resulted in utilization of
E190s of 10 to 11 hours a day, significantly more than average of 8
hours per day for RJs.
 Number of passengers required for a flight to meet the typical
“breakeven” load of 75% to 80% was much lower on the E190 than the
A320, E190 made it easier for JetBlue to introduce service in new
markets.

10. How should JetBlue slow down the
growth of its fleet?
Should it cut growth in A320 capacity,
E190 capacity, or both?
Question 4

11.  JetBlue should slow down the growth of its fleet.
 This cut should be across both in A320 and E-190 planes.
 Reasons:
 E190 as a unique plane that could be used as an engine for future
growth.
 A320 is a proven aircraft around which JetBlue had standardized
its training and operating activities.
 In addition, E190 and A320 could inter-activate utilization. So it
is not fit to cut growth in only A320 capacity or E190 capacity.

12. THANK YOU