JetBlue Airways: Starting from Scratch

HistroyTime EventsFebruary-1999

Founder David Neeleman announces plans for his new airline

Apri l-1999 JetBlue (then known as "New Air") places a $4 billion order with Airbus Industrie for up 75 new A320 aircraft, and commences leasing arrangements for another eight aircraft

July-1999 JetBlue reveals that all its aircraft will offer 24 channels of live satellite television at every seat, a first for the airline industry

September-1999

JetBlue receives an unprecedented exemption for 75 take-off and landing slots at John F. Kennedy International Airport (JFK)

4-Dec-1999 JetBlue takes delivery of its first Airbus A320 aircraft3-Feb-2000 The United States Department of Transport (DOT) issues

JetBlue with a Cert if icate of Public Convenience and Necessity, representing the successful complet ion of the air l ine's applicat ion processes before both the DOT and the Federal Aviat ion Administrat ion

17-Feb-2000 JetBlue adds service between JFK and Buffalo NY21-Jun-2000 JetBlue begins flights between JFK and Orlando, FL23-Jun-2000 JetBlue takes delivery of its 5th Airbus A320 aircraft21-Jul-2000 JetBlue commences flights between JFK and Ontario, CA, near Los

Angeles

History

7-Sep-2000 JetBlue adds service between JFK and Burlington, VT18-Oct-2000 JetBlue commences flights between JFK and West Palm Beach, FL10-Nov-2000 JetBlue takes delivery of its 10th Airbus A320 aircraft17-Nov-2000 JetBlue inaugurates service between JFK and Salt Lake City, UT18-Nov-2000 JetBlue adds service between JFK and Fort Myers, FL1-May-2001 JetBlue inaugurates service between JFK and Seattle, WA and adds a

daytime flight to Oakland, CA

7-May-2001 JetBlue inaugurates service between JFK and Syracuse, NY, its third upstate city

17-May-2001 JetBlue inaugurates service between JFK and Denver, CO and adds a daytime flight to Ontario, CA

18-Jul-2001 JetBlue orders up to 48 more Airbus A320 aircraft valued at $2.5 billion. The airline's fleet order now totals up to 131 new A320 aircraft

26-Jul-2001 JetBlue starts twice daily service between JFK and New Orleans, LA29-Aug-2001 JetBlue launches second focus city in Long Beach, CA with two daily flights

to JFK

9-Nov-2001 JetBlue takes delivery of its 20th Airbus A320 aircraft19-Dec-2001 JetBlue expands service between JFK and Fort Lauderdale, FL to ten daily

flights

David Neeleman Background

JetBlue Airline

Morris Airline

South West Airline

In 1993, he sold to South West Airline and joined top management

team.

He was bringing new technology to South West (e-ticket), but

he didn’t fit the culture

Open Skies( in 1998, sold

to Hewlett Packard)

Top Management Team

• Thomas Kelly-executive vice president and general counsel (really old friend of Neeleman)

• Dave Barger-president and chief operating officer (New York Air and Continental Airlines Newark experience)

• John Owens- chief financial officer(South West 14years experience)

• Ann Rhoades- executive vice president of human resources (30years of experience in service based businesses)

Initial Strategies

• Base Home: New York (population, central location and JFK airport-T5)

http://www.youtube.com/watch?v=BvD5Hx9T94s&NR=1

• Aircraft: A320s (less fuel, better cabin technology and wider cabin)• Paperless: pilot communication, e-ticket and A320

highly computerized increase performance

Entrepreneurship

• Refers to conceiving an opportunity to offer new or improved goods or services, showing the initiative to pursue that opportunity, making plans, and mobilizing the resources necessary to convert the opportunity into reality.

Social Entrepreneurship

• Refers to the conceiving of an opportunity to provide social value, relentlessly pursuing that opportunity while being accountable to relevant stakeholders, continuously learning from and improving upon plans, and mobilizing the resources necessary to sustainably convert the opportunity into reality.

Four Steps of Entrepreneurial Process

•Step 1: Identify Opportunity

•Step 2: Show Entrepreneurial Initiative

•Step 3: Develop a Plan for the New Venture

•Step 4: Mobilize Resources

Mainsteam Approach vs. Multistream Approach

Mainsteam Multistream

1.Identify opportunity Offer a product or service that meets a need that people are willing to pay for

Offer a product or service that meets or eliminates a needs that people have

2. Show entrepreneurial initiative

♦Personality traits--- ♦ Need for accomplishment ♦ Sense of confidence ♦Life-path circumstances

♦Need for achievement ♦Self-confidence♦Transition, push, pull

♦Need to help others♦Confidence in community ♦Transition, push, pull

3. Develop plans for the new venture

Have plans in place prior to start-up highlight financial costs and benefits

Focus on flexible ongoing learning; highlight financial, social, and ecological costs and benefits

4. Mobilize resources Attract financial resources and get started

Establish community support and get started

The Entrepreneurship of JetBlue

•Step 1: Identify Opportunity

Financial Well-being

Ecological Well-beingSocial Well-being

Sweet Spot

＊ Low fares

＊ Highly productivity

＊ Advanced technology

＊ Safety

＊ Customers’ expectation

＊ Efficiency

The Entrepreneurship of JetBlue

•Step 2: Show Entrepreneurial Initiative•Personality traits--- ♦ Need to help others ♦ Confidence in community •Life-path circumstances

Transitions Push Pull

The Entrepreneurship of JetBlue

Step 3: Develop a Plan for the New Venture

2. Summary

3. Concept of the new venture

4. Management team

5. Operations

6. Timeline, projected performance, and contingency plans

The Top Management team of JetBlue

• David Neeleman─ the founder, chairman and CEO of JetBlue

• Thomas Kelly─ Executive vice president and general counsel

• Dave Barger─ president and chief operating officer

• John Owens─ chief financial officer

• Ann Rhoades─ executive vice president of human resources

The Entrepreneurship of JetBlue

Step 3: Develop a Plan for the New Venture

2. Summary

3. Concept of the new venture

4. Management team

5. Operations

6. Timeline, projected performance, and contingency plans

Flight Operations in JetBlue

• Paperless

• highly computerized

(computer based)

• the perfect 30-minutes turnaround

Human Resources in JetBlue

• hold the same values

• A non-union environment

• customized employment package

• other HR practices

-”320-degree” performance management process

-communication

(one-on-one conversations)

The Entrepreneurship of JetBlue

Step 3: Develop a Plan for the New Venture

2. Summary

3. Concept of the new venture

4. Management team

5. Operations

6. Timeline, projected performance, and contingency plans

The Entrepreneurship of JetBlue

•Step 4: Mobilize Resources

--Attracting the support from community and get started

•Resources

Finical resources, physical resources, and

social resources

• Shareholders wealth

• Competitive advantage

• Stakeholder well-being

• Nurturing community and

ecological sustainability

Four steps of Strategic Management

Step 1. Review mission and vision

Mainstream: Maximizing organizational competitiveness Increasing shareholders’ well-being Multistream: Mutually beneficial cooperation Multiple stakeholders’ well-being

“ Values drove all other activities and were the basis for the development of an organization.” ~ Ann Rhoades.

Safety, Caring, Integrity, Fun and Passion

http://www.excelsia.ch/htmlgb/blog/images/swot-analysis-image.png

Mainstream Multistream

Physical Resources Material assets Ecological friendly

Human Resources Member competency

Seeking work-life balance

Infrastructural Resources

Organization structure and system

Developing nurture work

Mainstream MultistreamSupplier power Welcome new supplier

Customer power Welcome specific buyer

Threats of substitutes Enhance overall community well-being

Threat of entrants Removing Barriers

Intensity of rivalry Raising Beneficial interdependence

Five forces model—Michael PorterFive forces model—Michael Porter

No sell snacks during flights• relatively new airline company that the reason it still not have complete market hold on 50 states.• In year 2005 it had faced Aircrafts problems which reduced the profits.• Airline is operating in 12 countries.

The airline industry growth is not up to the mark but still JetBlue profits are on higher side.• Increase the number of flights.• Penetrate in US market.

911 crisis increases the security threat for airline industry• Recession in US may lower the revenues.• unpredictable fuel price• facing Strong competition in US and International market.

The low cost Airline of America.• Strong people on top management • Strong Brand widely known among the people of US.• continually hiring talented and experience people

Mainstream Multistream

Finical cost leadership - Minimizing

Overall cost leadership - Minimizing

Differentiation Minimizer strategy

Focus Transformer strategy

BCG Portfolio Matrix

Mainstream Multistream

Content school(rational- analytic, top-down, linear strategy)

Emergent strategy (central nervous system and unexpected signal)

Process school(bottom-up, emergent, egalitarian approach)

Strategy learning from stockholders and members

JetBlue’s Challenges and Present Day

Challenges

How to maintain the success?

The growth of JetBlue

JetBlue Revenue

In 2009 Fleet:151Employees:>10,000

JetBlue University

• Opened in 2005• 3 Major Training Centers (Orlando, Forest Hills, and Salt

Lake City)

New Challenges

The significant Challenges in 2005-- The first quarterly loss in 4th quarter 2005 ($42.4

million)

New Challenges

--Operation issue--Fuel price--Fleet costs

New Aircraft

Begined Embraer 190 serves In 2005

New Aircraft

• 156 passenger seat configuration• 2,700 nautical mile range

• 100 passenger seat configuration• 2,000 nautical mile range

SWOT of ERJ 190

Strength and Opportunities• Serve both large-and mid-sized markets• Enter new markets• Reduce fuel costs

Weaknesses and Threats • Against one model aircraft strategy• operation experience • Maintenance issue

Fuel price

Year Price( ￠ /gal) -2001( ￠ /gal)

2001 74.7 --2002 70.9 -3.82003 85.7 11.02004 120.8 46.12005 172.7 98.02006 197.0 122.32007 216.5 141.82008 298.0 223.32009 169.1 94.4

Reference:http://www.airlines.org/economics/energy/Annual+Crude+Oil+and+Jet+Fuel+Prices.htm

Fleet costs

Fleet: 2001: 21 A320 2002: 37 A320 2003: 53 A320 2004: 69 A320 2005: 85 A320 and 7 ERJ 190

Reference:http://www.planespotters.net/Airline/JetBlue-Airways

Incidents and Accidents

2005.09.21 Emergency landing

2007.02.14 Snowstorm ( $ 30 million compensation)

RTP( Retune to Profitability)

Cut costs and improve revenue to regain profitability • Slowed growth by deferring ERJ 190 deliveries• Increasing revenue by Selling 5 A320• Reducing fuel costs by removed a row of seats off (156 to

150) to lighten the aircraft by 910 lb ( 410 kg)• Reducing labor costs by decreasing the in-flight crew size

from 4 to 3• Increasing revenue by selling legroom seats which

increased the seats pitch by removed seats

Innovations

In 2002 LiveTV, LLCIn 2004 36 DIRECT TV channelsIn 2007 Free, limited Wi-Fi

Interesting Promotions

In 2005 Blue Betty In 2009 All you can fly

Blue Betty

Blue Betty since 2005Designed to take the JetBlue Experience to the

streets

Blue Betty

All You Can Fly

• passengers can book an unlimited amount of flights over a month for $599.

JetBlue 2009 Report

JetBlue 2009 reportRevenue: $3.29 billionNet income: $58million/$-85million(2008)Fleet: 150 aircrafts/ 112 A320 &38 ERJ-190Serve 60 cities with 600 daily flights in 11 countries

Conclusion

• David Neeleman Entrepreneurship *Identify opportunity *Show entrepreneurial initiative *Development a plan for the new venture *Mobilize resources

• JetBlue Strategies *Review mission and vision *Analyze external and internal factors (SWOT) *Formulate strategies *Implement strategies

Conclusion

• JetBlue Challenges *fuel prices continue raise *delivery new aircraft (Embraer190) *crisis resolve

• Successful key element *sensitive strategies making *customized human resources management *effective operation about e-systems *innovation *forecasting ability

Jet Blue vs. South West

Strategies: Jet Blue South West1. Human Resources Customized Humanity2. Operation E-systems Paper work3. Innovation High Low4. Facility Low High

5. Service High High6. Cabin crew Plentiful Fun