Case Study D: JETBLUE AIRWAYS
Names:
ID:
Fatima Al-lbrahim
200800025
Jumana Al-Umran
200800444
Malika Al-sharif
200801556
Razan Al-Sanea
200801164
College of Business Administration
Instructor: Dr. Emmanuel Okey Ntui
ASSE 4311: LEARNING ASSESSMENT III
Section: 202
Submission Date: July 22, 2012
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External Environment: Opportunities and Threats
External factors, involve:
1. Environmental factors

Weather fluctuations such as storms or hurricanes.
2. Technological factors

Computerization of tickets booking and personal check-in facilities.

Internet.

The use of social media.

The capability of consumers to search and equate prices of different airlines.
3. Legal and political factors

Deregulation of the airline industry in 1978.

The bankruptcy laws.

Terrorist occurrences on 9/11.

Federal Protocols, which necessitate one flight attendant for every 50 passengers.

The growing amount of safety and environmental regulations.
4. Economic factors

Weakening of economic of US airlines industry.

The rise of Oil prices

Interest rates volatility.
5. Industrial forces

The entrance of new players to the airline industry.

Alternative airlines.

Supplier bargaining power
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
Consumer bargaining power

Rivalry between competitors in the industry.
Opportunities:
Technological opportunities:
Technological innovations can be considered as a pronounced opportunity for the
company. The Internet usage has opened new openings for JetBlue. Such technologies can
decrease the costs of operations. This can assist in building a competitive advantage for JetBlue
in airline industries by having low costs. Technologies can include, computerization of tickets
booking which refers to using direct booking for tickets from the airline’s website without using
agencies for booking. Another technological opportunity is using Electronic cockpits instead of
paper ones, personal check-in facilities, and the use of luggage tracking technologies. Providing
extensive customer service is another opportunity for JetBlue. Employees in JetBlue can extent
their services for their clients to their homes. Technology furthermore can support in growing the
amount of in-flight features and mechanisms such as Internet. Lastly, JetBlue can use social
media to sponsor their brand and services in order to look attractive to more customers.
(Micanada.org, n.d.)
Legal and political opportunities:
Deregulation of the airline industry in 1978 proposed an opportunity to enter the airline
market. It permitted different market segments such as the low cost to enter the market. This
helped JetBlue to emerge in the market. It will correspondingly provide it with the opportunity to
expand more in the industry. (Micanada.org, n.d.)
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The bankruptcy laws have a momentous responsibility as they permit even loss making
and non-profitable firms to operates and continue in the industry when they are protected
(Micanada.org, n.d.). This considered as an opportunity to JetBlue to recapture market share.
Economic opportunities:
A weakening of economic of US airlines industry was because of the 9/11 attacks. Major
airlines suffered dramatically from the incidence. However, JetBlue was able to standstill during
this crisis. The focal reason why it didn’t undergo lots of troubles during this time is because
JetBlue was offering low prices and they were concentrating on second-tier airports instead of
going against big players in the market. Its usage of new aircrafts and non-unionized
employment were some of the reasons that helped in the accomplishment of the airline (Brizek,
2007). Another reason for JetBlue survival and major success during those hard times was
because JetBlue concentrated on building a name and a reputation for its brand. “Today, JetBlue
has a market value that is nearly as large as that of United, American and Delta combined”
(Frost, 2006). Gareth Edmondson-Jones, JetBlue’s Vice-President of Corporate Communication
said, “JetBlue has prospered more significantly by its brand work than by disruption after 9/11.
It’s certainly a combination, but more so the brand. More importantly, it was the pre-9/11 era
that did most damage to the legacy carriers, when they were making massive profits with poor
quality, indifferent service and high fares. That was the platform upon which JetBlue launched.
September 9/11 certainly meant that the big guys were distracted while we grew” (British Design
Innovation, n.d.).
Threats:
Environmental threats:
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Weather fluctuations such as Hurricanes and storms can be considered as a threat because
storms can cause postponements of the flights and very severe ones can cause a major danger for
the aircrafts and the passengers (Bennett et al, n.d.).
Technological threats:
Consumers now have the capacity to search and equate prices of different airlines, which
can create a price competition for JetBlue and other low cost airlines in the industry (Bennett et
al, n.d.).
Legal and political threats:
Terrorist attacking the World Wide Centre on 9/11 created a threat for the airlines
industry. After the attack, people started to have fears from travelling via airlines. Consequently,
this leads to security fears, postponed flights, and a lot other effects in the airline industry.
Subsequently, this can cause a great effect on the profitability of the company. (Bennett et al,
n.d.)
Federal Protocols, which necessitate one flight attendant for every 50 travelers will
increase the operational cost since it will increase the number of flight attendants, which can
cause more increase in wages payable (Bennett et al, n.d.). Also, the growing amount of safety
and environmental regulations can lead to increase of the operational cost of the company
(Bennett et al, n.d.).
Economic threats:
The increase of Oil prices cause operating costs of JetBlue to go up and have a great
influence on the profitability of the firm. Airplane fuel expense amplified 24% or $177 million.
This is instigated because of 67 million more gallons of aircraft fuel used, which resulted in $133
million of additional fuel expense, and a 5% rise in average fuel cost per gallon or $44 million.
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Aircraft fuel prices persisted in 2007 with average fuel price per gallon of $2.09 equated to $1.99
on December 31, 2006. The fuel costs of JetBlue represented 35% and 34% of their operating
expenses in 2007 and 2006, correspondingly. Cost per available seat mile enlarged 11%
predominantly due to the high fuel prices. (Corporateir.net, 2007)
Fluctuation in interest rates will affect the earnings of JetBlue. Interest expense amplified
31% or $52 million, chiefly due to the rise of $34 million in interest related with the debt or
capital lease financing for new aircraft deliveries. $13 million of interest for the financing of
previously unsecured property and $18 million of interest related to productions duties for new
terminal at JFK. Interest expense was condensed by nearly $7 million due to the arranged pay
downs of the long-term debt commitments and by an additional $6 million related to retired debt
for sold aircraft. The increase in capitalized interest was mostly attributable to the higher interest
expense used for the new terminal. (Corporateir.net, 2007)
Industrial threats:
The entrance of new players to the airline industry particularly in the low cost sector in
the industry can generate a threat of JetBlue. Following the deregulation of the airline industry in
1978, new players can enter the market very effortlessly due to the reduction of the barriers of
entry after the deregulation. Though, having strong operating procedures that opponents will not
be able to duplicate could intensify those barriers. Another way to intensify those barriers is by
product differentiation. JetBlue preservation of customer’s gratification and loyalty programs by
using membership cards, points system, or upgrades to reward loyal customers can create a
difference in the industry and will keep the customer from switching to other airlines. This can
create an opportunity out of the new entrants' threat. (Micanada.org, n.d.)
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Suppliers bargaining power can be a threat for JetBlue. Restricting of quantity of
suppliers for airplanes, their engines and in flight features can be hazard. Since there are the
simply two chief suppliers in the airline industry, Boeing and Airbus, there are not a lot of
available replacements to supplier’s products. “When the buyer industry is not an important
customer of the supplier group, the supplier’s product is an important input to the buyer’s
business, the supplier products are differentiated or built up switching costs, the supplier group
poses a credible threat of forward integration”. (Micanada.org, n.d.)
Threat of alternative airlines is excessive when the distances traveled are shorter. People
can switch to the cheaper alternatives such as cars or buses for short distance travelling instead of
going via planes. However for longer distances and for rushed customers, the airlines may face
substantial threat from alternative airlines such as Southwest airlines. (Micanada.org, n.d.)
Consumer bargaining power, which has been discussed in the technological threats, is
also considered as one of the industrial threats. Consumers now have the capacity to search and
equate prices of different airlines, which can create a price competition for JetBlue and other low
cost airlines in the industry. Consequently, they have the switching power. (Micanada.org, n.d.)
Rivalry between competitors in the industry is considerably high. There are numerous
corporations, which compete vigorously in the airline industry overall and in low cost segment in
particular. As considered previously, the bankruptcy laws offer the opportunity to remain in the
industry for an extensive period of time even to unprofitable firms, hence escalating competition.
(Micanada.org, n.d.)
Internal Environment: Strengths and Weaknesses
Internal factors, involve:
1. Management and employees
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2. Costumer service
3. Marketing and sales
4. Machine
5. Material
6. Money
7. Production
Strengths:
Management and employees:
JetBlue treat its employees so well by arranging comfortable workplace that promotes the
operating plans and service delivery structure. JetBlue aims to satisfy its employees to increase
their loyalty and productivity. It uses the strategy of part-time employees. According to Dodds
(2007), “A JetBlue flight attendant who used to work for United relates anecdotal evidence that
while her base pay is lower; she makes it up by working overtime and participating in the stock
purchase plan.” Its employees have the skills to deal with all situations and all kinds of clients
“knowing how to retain customers” (Bill Dodds, 2007). This in turn leads to powerfully run
internal structure that broadens to the external environment.
JetBlue hires the experts to help the employees to learn from their experience and to put a
good system to follow based on their knowledge. The top management insures good reputation
and values.
Costumer service:
JetBlue provides a good service by communicating with its costumers. The costumers can
complain or say anything they want to the CEO. The CEO travels to get it directly from them.
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Moreover, the company spends a lot of money to train its employees to have a good customers
service.
JetBlue uses advanced strategy that allows its customer to have online booking and
automatically passengers’ luggage carrying, which makes their life easier and save their time.
However, JetBlue spends a lot to keep tracking with the new technology to support its growth.
Marketing and sales:
According to Gareth (2005), “With JetBlue, all seats are assigned, all travel is ticketless,
all fares are one-way, and an overnight stay is never required.” JetBlue has a great service that
other airlines or competitors don’t provide. JetBlue offers a good price to business people.
Passengers usually care about low prices and high quality service, and JetBlue has both of these
features. In addition, it has good advertisements. JetBlue provides the lowest price comparing to
its competitors, while generating a good profit.
New and efficient aircraft (machine):
JetBlue uses effective aircrafts, such as Airbus A320 and Embraer 190. These kinds of
aircrafts are valuable to the airline because they reduce the expenditure on maintenance and
sparing parts. They also minimize training and increase scheduling flexibility. JetBlue’s planes
stay at the entry for about 35 minutes, which is 25 minutes less than its competitors. Also,
JetBlue does not allow the planes to spend a lot of time on the ground; an average JetBlue’s
plane is in the air for 13 hours a day. JetBlue airlines did studies and researches to develop their
growth by purchasing new planes. Moreover, JetBlue has a great record that shows that the
flights are safe and fast.
Weaknesses (money, development):
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JetBlue has limited destinations that just cover 11 countries. It is not existed in Asia and
other regions. Another weakness is that JetBlue has one class for all passengers. It also has some
financial problems.
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References
Business Resource Software, Inc. (n.d.). Internal factors. Retrieved July 18, 2012, from
http://www.brs-inc.com/models/model21.asp
Bennett, D., Gruenstein, T., Raman, R., Sachse, T., and Walsh, A. (n.d). Integrated company
analysis: JetBlue Airways. Retrieved July 13, 2012, from
http://business.library.wisc.edu/resources/kavajecz/10_Fall/JetBlue_Report.pdf
Brizek, M. (2007). JetBlue Airways, Trouble in the sky. Retrieved July 17, 2012, from
http://www.aabri.com/manuscripts/10478.pdf
Dodds, B. (2007). JetBlue Airways: Service quality as a competitive advantage. Journal of
Business Case Studies, 3, (4), P.38
Corporateir.net. (2007). JetBlue Annual Report. Retrieved July 15, 2012, from
http://library.corporate-ir.net/library/13/131/131045/items/ 290628/JBLU
_2007annualreport.pdf
Frost, R. (2006). Design and innovation news. Retrieved July 10, 2012, from
http://www.britishdesign.co.uk/index.php?page=newsservice/view&news_id=4179
Gareth, E. (2005). JetBlue appoints new Vice President, sales and marketing. Retrieved July 10,
2012, from http://investor.jetblue.com/phoenix.zhtml?c=131045&p=irolnewsArticle&ID=682515&highlight
Micanda. org. (n.d.). JetBlue Airways. Retrieved July 14, 2012, from www.micanada.org/Profgreg/Case01_JetBlue_Airways_TN%5B2%5D.do