Jet Blue Airlines: Cost Management the Objective

Jet Blue Airlines: Cost Management

The objective of this work in writing is to review the case study on Jet Blue Airlines and to analyze their system of cost management.

Price variance of fuel is noted by Jet Blue Airlines to be a critical matter in business operations as it was reported in 2007 that fuel costs were the largest operating expense for Jet Blue Airlines due to high average prices of fuel. The report specifically states "fuel prices and availability are subject to wide price fluctuations based on geopolitical factors and supply and demand. These facts provide strong incentives for highly accurate and comprehensive fuel inventory management -- particularly conservation." (Jet Blue Airlines, 2007)

Fleet Management

Jet Blue Airlines reports focusing on a "disciplined fleet management strategy to control the growth, size and age" of the Airlines' fleet. It is reported to be due mainly to "higher fuel prices and an ultra-competitive pricing environment" that difficulty was experienced in funding profitability through year 2007. Jet Blue Airlines reports having continued modification plans in 2007 just as had been done in 2006 and the A320 purchase agreement was additionally amended as well as was the E190 purchase agreement stated to be accomplished through "slowing delivery of aircraft from an average of 18 to 19 aircraft each year. In order to address the variable rate overhead variance of the older aircraft, Jet Blue Airlines reports having sold three of its older A320 aircraft and returned yet another aircraft to the company from who it was leased. (Jet Blue Airlines, 2007, paraphrased)

It is the belief of Jet Blue Airlines that "operating a newer fleet with the latest technologies" makes the aircraft much more fuel efficient as well as more dependable while bringing about a reduction in the costs associated with maintenance of the fleet and ultimately results in a "better experience for…customers." (Jet Blue Airlines, 2007) Older aircraft exceeded the standard quantity of unit in consumption of fuel as well as exceeding the standards set out for GHG emissions by aircraft.

II. Routes, Cargo, and Scheduling of Flights

Maximization of efficiency of Jet Blue Airlines aircraft is stated to be realized through the routes being managed actively with passenger and cargo traffic near capacity scheduling yet Jet Blue Airlines avoids overbooking strategies used by some carriers however, ensuring that aircraft are loaded fully prior to adding market segments thereby bringing about maximization of the assets value and minimization of the GHG emission intensity. (Jet Blue Airlines, 2007, paraphrased)

III. Fuel Management

Fuel Management formed its Fuel Challenge Team in 2004 when oil went above $40 per barrel for concentrating fuel conservation efforts. It is reported that resulting from initiatives 'that have matured over the years, our continued vigilance in conservation efforts, and our new, fuel efficient fleet" is the "fruits of crewmember-driven ideas" and the continued improvement of the "implementation of existing programs…" (Jet Blue Airlines, 2007)

A. One-Engine Taxi Procedures

It is reported that many Airlines have "adopted one-engine taxi procedures for select pilot groups" that Jet Blue Airlines pilots and technical operations crewmembers makes regular use of one-engine taxi procedures when that is a practical option. One -- engine taxis are not a good option at times due to weather and layout of the airport however, due to commitment of the pilot and technical operations there has been a great deal of success realized by Jet Blue Airlines using this strategy as 50% of flights are reported to have been implemented using the one-engine taxi strategy. In fact, in 2007, this strategy was used on 88% of A320 flights and 95% of E1900 flights at JFK, which is reported as the largest Jet Blue Airlines operation. This resulted in success that "has a multiplier effect that increases the magnitude of the fuel savings and emissions reductions attributed to the practice." (Jet Blue Airlines, 2007)

IV. Weight Reduction Initiatives

Also reported by Jet Blue Airlines are 'weight reduction initiatives' as the amount of weight on the aircraft determines the amount of fuel used. Jet Blue Airlines reports "having removed several hundreds of pounds from each aircraft. Switching to radial tires on the E190 saved 128 pounds per aircraft. Removing six seats from our A320s saved another 490 pounds per aircraft. In 2007, these changes, on top of adjustments to galley provisioning and galley cart weights, saved more than 950,000 gallons of fuel and approximately 9,200 metric tons of GHG emissions." (Jet Blue Airlines, 2007)

V. Climb and Descent of Aircraft and Costs

It is reported that the method of climb and descent has an impact on the cost of fuel therefore, "continuing to use a lower costs index or the relationships between the time cost of maintenance and crewmembers to the cost of fuel, allows Jet Blue Airlines to "conserve fuel on each A320 flight…" (Jet Blue Airlines, 2007) Through changing the flight speed, and the aircraft climb and descent the cost index is reduced from 50 to 35 and was a change that resulted in only two additional minutes added to each flight and saved a total of 188 pounds of fuel each flight.

Jet Blue Airlines report that they learned that when they increased the cruise speed of the E190 aircraft that fuel efficiency increase were realized and when added to that just stated the total fleet-wide fuel savings was more than 27 million pounds of fuel or approximately 4 million gallons in 2007 alone with a reduction in GHG emissions stated a "just over 38,000 metric tons." (Jet Blue Airlines, 2007)

The use of the aircraft auxiliary power units is also limited according to Jet Blue Airlines who relies on electrical ground power and pre-conditioned air units for starting the engines of their aircraft and to supply power to the systems when parked as well as supplying pressurization to the water systems onboard the aircraft. This is reported to be accomplished through logging all activities in maintenance and then prioritizing them so that all issues surrounding safety are addressed and efficiency of procedures is assured. (Jet Blue Airlines, 2007) The example stated is:

"if one of the air conditioning packs on an aircraft is not operating correctly, the aircraft maybe used safely and comfortably; however, it must travel at a lower altitude. This results in a slower speed and an increase in fuel consumption." (Jet Blue Airlines, 2007)

It is additionally reported by Jet Blue Airlines that programs in 2007 focused on reduction of GHG emissions include the following:

(1) Deploying state-of-the-art technology to develop efficient routings and reduce flying times;