JetBlue Airlines Case Analysis
JetBlue Case Analysis
Discuss the trends in the U.S. airline industry and how these trends might impact a company's strategy.
The time period the case study covers and the ensuing years have proven to be among the most turbulent ever for the airline industry on a global scale. Beginning with the reduced availability of capital and the lack of liquidity for expansion and the slowing rate of economic growth for business and leisure travel the latest global recession has been particularly difficult for the airline industry and its participants to navigate. The following are the key financial factors that the case study indicates as being the most responsible for the turbulence in this industry over the long-term. Continually escalating fuel and operating costs which fluctuate significantly over time force fuel hedging or the practice of purchasing large quantities of fuel on speculation of price increases or decreases (Forbes, Lederman, 2009). Second, the pervasive use of the hub-and-spoke model, a key factor in JetBlue choosing to expand into JFK International Airport in New York, is a risky move for the company as they are relatively unknown in this area of the country (Aydin, Morefield, 2010). A third strategic factor is that for any airline to survive they must have excellent cost controls, management and variance analysis in place to accurately predict and react to pricing variation. This is an area where JetBlue continued to struggle as well during the case study period. Fourth, the need for continually innovating and improving process performance at the business unit, operations unit ad field level of any airline is crucial to its success (Kumar, Johnson, Lai, 2009). In the context of the case study, JetBlue did aggressively pursue this area with a very high level of investment in IT, CRM, pricing and analytics...
JetBlue was actually ahead of their time in using lean-based workflow methods including rules- and constraint-based modeling to better attain in-plane optimization over time (Liou, Yen, Tzeng, 2010). This has significantly increased operating efficiency and dropped per-flight costs as well. The case study provides a glimpse into the many approaches and strategies the company had for using lean manufacturing and process improvement frameworks and techniques for gaining a greater level of insight into how best to reduce costs and keep customer satisfaction at parity or above competitors. The JetBlue business model was predicated on the idea of continual process improvement and the attainment of higher levels of efficiency in the areas of flight and crew scheduling, optimizing passenger loads per flight and the ability to better manage fixed and variable costs through more effective use of analytics compared to competitors. Lastly this industry is known for having exceptionally entrenched and well-capitalized competitors who are willing to invest heavily to hold onto market share despite the industry overall being in a decline stage of its product life cycle, facing eventual consolidation (Parast, Fini, 2010). It is a well-known fact in the industry that the continual infusion of capital investment is necessary to keep airlines operable and meeting federal and state-based governance requirements (Forbes, Lederman, 2009). Technology investments have proven over time to be a successful strategy for mitigating the high cost of capital and keeping operating costs under control (Liou, Yen, Tzeng, 2010). Unfortunately many airlines are unilateral in their cost reductions, choosing to cut customer services sharply to save on costs, leading…
