JetBlue Airlines: Strategy, Growth, and Market Position

The Airline Industry: Historical Background

After World War I, many of the pioneers in the airline industry recognized the enormous potential for consumer travel, business transportation, and mail and parcel delivery. This potential evolved further following the technological advances of World War II, giving rise to a massive global industry. Companies such as Pan American, TWA, and others increased production, expanded destinations, reduced costs, and improved safety standards. Manufacturers like Boeing, Lockheed, and McDonnell Douglas had tooled up for wartime production and were now seeking lucrative ways to translate that technology to civilian use. What followed was a slow but steady growth in airport construction, expanded flight schedules, and greater consumer accessibility.

In the 1970s, the industry received a new boost as technological advances made wide-body jumbo jets and longer-range flights possible. Demand for air travel burgeoned, and by the 1980s, over 50 percent of all airline travel took place in the United States (Mill and Morriston, 2002, pp. 355–393).

Deregulation, 9/11, and Industry Transformation

The massive shift toward consumer travel gave rise to a number of airlines set up specifically as low-cost, no-frills, short-route carriers. In 1978, the airline industry became the first major industry in the United States to deregulate, a move that had both positive and dramatically devastating effects on the market.

Following the September 11, 2001 terrorist attacks, Congress passed the Air Transportation Safety and System Stabilization Act in response to the severe crisis facing the industry. Recognizing that the economic health of the nation also depended on a healthy airline sector, Congress funded more robust security measures, provided up to $10 billion in loan guarantees, and issued $4.5 billion in cash reimbursements to the 427 U.S. air carriers. This bailout, combined with increased airport security, fundamentally changed the landscape of the aviation industry (Air Transportation Safety and System Stabilization Act, Public Law 107-42, 2001).

The economic crisis of the early 21st century also hit the airline industry hard. While thousands of flights operate daily, growth rates remain inconsistent, competition between U.S.-based Boeing and Europe's Airbus is intensifying, and consolidation has become the dominant trend — over 200 U.S. airlines have merged. As routes are frequently cut in order to fill planes, service quality has diminished. Most airlines now charge for checked baggage, in-flight refreshments have been largely eliminated, and seat spacing has been minimized. Airlines have increasingly become a means of moving as many passengers as possible from point A to point B with minimal amenities (Air Travel Report: Dip in Delays, Spike in Complaints, 2010).

JetBlue Airlines: Founding and Business Model

One of the prime examples of the new paradigm in the airline industry is JetBlue, an American low-cost, no-frills airline. Its main base is John F. Kennedy International Airport in Queens, New York. Founded in 1998, JetBlue began establishing focus-city hubs by 2001 in locations such as Long Beach, California; Boston, Massachusetts; and Fort Lauderdale, Florida. The airline's primary destinations include domestic U.S. hubs, flights to the Caribbean and Bahamas, and select routes to Central and South America. It operates as a non-union airline with a fleet of just under 200 aircraft, with an additional 50 on order. In 2009, JetBlue posted $3.3 billion in revenue and a net income of $58 million (JetBlue Shareholder Information, 2010).

The company's strategic mission was to serve flight routes not adequately covered by major airlines, while doing so at a lower cost through a no-frills policy. This approach proved successful for a time; however, rising fuel costs and increased competition from major carriers that launched their own low-cost subsidiaries caused a significant decline in profits during the mid-2000s. To counter this, the company launched a new marketing campaign featuring lower fares alongside added amenities such as free satellite television and radio, more legroom, and leather seats — branding the overall experience the Happy Jetting experience (Globe Newswire, 2010).

References

Air Transportation Safety and System Stabilization Act, Public Law 107-42. (2001, September 22). Retrieved October 2010, from Office of Transportation — U.S. Government:

Air Travel Report: Dip in Delays, Spike in Complaints. (2010, October 12). Retrieved October 2010, from CNN Travel: http://www.cnn.com/2010/TRAVEL/10/12/air.travel.consumer.report

Fisk, P. (2009). Marketing Genius. New York: Wiley.

Gittell, J. (2003). The Southwest Airlines Way. New York: McGraw-Hill Professional.

Globe Newswire. (2010, June). Flying: It's Why JetBlue Created Jetting. Retrieved October 2010, from NASDAQ OMX Global Newswire:

JetBlue Press Release — Names Dave Barger President and CEO. (2007, May 10). Retrieved October 2010, from JetBlue.com:

JetBlue Shareholder Information. (2010, October 12). Retrieved October 2010, from JetBlue:

Mill, R., & Morriston, A. (2002). The Tourism System. Dubuque, IA: Kendall Hunt.

Wynbrandt, J. (2004). Flying High: How JetBlue Founder and CEO David Neeleman Beats the Competition. New York: Wiley.