JetBlue Airways: A Success Story

The Company’s Current Objectives and Current Strategy

As far as the current marketing objectives and strategy are concerned, it is believed that the strategy JetBlue is implemented this far is perfect for the airline industry and the business JetBlue is in. The business JetBlue is in is that of the passenger airline business. JetBlue’s primary marketing strategy is to attract new customers by widely communicating their value proposition that low fares and quality air travel need not be mutually exclusive.

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This supports the main goal of their growth strategy and therefore should remain the same. The objective for advertising is to increase JetBlue’s current passenger traffic. As you know by now the airline industry is highly competitive. On almost all of JetBlue’s routes, there are competing airlines. Through the right advertising approach, JetBlue should be able to convert competitor passengers into their passengers.

The current corporate strategy of JetBlue commences with plenty of reserves and liquid assets. JetBlue is noted as the best-capitalized airline start-up in history. Consequently, JetBlue can empower itself in the market by offering the best services available. One may also observe certain products displayed with their unique planes, fast check-in technology cozy leather seats, and free satellite TV. Secondly, they fly the newest available innovative Airbus A-320. JetBlue has contracts for a fleet totaling 132 new A320 aircraft, with 123 ordered with Airbus. (Howe, 1)

The Company’s Current Strengths and Weaknesses

The strengths of JetBlue are various. They made a profit the first year! That is hardly ever heard of. The owner has made some excellent marketing and non-traditional decisions that have worked well for JetBlue. Costs are kept low by not offering traditional catering on the planes, using new planes with no maintenance expense to services the customers, employees are not under a union system and a large part of advertising is done by word of mouth.

In the beginning, the experts simply waited for JetBlue to fold, as nearly every other start-up airline with aspirations of major success has done since the U.S. airline industry was deregulated in 1978. There are still a lot of potential obstacles out there for JetBlue. The carrier is still small enough to care about customers and avoid the labor problems that hinder many large airlines, but its recent expansion throws up red flags: Growth for an airline frequently spells trouble for its customers. JetBlue is also dealing with hardball business tactics from other carriers, and the more the newcomer expands, the more opponents it will attract.

The Company’s Current Environmental Opportunities and Threats

The airline industry is an increasingly hostile and competitive business environment. The immense strain placed on individual firms to secure customers and return a profit pressures them to maintain a high level of efficiency during both booming and down-turned markets. When the economy performs well and business thrives an airline must scramble to meet the demand for new flights with airplane acquisitions and the hiring of more pilots and flight attendants to staff them.

On the other hand, when air travel sales slack these same companies face the challenge of hastily down-sizing their workforce to minimize the impact of the resulting shrinking revenues on their profit margins. Furthermore, the massive scale on which airlines compete with one another has established an exclusive and expensive playing field privy only to industry high rollers willing to gamble in the millions of dollars. These huge required initial outlays create a formidable barrier to the entry of new competitors.

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All of these factors combine to create a large, complex, and difficult-to-define business environment where Airlines scramble to stay in business. With the end of World War II, domestic airlines improved their ability to develop faster and larger aircraft, and the commercial airline industry was born. Since this time, the airline industry has unrelentingly faced unpredictable and sometimes devastating turbulence.

Stakeholder Analysis

JetBlue’s low costs have been a key component to the airline’s ability to secure customers. To maintain the profit margin they have enjoyed it will be critical for them to keep their costs low. Analysts and shareholders are watching closely and wearily for any increases in JetBlue’s cost structure. With aging planes, possible worker unions, and possibly expanding customer service costs and as JetBlue grows, it will be essential that they are extremely proactive in keeping costs down. The struggling airline industry, post 9/11, has shown that those with lower costs are more successful in weathering unforeseen difficulties that can and will arise.

Identifying Current Problems

There are many marketing problems and risks involved in passenger transportation. A risk that JetBlue will always have to deal with is the fact that they compete in a very competitive industry. On every route, JetBlue travels they are competing with other airlines. Almost all of these competing airlines have greater financial resources and better brand recognition than JetBlue. As JetBlue implements its growth strategy, the competitiveness of the airline industry could hinder JetBlue from attaining enough passenger traffic required to remain profitable in new markets. Another major competitive fact among the airline industry is price competition.

Price competition is characterized by low-profit margins and high fixed costs. Meeting price competition depends on JetBlue’s ability to operate at a cost equal to or lower than their competitors. Price discounting, fare matching, frequent travel initiatives, are some ways that price competition occurs.

Alternative Strategies

The alternative key factor to JetBlue’s success in the future will be its maintenance of customer service. Customers have responded very positively to some of JetBlue’s unique benefits: individual TV screens with satellite channel access, for example. A recent Forbes article showed the company to have has a far higher online booking percentage than other airlines. Also, customers are pleasantly surprised when JetBlue CEO David Neeleman hops on a plane and asks customers to provide feedback on JetBlue’s service. JetBlue’s unique approach to customer service has been a key component to its success. It will prove difficult for JetBlue to maintain this unique appeal to its customers as it grows and expands its business amidst more heated competition from other airlines.

The key component to JetBlue being successful in the long run is to remain the low-cost leader. It has been pointed out that the new fleet of airplanes, the lesser-traveled airports as hubs, and the no-frills commutes themselves are the major reasons for the company’s success. To ensure that these strengths do not become weaknesses, some serious planning will be required.

Arguably the single most important factor for the profit margins enjoyed by JetBlue is its new fleet of aircraft. They require relatively no maintenance and Neelman was able to work out an undisclosed mix of leases and purchases to keep operating costs low. However, as the fleet of aircraft ages, the company will surely face rising maintenance costs on the multi-million dollar jets. JetBlue has started on the right foot as they chose, partly for this reason, to have only one craft and one type of engine for their entire fleet. All of the JetBlue Airbus A320s have International Aero Engines (IAE) on their planes, making maintenance and repair single-faceted and more easily done.

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Recommendations

What do you recommend to a company that has turned a profit in every quarter since its inception and in an era of unprecedented industry troubles has more than quadrupled the profit margin of the nearest competitor? How do you prognosticate or even guess the problems that an airline will face when the industry itself is so highly cyclical resultantly unpredictable? Therefore, the difficult task of answering what JetBlue can do to immunize itself from the very turbulence that has arguably made them so successful is frightening.

However, if history is any indication of future events, JetBlue will be faced with many internal and external strategic issues to overcome to maintain its competitive advantage. A good lesson to any airline start-up: even the highly capitalized JetBlue, is the sparkle and fade fate met by the 1983 airline People Express. Twenty years before JetBlue a short-haul carrier under Donald C. Burr set out to reap a profit on cheap, reliable service offered to underserved cities such as Buffalo, Columbus, and Sarasota. Like JetBlue, People Express soared quickly, netting $10 million on revenue of $287 million in 1983.

Employees were initially enthralled by the company’s profit-sharing plan and Burr’s habit of calling even the lowliest employee a “manager”, but the idealistic corporate culture came under fire when two years later the company reported only $20 million in profits on $928 million in revenue. The more the airline grew and expanded its routes, the more it watched its profits grow anemic. People Express disappeared after only four years of business when it was bought by Texas Air for $301 million in stock and cash.

Most analysts predict that JetBlue will experience growing pains in the future, as did People Express. JetBlue CEO David Neeleman’s successful strategies will be put to the test in the coming months and years as the company seeks to expand its routes and business.

Works Cited

Howe, P. (2006). JetBlue’s growth prods creation of food court at airport. Knight Ridder Tribune Business News, 1.

JetBlue Airways. (2006). Web.

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