JetBlue
...d beliefs (p. 703). This goes to show, again, the ever important statement by Neeleman, “[the mission of the company was] to bring humanity back to air travel” (p. 702). The political factors are those that define legal and regulatory factors within which the firm must operate. JetBlue must follow those regulations and new laws that are set up by the government. One example of this is when the airline was continuing to grow domestically by adding an increasingly number of flights with more destinations. In August 2004, JetBlue requested authority from the US Department of Transportation to provide international nonstop service to the Bahamas. After being granted approval from both governments later that month, JetBlue began selling tickets for this new destination. Since the government can restrict flying access to certain areas, it is necessary for airlines to always be aware of current and new laws and regulations to avoid controversy or breaking the law. In addition to the previous factors, JetBlue must keep up with technological factors, which promote renovation to prevent falling behind. These technological factors for JetBlue include examples such as adding more features like MP3 music and internet access to keep up with the technological advances other airlines are now offering. In addition to this, JetBlue has always tried to stay on top by offering newer jets and constantly striving for the newest advances in jet technology. Lastly, in the remote environment are the ecological factors, the most prominent factors in the remote environment which are relationships between humans and other living things which include pollution, global warming, etc. Since current trends in global warming and other problems going on in the world today, it is necessary for a large, public company like JetBlue to do the most they can to work towards ecological harmony. With technological advances on jets and their systems, they are becoming more efficient and therefore working towards ecological synchronization. Industry Environment In regards to the firm’s external industry environment, JetBlue had some hurdles to jump over in order to keep their small business alive. The first thing they had to deal with was entry barriers- basically, the reasons that made it hard to enter the extremely competitive airline industry. JetBlue had great planning before they even got off the ground. First of all, they used their different strategies to exploit certain areas of weakness in the market, such as product differentiation. By finding what other airlines were lacking, JetBlue managed to find an area they could utilize. Another advantage that JetBlue held in dealing with specific entry barriers was in regards to capital requirements. Neeleman made sure that his new airline would launch with more than $130 million dollars, which made it the “best-funded startup airline in U.S. aviation history” (Tobias, 3). This allowed them to have high quality equipment in order to attract potential customers. However, JetBlue still faced some big problems with other entry barriers. Because of the enormous expense of operating an airline, JetBlue could not operate on any kind of economy of scale. Because of their large capital outlays they were able to compete better than most, but initial costs were very high. Another aspect would be their cost disadvantages that were independent of size. Basically, JetBlue was fighting against all other major, established airlines. For example, Southwest had been a profitable airline for more than 30 years, and had their reputation established. Their access to distribution was also limited. Space at certain important airports was limited, and JetBlue had no system already set in place to help them along. Finally, government barriers existed. Although airlines were deregulated in 1978 in order to bring down prices and initiate competition, other laws can make it difficult for a new airline to take off (Dess, 1). Many environmental laws have come into effect recently for all airlines, and after 9/11 airlines were forced to beef up their security procedures. These extra expenses made it even harder for new companies to enter into the airline industry. A few other issues affect JetBlue’s industry environment, the first being supplier power. In some situations, suppliers can be so powerful that they can literally force smaller companies out of business by raising their prices significantly. They can do this because they are the only option. So far, this has not been a huge issue for JetBlue. The suppliers of their aircrafts are AirBus and Embraer. Although their main rival is Boeing, these companies are in such tight competition that their prices are remaining low. Fuel would be the other great expense that JetBlue has, but fuel prices are locked in ahead of time, so they have not been a problem. JetBlue only serves up snack food on board, so there is no real expense there, and DirecTV has enough competition in their industry to ensure relatively a relatively low priced contract. Buyer power is also important, in fact, it was what created the need for JetBlue. Customers wanted a low cost airline that also included quality service, and JetBlue answered. Substitute availability and competitive rivalry compose the last sections of the external industry environment. In regards to JetBlue, there are obviously quite a lot of airlines that would gladly take their customers. There are seven major airlines in the US, as well as regional and other low cost airlines. Their biggest competition is the other low cost airlines, such as Delta’s Song, and Southwest. They are offering many of the same routes as JetBlue, and are now concentrating on more low cost areas as well. However, right now “‘JetBlue will continue to eat out of the major carders’ rice bowls for quite some time,’ says analyst Robert Mann, who thinks spin-off carders like Song will ultimately undercut the main airlines rather than hurt JetBlue” (Tobias, 5). Therefore, their competitive rivalry will slackened for a little while. However, JetBlue has had to make some changes, such as implementing their “True Blue” program to give customers rewards for their purchases in order to keep up with some other companies, which is something they had hoped to avoid for some time. Operating Environment The last sector in the firm’s external environment is the operating environment. According to Pearce & Robinson, “the operating environment comprises factors in the competitive situation that affect a firm’s success in acquiring needed resources or in profitably marketing its goods and services.” (82) The five main features the operating environment includes are the firm’s competitive position, creditors, customer profiles, labor, and suppliers. JetBlue has fared well in this sector due to the fact that the company’s philosophy and value systems. JetBlu has seemingly taken a firm stance in being a proactive firm in the airline industry. Although Southwest Airlines came before JetBlue Airways, it is still acceptable to label them as being proactive in their operations. Though they provide low airfare rates similar to Southwest, JetBlue has been able to be the first low-fare airline to offer such amenities as leather seats, satellite television, and quality customer service. In the airline industry, it is imperative to be aware of one’s competitors. In JetBlue’s situation, they list their competitors as AMR Corporation, Southwest Airlines Co., and UAL Corporation. In addition to JetBlue’s own self-prescribed competitors is “Song” a discount airline by Delta Airlines in 2003. “Song” directly competed with JetBlue, flying the same routes and offering similar benefits. These competitors may be able to offer the same low-fare rates as JetBlue, but again, JetBlue can offer something different. JetBlue has always offered something more than their competitors, for example their pre-assigned seating, flying larger planes (which lowers cost per mile traveled), and extending legroom on all of their A320 planes. All of these minor details add up to great benefits to the customer, which then gives them a competitive advantage. As mentioned earlier, JetBlue strives to satisfy their customers. All of their competitive advantages as a company add up to be benefits to the customers at JetBlue. Some examples of JetBlue’s commitment to consumers are simply at the core of the culture at JetBlue. JetBlue considers their airline to be safe, caring, fun and full of passion for the consumer. Neeleman refers to JetBlue as a “service company…not just another airline” (Dess 704). This caring culture for customers at JetBlue is demonstrated in the many times that Neeleman has actually participated in helping the landing crews, flight attendants, and flying with the customers themselves. An important aspect of any company is the suppliers from which they purchase and obtain their important supplies. JetBlue currently owns a fleet of 73 Airbus A320 aircrafts. They have plans to purchase another 11 or so aircraft from the company. In addition to this fleet, JetBlue was planning to also purchase 7 E190’s in October of 2005. These 7 Embraer aircrafts would help JetBlue offer service to many mid-sized markets, offer additional service in current areas, and help balance their seasonality in their networks. With these E190’s, JetBlue plans to provide over-water flights to the Caribbean and Mexico which will provide them with much more ability and flexibility. As human resources are always an important aspect of any company, according to Dess, JetBlue has always taken care of their employees as their biggest asset to the company. They invest a lot of resources into selecting and training their employees so as to provide their future customers with the best possible service. As an important issue at JetBlue, safety is one of the major concerns when training pilots, flight attendants and other crew members from the beginning. As they are considered a great asset to the company, employees of JetBlue are treated and rewarded with competitive salaries and benefits. Neeleman believes, as stated in Dess, “[that] great people drive solid operating performance which yields continued prosperity” (704). Internal Profile Internal Analysis The internal profile of JetBlue can be looked at by the Resource Based View. This is a look at how well the firm uses its internal resources. There are three basic types of resources that create the building blocks for distinctive competencies. These are tangible assets, intangible assets, and organizational capabilities. The tangible assets are located on the balance sheet of JetBlue’s website. JetBlue’s tangible assets have continued to grow since they began operating, showing the success they are having, while keeping their debts fairly low. JetBlue had 69 Airbus A320’s in 2004 and of these they owned 44 and leased the others. They also have 114 A320’s and 100 Embraer E190’s on order that they began to take delivery with 22 planes in 2005. There is a resource scarcity in new aircrafts, mainly because they take so long to produce so the fact that they already have them ordered in advance gives them an advantage because they are a path-dependent resource. They do not own any land, they lease it all. They have built two 70,000 sq. ft. maintenance hangers on the airport grounds. They have also built a 32,000 sq. ft. office facility and they are building a flight training facility. JetBlue has $515,080,000 in current assets with most of that in investment securities. They also have a little over $2.1 billion in property and equipment. Most of that is in their ground and air equipment. The total in tangible assets that JetBlue has is $2.8 billion. The intangible assets of JetBlue are another valuable asset of JetBlue. Intangible assets are made up of brand names, company reputation, patents, and accumulated experience in the organization. Their company name and reputation is growing and becoming known as a quality low-cost airline. In an internal study, they found that 94% of customers found JetBlue to be a “much better” experience than other airlines. Also, 99% said they would definitely recommend the airline to others. This shows that quality of JetBlue, and how satisfied they are with the service. They have also received many awards including best domestic airline three years running. JetBlue was the first to use a “paperless cockpit” and they use no paper tickets. Even though JetBlue is a young airline, they have a lot of accumulated experience within the organization. The founder, David Neeleman has said that the people working at JetBlue are the most valuable assets they have. He is the CEO and chairman. Neeleman was the president and a founder of Morris Air; he also developed the Open Skies reservation system and helped start WestJet. David Barger, the President and Chief Operating Officer, was the vice president of Continental Airlines. The Chief Financial Officer, John Owen, was the treasurer of Southwest Airlines and Thomas Kelly, the Executive Vice President and Secretary, has worked will Neeleman for over 20 years at Morris Air and on Open Skies. The organizational capabilities of JetBlue are a set of skills that set them apart from other airlines. This is the abilities and ways of combining assets, people and processes. One skill that JetBlue has is its high number of seats that are filled during each flight averaging 83% of their seats filled in 2004. JetBlue also has setup a process to utilize their aircrafts better than their competitors. They have continually improved this as well. They use their planes over 13 hours a day, much more than other airlines. Through this, they also get the customers’ baggage to them quicker than other airlines as well. Another skill that JetBlue has is their ability to tap into underserved markets and large metropolitan areas that had high average fares. They are also successful in increasing demand in the airports that they operate out of. Strengths and Weaknesses JetBlue knows what their strengths are and utilize them to their fullest. They started with a very large amount of capital, which allowed them to purchase a fleet of new aircrafts. This makes it hard for other airlines to imitate because of the economic deterrence. Most other low-cost airlines start out with used aircrafts. This has meant that they have much lower repair costs and their planes are able to be in the air more. In 2004, JetBlue completed 99.4% of their scheduled flights. The new aircrafts have helped in the low operating costs. The operating cost per available seat mile was 6.03 cents. This is lower than any other major U.S. airline, whose average is 10.91 cents. JetBlue keeps their aircrafts in the air over 13 hours a day. The workforce at JetBlue is also very productive since they hire people who are committed to serving customers. Also until this year, JetBlue operated only one type of aircraft. The cut down on training costs for pilots and mechanics. It also keeps spare parts costs down. They feel that the new fleet of aircrafts, the E190 will allow continued low operating costs per available seat mile. This allows the competitive superiority of offering tickets at a lower cost to customers than other airlines. The aircrafts also are equipped with leather seats, satellite television, and longer leg room than other airlines. The weaknesses associated with JetBlue are that they are a newer and smaller airline ...