Bringing Humanity back to Air Travel

www.jetblue.com

A free baggage allowance (under 50 pounds)

JetPaws- for your pet travel needs TRUE Blue loyalty program Access to low cost, luxury flights Wifi and Inflight Entertainment Gift Cards

What services/products can you get with Jetblue?

Later in this PowerPoint you will find a Matrix with all of the positions; the reasons will be in the meat of this PowerPoint.

The BCG Growth-Share Matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970's. It is based on the observation that a company's business units can be classified into four categories based on combinations of market growth and market share relative to the largest competitor, hence the name "growth-share". Market growth serves as a proxy for industry attractiveness, and relative market share serves as a proxy for competitive advantage. The growth-share matrix thus maps the business unit positions within these two important determinants of profitability. ◦ (http://www.netmba.com/strategy/matrix/bcg/)

Where do they stand on the BCG Consulting Group Matrix?

American Airlines

Southwest Airlines

United/Continental Airline Merger, now called United Continental Holdings

http://www.dailyfinance.com/company/jetblue-airways-corporation/jblu/nas/top-competitors

Top competitors to JetBlue

2008 figures JetBLueTrue Blue Program

SouthwestRapid Rewards

United Contine-ntal

American

% of passengers that flew on pts

3.7% 6.4% 8.3% 8.5% Almost 10%

Number of travel awards issued

297,000 2.8m 2.3m 1.6m 3.1 m

Points earned 6 Points for every dollar, (booked online)

2 Points per any round-trip

25 miles per dollar

Miles/Points needed to redeem a round-trip flight in North America

10,000 points 16 credits 25000miles

25000miles

Loyalty Programs by Comparison

Sources: sec fillings and http://www.insideflyer.com/articles/article.php?key=5277

1- American Airlines 2- Continental Airlines 3- United airlines 4- Southwest Airlines 5- JetBlue Airlines

Rankings based on percentage of passengers currently using loyalty

programs

OPERATIONS COSTS FFPs are big operations, employing hundreds of marketing, customer service and technical staff. Other significant costs: facilities,

computer hardware and software, phone systems.   COMMUNICATIONS COSTS Member communications: enrollment materials, program brochures, newsletters, postage, etc.   TRAVEL AWARDS COSTS Travel award costs depend on whether the member uses a free award ticket on the host airline, or an award on one of the

program partners.   1. When a member uses a free ticket on the host airline, the costs include... (a) Direct costs (extra costs of meals, fuel, etc. required to carry an incremental passenger)   (b) Displacement costs (where a non-paying passenger occupies a seat which would otherwise be occupied by a paying

passenger)   (c) Diversion costs (where a customer uses an award instead of buying a ticket)   Whereas (a) will always be a cost, (b) and (c) may or may not apply, depending on how full the flight is, and whether the member

would have traveled even if he'd had to pay for the ticket.   2. When a member uses an award on a program partner... The host pays the partner company, in essence buying the award for the member. Typically the rate would be between 1-2 cents

per redeemed mile.   Example: A free trip to London on AAdvantage partner British Airways (available for 50,000 miles) would "cost" AA between $500

and $1000, depending on the per-mile rate negotiated between AA and BA. Assuming the member earned those 50,000 miles flying on AA, and AA earned on average 10 cents per-flown-mile, the award would amount to a 10-20% rebate to the member (simply the member's revenue contribution to AA, versus the cost to AA of the award ticket purchased from BA).

Frequent Flyer Programs-Cost

PARTNER REVENUES Because FFPs are such effective marketing programs, many companies are willing

to pay for the privilege of participating in them as program partners. (Such partnering also benefits the FFP host company, which wants its FFP to boast a wide array of high-quality partners.)

  Typically, a partner company pays the host company 1-2 cents per mile earned

when a member uses the partner's product. (These expenses are counted against the advertising or sales promotion budget, and can be significant. A hotel giving 500 FFP miles (@$.01 = $5) for a $100/night room stay suffers a 5% yield dilution, right off the top.)

  ADVERTISING SAVINGS Also counted on the revenue side of the ledger are the savings FFP marketing

affords over mass-market advertising.   Because FFPs allow targeted communications with the airlines' proven customers, it

is not necessary to spend as much on expensive (and inefficient) print and broadcast advertising to maintain the interest and loyalty of current customers. The dollars "earned" through these savings run into the millions.

Frequent Flyer Programs-How Revenue is made

American Airlines has issued the most rewards, which means that they have had people accumulate the most points, which means more people are using the program. ◦ AA was one of the first to implement a rewards program

AA has the highest percentage of passengers using its program

JetBlue has the lowest percentage and the lowest number of awards issued◦ JetBlue is also one of the newest airlines and has one of

the newest loyalty programs, so they have a lot of room for growth, a lot of potential, especially considering how well they have done in other areas.

Review of Loyalty Programs

Suggestions

In order for JetBlue to increase their market share they should continue to expand and remain profitable. Things look positive for this relatively new airline, but they must remain competitive through the things that have allowed them to be competitive– their marketing, comfortable flights, pet friendliness, low cost and entertainment.

Another suggestion is that JetBlue could better promote the program through Viral Videos over the internet.

A third suggestion is to create a forum where answers can be found for questions about loyalty programs. They do have a FAQ; however, I had many questions that I had to search diligently for– the average consumer would most likely give up

Because they matterPet Programs

P.A.W.S, stands for “Pets are welcome at Southwest”- Southwest

JetPaws- JetBlue United Airlines, no pet program, just a pet

policy Continental Airlines, no pet program, just a

pet policy American Airlines, no pet program, just a

pet policy

Programs for bringing your Furry ones on flights

JetPaws is JetBlue's exclusive program designed to provide pets and their owners the tips and tools they need for a smooth trip from start to finish. We're simply committed to each and every one of our customers—including the four-legged ones. There's no charge and the program provides:

Pet carrier bag tag - a bag tag will be attached to your pet carrier at check in to let everyone know your pet is ready to jet.

Travel Petiquette™ - a handy list of JetBlue's social graces of pet travel.

TrueBlue® points - you'll earn 300 TrueBlue points each way when traveling with your pet. If you're not a TrueBlue member, sign up now, it's free!

JetPaws welcome email - once you book your pet, you will receive a welcome email with useful information such as next steps, Petiquette and travel tips.

Free Pet Travel Guide - a useful, downloadable e-booklet featuring: The ins and outs of jetting with your pet from the moment you book your flight to your arrival at your final destination.

Travel Petiquette Pet-friendly hotels, restaurants and parks plus animal hospitals in some of JetBlue's major cities Accepts small dogs and cats $100 dollar one way fee per pet Travelers earn 300 TrueBlue points if they travel with a pet.

www.Jetblue.com

JetPaws

$75 dollar charge each way Only for small cats and dogs Pets must be accompanied by owner Not as developed of a program- marketing

wise.◦ JetBlue has a more focused website whereas

southwest still seems like others that appear to just have a pet policy.

P.A.W.S Program

Only Cats and dogs allowed Allowed Travel Destinations

◦ Flights within the 48 contiguous United States, Alaska, Puerto Rico, St. Thomas and St. Croix.

◦ From the U.S. to Canada, Mexico and the Caribbean provided the country of arrival permits entry.

Free within US, 100 dollar charge outside of US

Pets can travel alone

American Airlines

Accepts birds, dogs, rabbits, guinea pigs, and other animals

Unaccompanied pets are allowed Charge between 175 and 250 dollars per

flight

United Airlines

125 dollars to transfer a pet one way Can earn miles through Petpass program

Continental Airlines

American Airlines has the least cost, but JetBlue has the best marketing.

United Airlines accepts more animals, but charges substantially more

JetBlue also appears to have the most user-friendly website, the appearance of empathy for the desire that customers have for their pets to be safe.

Review of the Pet Programs

JetBlue is doing a great job at promoting the “new” policy; however, they should concentrate a percentage of their efforts on viral videos and social media– something they are doing well with the overall company.

They have a Facebook, but it may be even more helpful if they connect a PetPaws Facebook page with the JetBlue one– a page where pet owners can create a community. The JetBlue page has 430,557 likes. That is great!

Suggestions

JetBlue (domestic, economy)◦ First bag free, and carry on.

All checked bags must not exceed 50 pounds $30* fee for checking a second bag and a $75 fee for a third bag

American Airlines (domestic, economy)◦ 25 dollars for first checked In bag

Bags must not exceed 50 pounds $35* fee for checking a second bag, $100 dollars for a 3rd bag.

Southwest Airlines (domestic, economy)◦ First two bags are included in ticket

Bags must not exceed 50 pounds $50 dollar fee for a 3rd through 9th bag.

Continental Airlines (domestic, economy)◦ First two bags are free if you are part of their elite/first class loyalty program,

or if you are in the military; otherwise first and second bag check ins are 23 and 32 (online) and 25 and 35at the airport.

United Airlines (domestic, economy)◦ First bag is 25 dollars, second bag is 35 dollars.

Oh, those Airlines and their Baggage

Based on customer cost, two bags, online purchase, and the average flyer (someone that is not part of a loyalty program):

Tied-4- AmericanTied-4- United3- Continental2- JetBlue1- Southwest Airlines

How has the baggage policy that is likely to attracts the most customers?

Not much to suggest here: JetBlue has an advantage to its other competitors when it comes to price for luggage- and that is a huge competitive advantage. The main concern is southwest, which happens to be one of its biggest rivals in the Low cost carrier market. It is necessary for JetBlue to ensure that it does not get beaten due to lower prices by its competitors. Factors that would allow them to lower prices would include changes in oil prices and other operational costs.

Suggestions

Major differences:◦ United Airlines promotes their cards as selling

miles and not gift cards◦ Southwest has the greatest amount you can

purchase, $25,000◦ All other airlines provide gift cards◦ Gift cards are nothing new◦ All these gift cards rank similarly

Conclusion: all companies are doing a great job.

Gift Cards

A Comparison for funSide By Side Comparison of Flight based on ticket details:

Departure: December 12, 2010One Way ticket from Fort Lauderdale Airport to Newark, New Jersey

Departing before NoonBased on the lowest price

One flight, five airlines, who offers the best price?

JetBlue- $183- 3rd Place Continetal- $163- Tied American Airlines- $158- 1st Place United Airlines- $163- Tied Southwest- does not offer flights to Newark

I found it interesting that JetBlue didn’t have the greatest deal, considering that they are an LCC. However, it might put things into perspective to remember that JetBlue offers things that other Airlines do not:◦ A lot more leg room and comfort◦ Free Wifi, TV per seat, and movies◦ And, according to JD Power and Associates, great service.

The airline industry is not a new industry; however, JetBlue has managed to be one of the top airlines in an industry that is known for entry barriers and extreme competition, so I would still classify them as question marks due to their high growth over the last ten years, but small market share (see next slide). JetBlue should continue being competitive and find ways to continue cutting cost so they can compete in their niche of low cost, luxury travel.

Some thoughts

Rank Carrier Market Share

1 American 13.8%

2 Southwest 13.8%

3 Delta 11.8%

4 United 10.4%

5 US Airways 8.0%

6 Continental 7.6%

7 Northwest 4.8%

8 JetBlue 4.3%

9 AirTran 3.4%

10 Alaska 3.1%

11 Other 19%

2010 Top 10 U.S. Airlines Market Share based on Revenue Passenger Miles[29]

http://www.wikinvest.com/stock/JetBlue_Airways_%28JBLU%29

American Airlines: flights over 3 hours are 12.95 or 30 day subscription of $29.95

United Airlines: ranges from from $8-$13 Southwest Airlines: 5 dollars JetBlue: free wifi access Continental Airlines: no wifi

Rankings based on likelihood to attract customers: 1- Jetblue 2- Southwest 3-Tied for United and American Airlines 4- Continental Airlines

Wi-Fi

JetBlue has done a great job of promoting there free Wi-Fi, even though carriers that offer Wi-Fi at a charge usually don’t ask for more than 13 dollars– I find that interesting considering that people will make a huge deal out of this, but, alas, it’s psychology. JetBlue probably loses money doing this, but makes up for it in the attention it receives.

I recommend that JetBlue continue promoting their Wi-Fi; however, it may be a competitive parity because other companies, like continental are already talking about installing wireless internet. Also, they should always be conscious of Southwestern because they are one of their most similar/dangerous competitors .

Suggestions

BCG Consulting Group Matrix for JetBLue’s Products

JetPaws

TrueBlue

BaggageGift Cards

FLights

Wireless Internet

Diversification

Alliances

One of the largest independent regional airlines in the United States.

According to www.Jetblue.com, Now JetBlue customers can enjoy smooth, simple connections from Boston's Logan International Airport to Nantucket (ACK), Martha's Vineyard (MVY), Provincetown (PVC), Hyannis (HYA) and Rutland, Vermont (RUT) on Cape Air. Customers can book connecting flights between Cape Air’s New England cities and JetBlue cities online at www.jetblue.com

Related Diversification

On February 14, 2007, JetBlue entered into its first codeshare agreement, it happened with Cape Air.

Codesharing: the practice of multiple airlines selling space on the same flights, so Aer Lingus, Lufthansa, and Cape Air can fly on JetBlue planes, and the other way around, allowing

customers more freedom and less hassle

JetBlue Airways announced, that it had “entered into a marketing partnership with Cape Air, an airline based in

Hyannis, MA, to provide easy connecting service beyond JetBlue's Boston focus city to four new destinations served by Cape Air: Nantucket, Martha's Vineyard, Provincetown, and Hyannis, MA.”

http://investor.jetblue.com/phoenix.zhtml?c=131045&p=irol-newsArticle&ID=963198&highlight=

Aer Lingus

JetBlue customers can now easily connect to Ireland’s Dublin and Shannon airports through our partnership with Aer Lingus, Ireland’s airline providing true Irish hospitality, low fares and access to great destinations.

http://www.jetblue.com/about/ourcompany/aerlingus/Related Diversification

On February 6th 2007, USA today reported JetBlues plans to develop an alliance with Aer Lingus.

On February 1st 2008, JetBlue announced details about this alliance

On April 30th 2008, JetBlue and Aer Lingus “celebrated their partnership by welcoming the first customers connecting between the two airlines at New York's John F. Kennedy International Airport. The innovative partnership enables Irish and U.S. customers to book a single reservation between Ireland and more than 25 U.S. destinations, connecting through JetBlue's home base at JFK.”

http://investor.jetblue.com/phoenix.zhtml?c=131045&p=irol-newsArticle&ID=1137738&highlight=

Aer Lingus

Alliances

Lufthansa

One of the world’s largest airlines, Lufthansa flies from 21 North American cities to over 200 destinations in nearly 80 countries, through its Frankfurt and Munich hubs. Together with its partners, Lufthansa serves 915 destinations in 160 countries.

An industry innovator, Lufthansa has long been committed to environmental care and sustainability, operating the most technically-advanced and fuel-efficient fleet in the world. Lufthansa will be the largest European operator of the Airbus A380 and is the launch customer for the new Boeing 747-8. For more information please visit lufthansa.com.

http://www.jetblue.com/about/ourcompany/lufthansa/

Lufthansa currently owns a 19 percent stake in JetBlue.

Related Diversification

LufthansaOn January 22, 2008, Lufthansa and JetBlue completed their stock purchase transaction that established a 19 percent ownership of JetBlue by Lufthansa

On March 12, 2008, Financial Times reported Lufthansa’s plan for an alliance with JetBlue.

On August 31, 2009, Lufthansa signed a codeshare agreement with JetBlue

On November 11, 2009, began their codeshare agreement via Boston and New York, expanding customer choices for both airlines, and allowing JetBlue customers with new access to Europe, Africa, the Middle East, and Asia

On October 1st 2009, “Travelers flying JetBlue from these cities will be able to connect via New York/JFK or Boston onto Lufthansa flights bound for Germany and beyond, including top cities like Delhi, Madrid, Rome, Tel Aviv and Zurich.”

Austin, Texas Buffalo, NY Fort Lauderdale, FL. Fort Myers, FL New Orleans, LA Pittsburgh, PA Raleigh/Durham, NC Rochester, NY San Juan, Puerto Rico Syracuse, NY Tampa, FL West Palm Beach, FL

http://investor.jetblue.com/phoenix.zhtml?c=131045&p=irol-newsArticle&ID=1337578&highlight=

Emirates Airline JetBlue struck a deal to provide

connecting flights with them when they are flying into the United States. ”JetBlue will provide connecting flights from its destinations in the US and Caribbean and Emirates will handle the long haul routes to the Middle East from New York’s JFK. This deal comes on the heels of a similar interlining agreement between JetBlue and American Airlines.”

http://www.lowfares.com/blog/2010/11/17/jetblue-and-emirates-

airlines-alliance/

Related Diversification

On November 15, 2010, JetBlue Airways and Emirates (one of the worlds largest international carriers) partnered to create new global connections

This partnership will allow JetBlue to “connect to cities as diverse as Auckland, Bangkok, Hong Kong, Kuala Lumpur, Nairobi, Singapore and Sydney plus ten cities in India, points throughout the Middle East, and a host of exotic island getaways including the Maldives, Mauritius, and the Seychelles,” greatly enhancing JetBlue’s scale and ability to compete with other Airlines.

http://investor.jetblue.com/phoenix.zhtml?c=131045&p=irol-newsArticle&ID=1496341&highlight=

South African Airways

JetBlue and South African Airways (SAA) Africa’s most awarded airline have partnered to offer easy connections and seamless travel through New York’s JFK airport to over 40 destinations in southern Africa and beyond.JetBlue customers are now able to book travel to all SAA destinations worldwide: South Africa, Kenya, Mauritius, Tanzania and Zimbabwe are now all within easy reach with the convenience of a single ticket and automatic bag transfer at New York’s most convenient hub. Visit flysaa.com to start your journey right now.

http://www.jetblue.com/about/ourcompany/south-african-airways/

Related Diversification

On May 12, 2010, an agreement took place with South African Airways that allowed travelers to fly on both carriers with one single ticket.

American Airlines

American Airlines

JetBlue and American Airlines have teamed up to offer convenient connections between 26 domestic JetBlue markets and 15 international destinations served by American from New York's JFK and Boston's Logan airports. The interline service can be booked through jetblue.com (coming in early 2011), travel agencies, American Airlines AA.com website, American Airlines ticket counters and American Airlines Reservations. Additionally, JetBlue's TrueBlue members may earn TrueBlue points when they fly on American flights in the select markets listed above. Enjoy the convenience of interline service with seamless check-in and baggage transfers when connecting between JetBlue and American within any of our included markets.

http://www.jetblue.com/about/ourcompany/aa/

Related Diversification

On March 31, 2010, it was announced that American Airlines and Jetblue had arranged an alliance

On November 17, 2010, JetBlue and American Airlines announced a reciprocal frequent fler agreement, which allows members of the American Airlines loyalty program and the JetBlue loyalty Program to earn points on select routes

Acquisition of LiveTV

JetBLue LiveTV

Now a wholly owned subsidiary of JetBlue.

LiveTV provides televisions for the back of headsets and LiveTv channels that customers can watch while inflight. Jetblue provides this service for free, all other Airlines do not.

It is interesting to note that LiveTV also provides services to Continental, Virgin Blue, Frontier, WestJet, Airtran, Expressjet, Air One, and Blue Wings

Unrelated diversification

JetBlue has done an incredible job of expanding. It can be easy to forget that JetBlue, as a company, has barely existed ten years-it is in credible that it is considered one of the top Airlines of the United States. They know what they are doing.

The decisions made by the Executives to expand alliances with partners worldwide is a smart decision considering that they are mostly a domestic airline. I believe these partnerships are only the beginning and that JetBlue will continue to acquire partnerships in various strategic locations. JetBlue is one of the fastest growing airlines, and one of the few that are consistently profitable; I have no doubt that their profitability is largely influenced by their related and unrelated diversification strategies.

The fact that their subsidiary, LiveTV, is in the Airplanes of many other well known Airlines is a great indicator that the Airline is using that partnership to create value in their company (others must charge customers, but they don’t have to- so customers will be more inclined to go with JetBlue).

Analysis

The next 3 years will belong to JetBlue. It is highly unlikely that the Airline will surpass giants like American Airlines; however, I see JetBlue becoming an even stronger player in the industry; possibly surpassing Southwest- though that may take longer than JetBlue.

The next 3 years will consist of reduced cost for JetBlue because of the savings that occur when airlines participate in codesharing (almost no expenses are incurred by JetBlue when another airline’s customer travels on the Airplane, because that airline pays for the cost per seat).

The next 3 years will bring more destinations for JetBlue customers to connect to with all of their current partners, as well as new partnerships.

The next three years will show an increase in customer loyalty to JetBlue because of their marketing efforts toward their TrueBlue frequent flyer program. Their loyalty program is still relatively new, and I do not doubt that JetBlue’s excellent marketing will lead to a greater awareness of the programs benefits.

The next three years will bring lower costs as a result of economies of scope from all of their partners working together, but most especially Lufthansa.

The next 3 years will consist of more competition from other Airlines developing possible partnerships with other companies similar to LiveTV; possibly leading to more perks for customers, or a struggle for JetBlue to diversify itself- though, given their track record, JetBlue, will do just that in order to deliver value, style, and service.

The next 3 years

1. The purchase of a subsidiary oil company that would allow JetBlue to purchase part of their oil at a discount. In an industry where cost of oil is one of the greatest determining factors of success, reducing oil prices would boost JetBlue to a whole new level.

2. A partnership with Amazon where Amazon provides Kindles that JetBlue can have on their airplanes, exclusively with JetBlue, could help continue the “cool” vibe surrounding JetBlue’s brand, while providing a benefit to customers that enjoy reading and inflight entertainment- some people prefer to read. JetBlue could charge a minimal fee, or provide it for free depending on whether JetBlue would be able to afford that.

2 Unrelated Diversifications that would change JetBlue completely