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Current Strategies

In order to make a few recommendations and evaluate some alternatives

strategies that JetBlue Airways can implement in its near future, we will briefly

touch upon a few facts generated from the SWOT Analysis. By taking a look at the

key issues surrounding the organization, we can suggest a few strategies and

recommendations the company should emphasize to retain its success and

leadership position within the industry. For example, one of the key issues facing

the company is the extremely competitive nature of the industry. JetBlue has been

able to succeed in this environment by formulating a double-edged strategy; low-

cost and service differentiation strategy.

JetBlue is capable of providing its low priced tickets because of its successful

cost saving policies. Within the airline industry, the biggest reduction in price a

company can realize is on the actual planes themselves. In fact, the company has

used only one model airplane, Airbus A-320, of which it uses to replenish its

inventory every two weeks per year (JetBlue, 2011). By focusing on just one

airplane, it has allowed the company to gain economies of scale. Moreover, the

company can reduce unnecessary expenses and complications that can result from

training pilots, multiple different maintenance costs, and intricate scheduling by

exclusively operating with just one model. In 2005, the company announced that it

would be introducing a new model, the Embracer 190, which offers customers one

of the most spacious and relaxing cabins in its class (JetBlue, 2011). Nevertheless,

with just two different models in its fleet, the company can still benefit from its

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substantial cost savings compared to other competitors with numerous different

models.

Moreover, labor costs contribute to a substantial portion ofJetBlues

operating costs. In 2010 alone, salaries, wages, and benefits summed up 23% of the

companys revenues (JetBlue, 2010). Compared to other major carriers, JetBlue has

enjoyed a lower cost labor force. It accomplishes this by requiring its employees to

assist with cleaning the cabin after every flight; usually done by other crewmembers

in other companies. This provides a double advantage for the company, a faster

turnaround time between flights and at the same time, lowering the companys

overhead costs.

JetBlues has been able to increase its operational efficiency and reduced its

costs by heavily investing in technology. For example, it has implemented a

paperless ticketing system that saves on both administrative and material

expenditures. The airline has also chosen to supply their pilots with notebook

computers to use for their training, which has resulted in considerable savings. Yet,

another example is the companys customer service agents that use a reservation

system that can be accessed from home using VOIP that further saves the company

in office space and free phone calls.

Its differentiation strategy consists on paying their employees with premium

wages and treating them with a high level of respect. This philosophy provides great

value to their HR management by stimulating its culture and driving employee

motivation. At the same time, providing exceptional customer service creates a

competitive advantage. If for example, Southwest Airlines offers a lower price,

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JetBlues superior service will drive in more business. Furthermore, by providing in-

flight amenities as well as excellent service, it allows the company to reach a

broader audience.

Recommendations

Due to the companys rapid growth, its unique and pivotal culture has the

potential of being diluted. Throughout the companys history, top management has

recognized its entire workforce from crewmembers to executives as a crucial factor

of the companys success. As it continues to expand however, top management can

eventually lose the type of interaction and close-knit culture it enjoys today. As with

any other organization, when it significantly expands it can experience ineffective

communication and loose the valuable aspects of the culture they have developed.

This provides the company with a strategic opportunity to implement a

management-training program that will focus on integrating the new hires to the

companys dynamic culture and core values. Companies such as Enterprise Rent A

Car, Hyatt Hotels, and Marriott Hotels have used management-training programs to

develop new employees and train them to be the future leaders of the organization.

This type of program will focus on teaching them the critical components of the

companys culture from a managementperspective and at the same time get

feedback to continue to improve the process. In fact, it can present both short-term

and long-term advantages. For example, JetBlue can continue to maintain a

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connection between management and trainee at a time of rapid growth and, it can

develop a solid management base that retains the passionate culture of the

organization. By training the future leaders of the organization with these values, it

will help guarantee that the exclusive culture will continue even after the departure

of its CEO, David Neelman. Drawing from the companys strengths in the SWOT

Analysis, we can see the importance the companys CEO has embedded into the

culture. His asset to the company as a leader has made a substantial influence in

creating a culture that supports both the structure and organizational goals of their

organization.

In regards to dealing with the instability of its operational costs, JetBlue has

to create policies and procedures that harmonize the internal and external

environments. In 2005, the company faced some difficulties that led them to

reevaluate its operations in a plan called Return to Profitability. At the time, the

company had decided to focus on new initiatives that ended up deviating from its

traditional operations. Although this plan had important elements such as focusing

on implementing quality service and cost control measures, it also needs to

concentrate on innovative IT policies that has proven to save the company millions

in operational savings. As mentioned before, JetBlue has reached considerable

savings by having paperless ticketing and telephone reservation systems. This has

allowed the company to offset some of the other uncontrollable operational

expenses like fluctuating fuel prices and increase labor wages. The heavy

investment in these systems has proven effective in the past. In the future, they

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should continue to invest in IT because their competition will also find other

technologies to exploit for increased market share and cost saving measures.

Going back to the SWOT analysis, one of the weaknesses facing JetBlue is that

their company only provides service to a limited amount of destinations. In trying

to find new ways to expand, their management has been discussing the expansion

into international destinations. In my opinion, this strategy would prove ineffective

because it has several flaws. There are a few ways they can expand internationally.

They can enter a joint venture with another carrier, raise additional capital through

the securities markets, or take out additional financing to support their expansion.

By entering a joint venture, they will lose its competitive advantage because the

company will be forced to share its know-how, surrender some control regarding its

decision-making, and share some revenues with its potential partner. JetBlues

competitive advantage has been a low-cost carrier in the domestic US market. If

they would expand into global markets, they would be forced to partner up with

another organization, which will in turn, dilute the organizations strong

management team. Additionally, there is heavy government regulation in the airline

industry with regard to global expansion. Therefore, the combination of heavy

government regulations and thus costs, disadvantages of a joint venture, and the

inexperience in global markets make this strategy highly unappealing.

Instead, JetBlue should continue to expand in the U.S. in areas of the Midwest

or other regional airports they do not currently compete in. The company can

efficiently compete in these markets by focusing on their dual advantages

mentioned earlier; low cost airfare and differentiation thru service. Growth in these

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types of markets will provide JetBlue with the opportunity compete with smaller

carriers and leverage their economies of scale to reach operational efficiencies.

Similarly, JetBlue needs to maintain a solid relationship with its suppliers

(Boeing and Airbus) and other players within the industry. Recognizing that the

cost of airplanes and jet fuel are the most expensive item in their financial

statements, it is important for the company to build relationships to gain other

efficiencies in their operations. In regards to its fuel costs, the company should also

look into hedging in financial markets to try to offset the escalating price of fuel

especially with the rise in political events in OPEC producing countries in the last

few months.

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Works Cited

JetBlue. 2011. Our Planeshttp://www.jetblue.com/flying-on-jetblue/onboard/our-planes.asp

JetBlue. 2011. Annual Report 2010.

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