JETBLUE AIRWAYS Innovation in Action Launched in 2000, by mid-2002 JBLU had market capitalization greater than Delta Airlines, although JBLU is muchsmaller. Business Design JBLU operates on busy cross-country routes between secondary airports (e.g. JFK and Long Beach, CA)—making it more difficult for the majors to compete. All coach seating with upscale features Low cost operations--7¢ per passenger mile Flies only Airbus A320 aircraft, and achieves 13 hours per day aircraft utilization Schedules flights during off-peak hours No meals are served Market Opportunity JBLU entered the air travel market in 2000, amid intense competition September 11, 2001 was a major shock that many air carriers are still trying to overcome The industry reported $9 billion in losses in 2001
Targeting Business and pleasure travelers seeking low coach fates with frills • Value proposition—low prices (walk-up fare to the west coast is $300 versus competitors’ $1400 • Premium coach class with leather seats • Free satellite TV • Unlimited snacks • Informal customer responsive service Positioning Strategy Provide coach travelers an exciting experience with low fares, hip style and luxury perks Performance • Earned $39M in 2001 on revenues of $320M • Earnings are expected to increase 25% to 30% per year for the next few years Will JBLU Continue to Perform Well? CEO David Neeleman is a key asset. He successfully launched Morris Air, which was acquired by Southwest Airlines in 1993. JBLU has 300 pilots and an extensive number of applications for jobs.
Major airlines are considering low-cost initiatives to counter JBLU—aggressive pricing is a likely consequence. Obtaining capital for expansion will be difficult in this troubled industry—JBLU is highly leveraged but it has cash reserves. JBLU had a passenger traffic gain in May 2002 of 106% compared to losses of the five largest carriers ranging from 8% to 14%. Continued turbulence in the air travel industry is likely as the major carriers evaluate their business designs. American Airlines announced major strategy changes in August 2002. Based,in part, on: “This Year’s A-List”, Worth, July/August 2002, 70; “JetBlue’s IPO Takes Off”, Fortune, April 29, 2002, 150; Robin Farzad, “Will Success Spoil JetBlue?” SmartMoney, June 2002, 102-106; “American Draws a Bead on JetBlue”, Business Week, July 24, 2002, 48.