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Jetblue Airways

Jetblue Airways

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Jetblue Airways

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  1. Jetblue Airways By: Brian Fitzgerald

  2. Company Overview • Founded by David Neeleman in 1998 • Reported revenue of 3.8 billion dollars in 2010 • Reported a profit of 97 million dollars in 2010 • Has 4.4 percent of the United States market share for regional domestic airlines • Headquarters are located in Forest Hills, New York • Delivers service daily to 60 destinations in 20 states • April 11, 2002- Initial Public Offering (IPO)

  3. Company Overview Continued • Publicly listed (JBLU) Nasdaq • Fly’s two types of aircrafts (Airbus A320) and (Embraer 190) • JetBlue flies to smaller underserved markets and airports, opposed to larger major hubs • JetBlue is categorized as a focused national carrier with a few international destinations

  4. Airline Industry Explained • Commercial passenger air travel has 4 different segments according to the US department of Transportation (DOT) • International • National • Regional • Cargo

  5. PEST Analysis

  6. Political • Unionization affecting cost structure and freedom of companies • Large Government funded stimulus plan to bring high speed rail travel to the United States • Political unrest in the middle east (major source of oil) • Safety regulations • Customer bill of rights to protect consumers

  7. Economic • Price of a barrel of oil continues to rise • Profitability of airline companies in the industry • Decreased disposable income of many families through the recession. • Low economic growth rate

  8. Social • Customer fear about flying and terrorist attacks • In-flight entertainment and media devices are becoming expected by customers who like to travel comfortably • Baggage loss blamed on airlines by customers • On time arrival percentage • Internet blogging on social media sites about unsatisfactory travel and delays

  9. Technological • Increased usage of internet ticket booking • Increased usage of lowest price travel agency websites (Travelocity, Orbitz, Expedia, Priceline) • Technology used to cut labor and check guests in at a quicker pace • Increased fuel efficiency of newer aircrafts by aircraft manufacturers • Technology such as Cisco tele- presence and internet meetings hurting business travel

  10. Porters Five Forces • Bargaining Power of Buyer- High • Threat from Substitutes- High • Bargaining Power of Suppliers- High • Threat of New Entrants- Moderate • Competitive Rivalry- High

  11. Bargaining Power of Buyers (High) • Several airlines for consumers to choose from • Various travel sites to book the lowest fares ( Orbitz, Priceline, Travelocity) • Frequent flier programs keep customers loyal to airlines by giving them incentives and rewards to continue flying on a certain airline

  12. Threat From Substitutes (High) • High level of threat as costs can push consumers to use alternative modes of transportation if the cost is high enough • Convenience of other travel such as wait times and security check points at airports can push people to other forms of travel • Car, Rail, Bus, boat etc. • Many business travelers are using technology instead of travel Ex: (Conference calls, Cisco Telepresence, etc.)

  13. Bargaining Power of Suppliers (High) • Only a few major producers of Airplanes, Boeing, Airbus, Embraer • Fuel Suppliers have a high level of power because they control the price per gallon of jet fuel • Economies of scale lowers the cost per airplane ordered when orders are large enough • Switching costs are high for many airlines who only fly one type of aircraft

  14. Threat of New Entrants (Moderate) • High capital start up costs • Very low rates of return on investment • Hard to differentiate your product from the existing competition • To much competition on price from larger legacy carriers • Deregulation of the airline industry has made it hard for airlines to become profitable • High congestion of major airports

  15. Competitive Rivalry (High) • Many other existing airlines • High Fixed Costs • Pricing wars between airlines exist at many large hubs. • When industry growth is slow it attracts low margins as competitors fight for market share. • The price of oil has a significant impact on travel because the higher oil is, the higher an airline charges for tickets to try and recoup their business operation costs.

  16. Conclusions • Continue to only fly two types of aircrafts to avoid high switching costs • Continue to utilize economies of scale when placing orders with Airbus and Embraer for contracts of new aircraft purchases • Continue to serve smaller secondary airports that are underserved (Ex: Long Beach instead of L.A.) • Continue to keep your product differentiated by offering entertainment and continually adding to the customer experience • Continue to avoid internet middlemen to sell empty seat’s that have not been sold

  17. Thank You!

  18. JetBlue Competitors By: Brian Fitzgerald

  19. Main competitors • Southwest Airlines • American Airlines • United Airlines • Delta Airlines

  20. Competition

  21. Generic Strategy

  22. Business Strategy groups

  23. Target Market of Legacy Carriers • Identical target market for United, American, Delta • Frequent Business Travelers • Wealthy upper middle class • International Travelers • Travelers who need to make it to certain destinations that low cost carriers do not serve

  24. Target Market of Low Cost Carriers • Cost conscious consumers • Occasional business travelers • Internet/ technology savvy customers • Last minute travelers

  25. How The competitors compete

  26. How The Competitors Compete

  27. Strength Assessment

  28. Core Competancys • Southwest • Flying one type of aircraft, empowering employees to make decisions, Promoting a casual laid back atmosphere for employees which promotes a strong loyalty to the company and a commitment to customer satisfaction. furthermore Southwest does not charge baggage fees • United, Delta, And American • Offering customers nonstop flights to destinations all over the United States and internationally, offering a wide variety of fares and classes on flights. first, business, economy plus, and economy. These airlines use technology and customer rewards programs to keep customers loyal. All three companies use alliances and partners to fly all over the globe

  29. Changes in competitive position United Airlines American Airlines

  30. Changes in competitive position Delta Airlines (Song Airlines) a failed attempt at cost Leadership by Delta

  31. Southwest Competitive Positon • Southwest has always incorporated the low cost low frills, and no assigned seating method to conserve costs • Their method of only flying one type of airplane (Boeing 737) has helped them to keep costs low and offer customers the lowest fares possible while remaining profitable • Cost leadership has always remained their model with 37 straight years of profitability • Deregulation made it lucrative for Southwest to stay profitable, while their competitors were filing bankruptcy Southwest was expanding operations and continuing to stay profitable • Their low cost model has inspired other low cost startups following deregulation of the airline industry

  32. Size of Airline Market • Over 300 Million United States citizens • Over 703 million passengers flown in 2009 • Growth in the industry has averaged 7% a year in the past decade • Over 6 billion eligible customers across the globe

  33. Key Trends in industry • Increasing Oil prices causing increased variable costs to all airlines • The switch to more efficient aircrafts, while retiring older less fuel efficient aircrafts • Cutting flights to increase capacity on existing flights • Alliances and mergers are becoming more common • Union wage concessions and decreased power of collective bargaining

  34. Key Trends 2 • Cost cutting efforts to increase efficiency • Charging customers for baggage to reduce weight on flights, and to increase revenue • Fuel Hedging • Charging for Meal Services that were previously free • Using Internet Middlemen to sell unsold seats

  35. Target Market and Product type • Middle class to upper middle class families • Vacation Seekers • Business Travelers • Consumers with disposable income to afford travel • Students • Product type of airlines can be broken down into three classes • First Class Travelers • Business Class • Economy Class travel • Certain companies only offer one type of class which is economy Class Target Market Product Type

  36. Market Segmentation

  37. Region Growth Rate

  38. Social Media Importance • Free source of marketing and promoting The brand • Satisfied customers offer free word of mouth advertising one these sights • Dissatisfied customers can ruin your reputation ex: ( united breaking a musicians instruments and the artist making a song called “ united breaks guitars”) This song received millions of hits on Youtube

  39. Conclusions • Airline Industry will see small growth domestically in the coming years • Major growth will be in Asian countries for the next couple of decades • Mergers and alliances will continue to dominate the industry • Without an aggressive switch to a cost leadership platform it may continue to be impossible to achieve profitability • Cost cutting will continue • Customer service is crucial to preserve reputation and avoid negative publicity from the media and social media

  40. Thank You

  41. Flying High With JetBlue An Internal Analysis By: Brian Fitzgerald

  42. The JetBlue Mission • JetBlue's goal is to be the leading low cost passenger airline through offering customers a high quality product and exceptional customer service

  43. JetBlue's Core Values • Safety • Caring • Integrity • Passion • Fun

  44. JetBlue's Business Model

  45. Passenger Growth 2.4 % 2.4 % 15.2 % 26.0 % 25.0 % 30.7 % 56.7 % 84.3% 273.6 %

  46. JetBlue’s destination and fleet growth

  47. JetBlue's Route Map

  48. Financial Information JetBlue has been one of the most profitable airlines in the United States, however during the 2005-2008 period, rapid expansion and high fuel prices increased costs and hurt profitability. JetBlue's slowing growth model has helped the airline return to profitability as of 2008

  49. Change In Distribution/ Sales • Increased growth in Latin America • Growth of the airline has spread to several new locations • Increased usage of travel booking on their website www.jetblue.com • The implementation of a two aircraft model system opposed to one in the past • Increased usage of the JetBlue “True-blue” rewards program

  50. JetBlue’s Resources • Airplanes • Employees • Airports • Alliances • Capital