JetBlue Airways: Managing Growth
Instructed by: Prof. Jonathan Lee
Section3 Team 2
Jie Yan | 103795915 |
Ling Lu | 103999797 |
Nan Liu | 103744807 |
Renhan Zhu | 103943651 |
Yishi Shi | 103956048 |
Part I: Issue Identification
In May 2007, David Barger, President and CEO of JetBlue Airways, expressed the great need to slow down the airline’s growth in response to increasing fuel costs and the consequences stemmed from the Valentine’s Day crisis.
As an LCC, JetBlue had to decrease its growth rate by reducing deliveries of E190 and A320 due to its weak financial position and the market’s softening demand. Considering the performance of ...view middle of the document...
Part II: Internal & External Analysis
In this part, the internal and external issues of JetBlue will be analyzed through VRINE model and Fives forces model
The internal analysis - VRINE Model
Valuable- the JetBlue recognized demand of new market as a source of growth in medium-sized cities, therefore, their decision to which the E-190 would serve as the launch customers by providing a more comfortable flight than typical regional jets. In addition, the operation of E-190 at a cost per available seat-mile was 12% greater than that for an A320 and 34% less than that for typical regional jets and cover a wider range of profitable destinations.
Rare- In terms of the requirement of JetBlue, the aircraft producer- Embraer did not follow the orders but slowed down their production ability to limit the amounts of E-190, which offered some extra advantages over JetBlue's competitors.
Inimitable- the purpose of designing JetBlue E190 is to play a significant role in allowing company to customize their aircraft specifications, which implies that other competitors were not likely to imitate JetBlue's features.
Substitutable- the growth of availability of a range of choices for JetBlue's passengers was expandable. Passengers could make choices between A320 to E190 at focus cities.
Exploitable- JetBlue aircraft interior can be designed to enhance the comfort and passenger's satisfaction. E190 was used as a useful tool to expand the market and attract new customers.
Nevertheless, there were uncountable drawbacks of introducing E-190. Expenditure on non-revenue training on pilots to shift from one plane to another was huge and that was time consuming. Moreover, the introduction of E-190 resulted in pilots’ dissatisfactions due to imbalance of pilot compensation between the operation of E-190 and A320.
The external analysis - Five Forces
Fives forces model is used to analyze the external competitive elements of JetBlue Airway. If suppliers own this resource, they will have high bargaining power to the company.
First element is the barrier of new entrants, which helps the company to identify the threat from competitors. The threat of new entrants is low for airline industry. There are few barriers to enter the airline industry. All airlines in this industry do not have own core technology. They are depending on buying aircrafts from other aircraft manufactories, such as Boeing. JetBlue also has no absolute cost advantage. Comparing with airlines in the industry, JetBlue kept lower cost for its reservation function. Other airlines retain the low operating cost in order to offer high discount fares to passengers. So, there is not absolute cost advantage for JetBlue. The brand identity is lower than other industries. It is difficult to develop loyalty customers. JetBlue provides 65% fare which is lower than other competitors and all-round services to build loyal customers, but other competitors offer same air...