Jetblue Case
[pic 1]Case Report[pic 2] Course Number: 78-651-02 Submitted to: Dr. Gerry Kerr Submitted by: Group 4 Faizan Usmani 104111402 Haoyue Hu 104119758Linfang Zhang 104016136Mengxi Pan 104101951Siyang Wang 104112010SummaryThis case study considers the situation facing David Barger, President and CEO of JetBlue Airways, in 2007 as he addresses the airlines need to slow its growth rate in the response to increasing fuel costs and the effects of major operational crisis for the airline in February 2007. In 2005, JetBlue-typically viewed as a low-cost carrier (LCC)-made a move that is often considered antithetical to the LCC model. Specifically, JetBlue moved from a single aircraft type (i.e., the Airbus 320, or A320) to a fleet with two types of aircraft by adding the smaller Embraer 190, or E190. The induction of E190 into JetBlue created problems for the organization because they are were not properly equipped, therefore JetBlue was under cash flow pressure and negative net income starting 2005. In 2006 JetBlue announced that it would slow down rate at which it took airplane deliveries and redouble efforts to sell used aircrafts.
Decision need to be made regarding how the reductions in aircraft capacity growth should be spread across the two plane types, keeping in mind organization competitive priorities as a whole and issues of aircraft efficiency but also on those of operational focus.IssueHow much Capacity reduction should come from E190 and A320 to slow down the growth rate of JetBlue?IndustryUS, Airline Industry StrategyDifferentiation Strategy / Low-cost Strategy External AnalysisPolitical – Government regulations, political instability in Middle East, Unionization Political instability in Middle East which is major supplier of oilGovernment regulations on air safety travel, certifications and training. Unionization is usually effect cost structure and ability to make free decisions for companies. Economic – Recession, fuel prices, Inflation, labor costEconomic recession directly dampens the demand of airline industryHigh fuel prices increases operating cost of airlines Inflation increases cost for the airlines and decreases disposable income for the customers