Jetblue Write Up
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The case talks about JetBlue, an airline company that was founded in 1999. Over the past few years the company had started to grow at a high rate, which lead to operational problems. Jetblue needed to take further steps to slow its rate of
growth due to operational challenges and unabated rise in fuel costs. Jetblue needed to cut down their plane deliveries but they are not sure how much of the capacity reduction should come from each airbus.
I analyzed the case by looking at how the company was operating. The case talks about Jetblue starting out as a low class leader in the legacy competitors, which was a huge plus for them. Jetblue offered fares up to 65% less than its competitors and also added comfort features on top of that. Jetblue tried to differentiate itself from its competitors by providing lower airfares along with luxury travel. Jetblue was able to offer lower airfare was because of there low operational expenses. They started out by using airbus A320 and did not add any other airbuses until 2003. Using only one type of airbus really helped Jetblue keep their operational expenses low because they were able to standardize their training and servicing process around the aircraft, which also helped with flexibility in scheduling and capacity management.
In 2003, Jetblue decides to add a mid-sized aircraft, E190 to its lineup. E190 was added to target customers traveling shorter distances. The new aircraft was designed to increase revenue but it also brought increased costs and many new problems. The new aircrafts brought problems with pilots, employees, and customers. Pilots who had short-haul routes had a disadvantage in accumulating flying hours because they would spend more time on the ground and pilots were not paid for any ground time. It brought problems for customers and employees because they had to adapt to the changes in the aircrafts.
By growing at a fast rate Jetblue airways was not able to maintain low operating expenses. I would say Jetblue needs to cut down on its size of both, airbus E190 and A320 until it gets to a more manageable size of aircrafts. In 2003 you can see when they operated a smaller number of aircrafts their net income was higher even though their revenue was not as high and in 2005 and 2006 when their revenues increased dramatically their net income was a lose.