UA744Flagship
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Evaluate My JetBlue Business Article

Wed Apr 16, 2003 8:25 am

Each week in my airline industry course, we are required to write an article about an airline/aviation/aerospace company at a specific time period. This weeks assignment was to write an article on JetBlue as if written during January 2002, after the fallout of September 11. Please evaluate my article before I turn it in, so I can make corrections, etc. I figured this would be a good source for criticism.

Up until the new millennium, no one would have ever thought that flying a low fare airline offering state-of-the-art entertainment onboard, brand new airplanes with leather seats, and nonstop coast-to-coast routes was even remotely possible. In 1999, an enterprising airline executive, teamed with a marketing savvy management team, secured the largest amount of venture capital ever to be used for an airline startup. Their airline turned out to be exactly the type the market had been crying for: an airline that offered not only reasonable ticket prices, but new extras that added value. Prior to JetBlue, there was little to no transcontinental low fare service, a dearth of low fare capacity into the New York metropolitan area, and a perception of low fare airlines as bare bones and inconvenient. It was a niche ripe for the picking, and JetBlue grasped it firmly.

David Neeleman was already a successful airline entrepreneur before leading JetBlue. He had founded the first ticket-less travel airline, Morris Air, developed a high-tech reservations and revenue management company, and co-founded Canada’s most successful low fare carrier, WestJet. Morris Air was purchased by Southwest, where Neeleman briefly spent some time and studied the strategies that made that low fare airline the standard of airline growth and employee satisfaction. Itching to start another airline, his informal discussions with wealthy fund investor and friend George Soros led to serious talks about starting up a low fare airline for New York. Politicians had been complaining of constrained and overpriced air service upstate, as well as a general lack of low fares to and from New York City. After assembling seasoned management team that included former Southwest managers and marketing people from England’s Virgin Atlantic, known for its high-brow marketing and product innovations, Neeleman convinced Soros that a new low fare airline was a worthy business proposition.

The airline was dubbed “New Air” at first because it was envisioned to be a unique airline; a category killer in a sea of low-frills and traditional carriers. It aimed to do everything right from the beginning: fly new planes, establish reasonable wages with incentives in a fun work environment, and make it easy for travelers to fly. In February 2000, JetBlue (the marketing people liked the versatility of this name better) began operations using $130 million in startup funds, far and away the greatest resources ever made available to a new airline. With cash not a worrisome issue, JetBlue was able to launch with many parameters for success. Workers started off at near the bottom of the industry in pay (only 25% of the company costs are labor), but were incentivized with performance bonuses and stock plans. One fleet type was selected, the Airbus 320, with 82 orders and options. New aircraft kept maintenance costs down and enabled a high utilization rate of twelve hours per day compared to an average of less than ten.

The goal of making JetBlue efficient and hi-tech was embodied in the product. Employees were given advanced tools to increase productivity, from pilots carrying laptops instead of manuals to ticket agents being able to wirelessly check-in someone in line. The ease of flying JetBlue was heavily marketed through a user-friendly website, excellent time-based pricing (with $250 the maximum one-way fare -- even for a transcontinental flight), and with an advanced airport and onboard experience. At the airport, passengers could access self check-in machines all over the terminal, and onboard, JetBlue’s trademark in-seat satellite TV offering 24 channels of programming delighted them and made many first time “JetBlue-ers” repeat customers from the get-go. While meals were foregone to keep costs down, the decision to innovate by providing unrivaled entertainment paid off in spades with exceptional word of mouth and publicity.

The combination of low, controlled costs and initial investments in efficient operating equipment and value-adding product enhancements enabled JetBlue to meet is high-growth, high-success goal of reaching profitability in its first year of operations. Six months after startup, the airline became profitable. By the end of 2000, the airline took in $100 million in revenue and had carried one million passengers. There were ten planes in the fleet flying from New York’s underutilized JFK to the upstate destinations of Buffalo, Rochester, and Syracuse, to Vermont, to major leisure traffic cities in Florida, and to cross-country destinations Salt Lake City, Oakland, and LA/Ontario. Upstate New York gave the company much praise for setting it free from price gouging, and New Yorkers couldn’t get enough of the low fare, high quality service to the sunshine state and across the country. By August 2001, JetBlue had increased frequencies system wide, ordered more A320s (for a total of over 100 orders), added service to Denver, Seattle, and New Orleans, and established a west coast base of operations at Long Beach, pledging to bring the west coast more low fare service. Only halfway through its history, JetBlue was flying 19 aircraft and pleasing customers in 11 cities with an aggressive growth plan.

At the end of 2001, low fare carriers Southwest, AirTran, and JetBlue (barely two years old) were the only profitable airlines remaining. From that point onward, it became apparent to the industry and public alike that a paradigm shift in travel patterns had occurred. Air travelers were no longer willing to pay exponentially higher fares for the alleged convenience and frills traditional major airlines offered. As business travel became more discretionary, the focus turned to the price-sensitive traveler. By starting out with a strong business plan and building on a great product, JetBlue became the new industry standard, offering more than just low fares to attract today’s typical air traveler.

References:
1. Feldman, J. M. (2001, June). JetBlue flying high. Air Transport World, 78-81.
2. Wells, M. (2001, October). Lord of the skies. Forbes, 54-59.
3. JetBlue Airways. (2001, August 29). JetBlue opens new west coast base with nonstop service between LA/Long Beach and New York/JFK starting Nov 1. Retrieved 03/30/03 from http://www.jetblue.com/learnmore/pressDetail.asp?newsId=80
no wire hangers!
 
Pilot1113
Posts: 2276
Joined: Thu Aug 05, 1999 1:42 pm

RE: Evaluate My JetBlue Business Article

Wed Apr 16, 2003 10:57 am

Hass:

Damn good article! Could you write my papers for me?  Smile

- Neil Harrison
 
Ex_SQer
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RE: Evaluate My JetBlue Business Article

Wed Apr 16, 2003 11:26 am

This weeks assignment was to write an article on JetBlue as if written during January 2002, after the fallout of September 11

I would focus a large part of the paper on why JetBlue survived the Sept 11 fallout better than the majors.
 
BWIA 772
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RE: Evaluate My JetBlue Business Article

Wed Apr 16, 2003 12:26 pm

EX_SQer

I agree. A greater emphasis should be placed on how JetBlue survived and what were the major airlines attitude toward JetBlue.
Eagles Soar!
 
pzurita1
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RE: Evaluate My JetBlue Business Article

Thu Apr 17, 2003 12:16 am

Ex_SQr and BWIA772,

I disagree with you. The paper is written as if in January 2002, too soon to say which airlines where survivors after Sept 11.

good article!
PZ
Next flight: IAH-DBX-MRU-ANT
 
BeltwayBandit
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RE: Evaluate My JetBlue Business Article

Thu Apr 17, 2003 12:32 am

I think it would add to the article if you referenced the importance of a strong balance sheet. jetBlue entered the industry with fantastic capital resources, and that has served them well. Money is cheaper when you already have it!
 
Guest

RE: Evaluate My JetBlue Business Article

Thu Apr 17, 2003 12:44 am

This is a very good article and the only thing it needs to make it a great article would be a little more emphisis on how this NY based carrier survived Sept. 11.

Stephen
 
Greg
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RE: Evaluate My JetBlue Business Article

Thu Apr 17, 2003 1:06 am

Major Flaw is that there are not any quotes. Neeleman is a loudmouth...find something lively..it'll makes for better reading.

Also...JetBlue is facing many hurdles in the next couple years...why no mention?

Also...knock off the superlatives....your artictle should be neutral. Let the reader determine if JetBlue is the 'new industry standard' (hint: it's not).
 
ktliem@YVR
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RE: Evaluate My JetBlue Business Article

Thu Apr 17, 2003 1:30 am

I think it's well a written paper, except that (I'm guessing here) your paper should have focused more of the aftermath of Sept.11. So, I agree with some of the comments made by other A.net forum members. Use the information you've collected to make a point, e.g. Why did JetBlue succeed after Sept.11 where more traditional airlines floundered.

If I were you I would have organized the paper differently. Start with a thought provoking statement or question, and use the remainder of the paper to answer your question. End with a conclusion.

You put one of your conclusions ("Their airline turned out to be exactly the type the market had been crying for: an airline that offered not only reasonable ticket prices, but new extras that added value.") in the 1st paragraph of your paper, well before you made your case. It's better to save it till the end.

Also, try rephrase the sentence: "Workers started off at near the bottom of the industry in pay (only 25% of the company costs are labor), but were incentivized with performance bonuses and stock plans."

I don't like the word "incentivized", also you're trying to squeeze 2 statements into 1 sentence.

  1. Statement 1: JetBlue workers are paid a low base salary supplemented by performance bonuses and stock plans.

  2. Statement 2: Labour cost at JetBlue is only 25% of the total cost... "(Explain why this is significant).



Hope this helps. Good luck!  Smile
 
UA744Flagship
Topic Author
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RE: Evaluate My JetBlue Business Article

Thu Apr 17, 2003 1:59 am

Thank you for all your comments.

I will keep this all in mind before turning the final draft on Friday.
no wire hangers!
 
PSU.DTW.SCE
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RE: Evaluate My JetBlue Business Article

Thu Apr 17, 2003 5:32 am

Yes, but keep in mind in Jan 2002 no one truly knew what was lying ahead for the airline industry. They were expecting the industry to bounce back in 2003. The aftermath wasn't really known and most carriers figured they could weather the storm.

Be careful to not make it sound like an advertisement for JetBlue. Granted, I don't know the exact criteria for your article though. I agree also that you might want to add a paragraph about some of the challenges that lie ahead. For every company, even ones that are doing exceptionally well, they always have to looking out for the future.