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.
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