Jet Blue Case Study

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Date Submitted: 07/15/2011 09:09 PM

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Discuss the trends in the U.S. airline industry and how these trends might impact a company’s strategy.

There are many trends in the US airline industry and they have a huge impact on a company’s strategy. I will discuss the following trends: crude oil pricing and the fluctuations that lead to passenger fees, shortages of pilots, and 9/11 Aviation Security. In 2008, crude oil prices increased to a record $140 per barrel. This dramatic price increase caused airlines to

struggle to offset the cost of fuel. Many began implementing new passenger fees including a fuel

surcharge, baggage check fees, fees for heavy bags, fees for beverages and snacks, and even fees for using blankets and pillows. However, the airlines continue to pass along the fees to its passengers to increase revenue. Clearly, the fees that began originally in response to fuel prices continue to be part of the revenue generating strategies of airlines (Thompson, Strickland, & Gamble, 2010). As baby boomers retire by the thousands, the airline industry is experiencing a shortage of pilots. Before becoming captains, pilots must earn sufficient fly hours. However, flying schools do not have enough instructors to train enough new pilots. According to the International Air Transport Association, an estimated 3,000 more pilots are needed each year than training schools can provide. In response, the airline industries face increase labor costs as they raise pilot salaries in order to attract pilots (Thompson, Strickland, & Gamble, 2010). “Shortly after the 9/11 terrorist attacks, Congress passed the Aviation and Transportation Security Act (PDF), which created the Transportation Security Administration (TSA) and mandated that federal employees be in charge of airport security screening (Kaplan, 2006).” These mandates caused the airlines to adopt several layers of security. TSA implemented more thorough screening procedures for passengers and their baggage, including requiring passengers to remove their...