How Can Jetblue Provide Low Fare, Extra Value, Top-Notch Service to Its Customers While Deliver Values to Its Stock Holders?

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Date Submitted: 01/31/2013 04:43 PM

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The airline industry has been facing tremendous challenges (See Exhibit 1 for Five force Analysis) and has disgruntled many customers. JetBlue was launched in 2000 with a commitment to provide low cost flights with extra value and top-notch customer services. Shortly after its launch, JetBlue enjoyed rapid growth, received high marks from customers and industry analysts. However, the early success did not sustain and the promise did not translate into value to its stockholders. Over the 5-year period ending December 31, 2007, JetBlue common stock fell 51%, trailing performances of Southwest and AMEX airline index by 40%, and S & P 500 index by 132%. Its reputation in customer service was also tarnished by the mishandling of the storm on Feb 14, 2007. How can JetBlue provide low fare, extra value, top-notch service to its customers while deliver values to its stock holders?

Business Model: A Best-Cost Provider Strategy

This strategy was adopted to give customers more value for the money (See Exhibit 2 for a SWOT analysis). Several key members of the JetBlue management team came from Southwest and brought onboard the Southwest formula - low cost, fast turns and low fares. JetBlue operated point-to-point routs, used only two type of airplanes (Airbus A320 and Embraer 190), served only snacks and maintained quick turnaround times at airports. Furthermore, JetBlue differentiates from Southwest by providing extra values to its customers- nonstop service on long haul flights, leather chairs and in-flight free movies. JetBlue’s low fare and differentiated products were designed for price/value sensitive leisure travelers and small business travelers, therefore very attractive. A best-cost provider strategy requires resources, know-how and good execution (See Exhibit 3 for key success factors). How did JetBlue score?

Report Card: Executing the strategy

Value to customers - JetBlue offered low fare flights with extra values (e.g., leather seats and satellite TV)...