Jetblue Airlines' Success Story|Business Strategy|Case Study|Case Studies

Jetblue Airlines' Success Story

            
 
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Case Details:

Case Code : BSTR045
Case Length : 15 Pages
Period : 2003
Organization : JetBlue Airways
Pub Date : 2003
Teaching Note : Available
Countries : USA
Industry : Aviation

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Background

JetBlue is the brainchild of David Neeleman (Neeleman), the son of a Mormon missionary, who grew up in Salt Lake City, Utah. Neeleman was a poor student and dropped out of the University of Utah after his freshman year. After dropping out, he spent two years in Brazil as a missionary.

Returning to the USA, he took up a career in sales, selling condominiums in Hawaii. To boost his business, he started his own travel agency by chartering flights to transport prospective clients to the Hawaiian islands. Neeleman was a hard-seller who even tried to push honeymoon packages onto couples during their weddings. His reputation as a salesman caught the attention of June Morris, who owned one of Utah's largest travel agencies. Together they started a Utah-based charter operation in 1984 called Morris Air. Neeleman modeled Morris Air on the lines of Southwest Airlines1 (Southwest) run by his idol Herb Kelleher. He took ideas from Southwest and tried to improve on them. He adopted a strategy of keeping costs low to increase margins by turning around2 the planes quickly and having reservationists work from home to save office rentals.

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He also developed the industry's first electronic ticketing system, which was easier to operate than manual ones and did not cost much. By 1992, Morris Air had developed into a regular scheduled airline and was poised for an IPO.

Herb Kelleher, impressed with the airline's low cost, high revenues strategy, offered to take it over. Southwest bought Morris Air for $129 million. Neeleman gained $22 million from this sale and went to work at Southwest as an executive vice president. This arrangement, however, did not work out. Neeleman, accustomed to running his own airline, was unable to adjust to working in a team. Within a year, he split ways with Southwest. Before he could leave, Kelleher made him sign a non-compete agreement, which would be valid for five years. Neeleman then moved to Canada, where he co-founded a discount airline called West Jet. He also fine-tuned the online reservations system he developed at Morris Air, called it Open Skies and sold it to Hewlett-Packard3 in 1999, for a reported $22 million...

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1] Herb Kelleher's Southwest Airways is America's most successful discount airline. The airline has been profitable for a straight 30 years. It is headquartered in Dallas, Texas.

2] Turning aircraft around as fast as possible to the gate to minimize the time that aircraft spend on the ground as ground time is non-revenue producing time for an airline.

3] Hewlett-Packard is a leading provider of IT products, computing, imaging and printing. It is headquartered in California.

 

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