JetBlue Airways: Growing Pains?
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Case Code: BSTR277 Case Length: 18 Pages Period: 2000-2007 Pub Date: 2008 Teaching Note: Available |
Price: Rs.400 Organization: JetBlue Industry: Aviation Countries: USA Themes: Business Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
"We don't spend tens of millions of dollars telling people how cool we are. We put low fares out there and let them tell us."
-David Neeleman, the founder and then CEO of JetBlue, in 2001.
"I do think they (JetBlue) had some growing pains. They were growing so fast they didn't have systems and redundancies in place."
-Michael Magiera, Managing Director at Manning & Napier, a Money Management Firm that owned JetBlue stock, in 2007.
A Change of Guard at Jetblue
In May 2007, JetBlue Airways Inc. (JetBlue), a low cost carrier (LCC) based in New York, announced a new leadership structure for the company. David Barger (Barger), President and Chief Operating Officer (COO) of the airline, replaced David Neeleman (Neeleman) as CEO. Neeleman, who founded JetBlue in 1999, had been its CEO ever since. Under the new leadership structure, Neeleman was designated as the non-executive chairman of the board. Russell Chew, a former Federal Aviation Administration (FAA) executive, took over as the COO; Barger retained his position as the President of the company.
Neeleman said at that time that the board's suggestion that he step down had nothing to do with the service breakdown that JetBlue had experienced in February 2007, when the northeast region of the US had been hit by a severe snowstorm. The airline's slow reaction to the adverse weather had left thousands of passengers stranded at the airports. In addition to having serious financial repercussions, this fiasco harmed JetBlue's image as a customer-friendly airline and tarnished its reliability record. Analysts greeted the leadership change positively. For several years after it was set up, JetBlue had been one of the most successful airlines in the US, rivaling Southwest Airlines (Southwest) in profitability and growth. However, it began facing various problems, both internal and external, in 2005-2006. Several analysts were of the opinion that JetBlue's growth in its early years had been too fast and unsustainable in the longer term, and that it was because of this that things started to come undone at the airline when the business environment changed....
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