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
Excerpts
Growth and Expansion
JetBlue was founded during one of the most turbulent times in the history of civil aviation in the US. The September 11, 2001 terrorist attacks had hit the industry hard and many of the major airlines had either gone into bankruptcy protection, or were on the verge of doing so. In 2001, JetBlue planned to launch an IPO to fund its expansion plans. The IPO had to be postponed in light of the terrorist attacks, but JetBlue continued with its expansion plans using its share of the $15 billion bailout ($5 billion in direct compensation and another $10 billion in loan guarantees) the US government granted to the aviation industry, and a fresh infusion of funds from its original investors...
Turbulent Times
JetBlue's performance in all the quarters of 2005 was considerably poorer than the corresponding quarters of 2004, and in the fourth quarter of 2005, it posted a quarterly loss for the first time since its IPO. JetBlue ended the year with its first annual loss of $20 million on revenues of $1.7 billion...
The Return to Profitability Plan
In April 2006, soon after announcing the first quarter loss, Neeleman and Barger announced a recovery plan for JetBlue called the 'Return to Profitability' plan (RTP). The main aims of the RTP were revenue optimization, improved capacity management, cost reduction, and retaining the commitment to deliver high quality service on every flight. As a part of the revenue optimization goal, JetBlue announced that it would reduce the number of long-haul flights and shift its focus back to short to medium routes...
The Customer Service Fiasco
Even as its financial performance started showing signs of improvement, JetBlue faced another crisis in February 2007, when a snowstorm hit the Northeast and Midwest regions of the US, throwing the airline's operations into chaos. Because JetBlue followed the practice of never canceling flights, even when the ice storm hit and the airline was forced to keep several flights on the ground, it desisted from calling them off. Because of this, passengers were kept waiting at the airports for their flights to take off...
More Turbulence Ahead?
Analysts felt that the appointment of Barger as the new CEO was likely to benefit JetBlue. According to them, the fresh leadership was likely to help JetBlue through its growing pains and provide it with a positive direction for the future. They also pointed out that Barger differed considerably from Neeleman in his leadership style (Barger was thought to be more organized than Neeleman, and much more focused on operational issues than the latter who enjoyed strategizing). However, JetBlue was likely to face many more challenges in the future than it had faced during its first few years of operations.....
Exhibits
Exhibit I: Annual Income Statements
Exhibit II: JetBlue's Operating Statistics
Exhibit III: JetBlue's Growth
Exhibit IV: Break-up of an Airline's Operating Costs (as of 1Q 2007)
Exhibit V: Increases in Fuel Price - Jet Fuel
Exhibit VI: JetBlue's Fuel Price History
Exhibit VII: JetBlue's A-320 Order Adjustments
Exhibit VIII: A Snapshot of JetBlue's Quarterly Performance
Exhibit IX: JetBlue's Customer Bill of Rights
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