Jetblue Airlines' Success Story

The company managed to succeed in a period when big names of the American airline industry like American Airlines, United Airlines, US Airways and others suffered huge losses and were a few steps from bankruptcy. The American airline industry was in a bad state owing to the effects of terrorism, war and economic downturn. The major carriers alone were estimated to have an outstanding debt of over $100 billion, as against a combined stock market value of $13 billion in 2002. Passenger traffic was also falling consistently. In early 2003, the traffic was 17% lower than in the same period of 2002 (which was itself 10% lower than the traffic in early 2001). In this scenario, a number of low cost airlines began to make their presence felt in the industry (Refer Exhibit-I for a note on low-cost airlines in the US).

The most successful exception to this condition was JetBlue. JetBlue, which was also modeled on the lines of Southwest Airlines, managed to succeed in a depressed and highly competitive industry, because of its innovative approach to business and its efforts in becoming a cost leader by cutting down on unnecessary frills and wasteful expenses. The airline managed to cut costs without compromising on the quality of service. In fact, it provided more amenities than other airlines, including personal television sets for every flyer and comfortable leather seats, creating a feeling of luxury. JetBlue's strategy was to identify and eliminate non-value adding costs and use the money so saved, to provide service of better quality.