You know the feeling you get when you look at the person dressed in the same designer outfit next to you, knowing you paid half as much for it? Choose jetBlue and that exceptional feeling will come right back to you. Operating as a safe, reliable, value-added airline focused on customer service and high quality travel, jetBlue’s prized mission is to compete as a low cost carrier while integrating great customer service. Do not be fooled by their low prices and operational efficiency, though. From leather seating to their customer bill of rights, from courteous flight crews to entertainment consoles, jetBlue offers inexpensive, stylish service unlike other contenders. Cost Leadership Competing through cost leadership, jetBlue spreads fixed costs over a large number of flights and seat miles, operates their company’s fleet roughly twelve hours a day (the longest in the industry), applies state-of-the-art scheduling services to minimize aircraft ground time, and hedges fuel orders in an optimal fashion to incur less operating costs as a whole. Economies of scale exist through these proficiencies, reducing costs and driving profit margins, while the operation of only two jet models (A320 and E190) expands cost-based advantages from aircraft production and service from the well-developed learning curve. Combining this "efficient asset utilization strategy" (Datamonitor, 2011) with jetBlue’s core customer service competencies makes jetBlue a tough, sustainable competitor in the domestic airline industry (shown in Appendix A). In a recent letter to shareholders, President David Barger announced, “We will continue to build a low cost culture by maximizing asset utilization and running efficient operations” (Letter to ... ... middle of paper ... ...ability to jetBlue is answered by the technological advancements of the time. These advancements have challenged jetBlue's leading edge and could potentially impair sustainability over time and terminate this structural advantage. Company Outlook While the company business strategy may be working presently, over time, minute comparable financials, ease of product imitation, and multiple core competencies will send jetBlue aircrafts and business crashing. Currently, jetBlue defines themselves as cost leader competitors but also differentiates their service with a unique business model. Attempting too many competencies is both difficult and rarely successful. The solution to cease this integrated struggle involves perfecting one core competency and increasing support among investors to amplify market share and provide a dominant competitive edge.
The following value chain, which focuses on Spirit Airlines, is representative of most of the firms in the Ultra Low-Cost Airline industry. Spirit is the industry leader in many areas such as operational efficiencies/cost structure, aircraft fleet management, brand/network and growth. The firm, however, trails industry foes in areas such as customer service and operational reliability and recoverability. While most in this segment pursue the cost-leader competitive strategy, Spirit has demonstrated the most effective model to date – whether the model is the most sustainable remains to be seen.
Spirit addresses “price” by attempting to get the lowest possible fair for their potential customers. They have instituted their “unbundling” strategy that essentially removes all the conveniences that other airlines afford. Fees for checked bags, fees for flight changes, and no complementary in-flight beverages are just a few of the cost-trimming techniques employed. This strategy allows Spirit to come up with impossibly low fares. It also conforms to customers who just want to get from point A to point B without paying extra for services they don’t use. This strategy, coupled with an in-your-face “promotion” ploy, has made Spirit Airlines “the most profitable airline in the U.S.” (Nicas, 2012).
Having a low cost of operations is one of the contributing factors to Southwest Airlines’ financial success. Such low cost model of the corporation is brought about by an effective strategy. Southwest uses only one type of aircraft – the fuel-efficient Boeing 737. This tactic keeps training and maintenance costs down. Moreover, the no-frills approach to customer service contributed to the low cost of operations for Southwest.
This paper analyzes the goals and actions of Boeing by analyzing its critical success factors as well as its strategic roadmap.
Airline and travel industry profitability has been strapped by a series of events starting with a recession in business travel after the dotcom bust, followed by 9/11, the SARS epidemic, the Iraq wars, rising aviation turbine fuel prices, and the challenge from low-cost carriers. (Narayan Pandit, 2005) The fallout from rising fuel prices has been so extreme that any efficiency gains that airlines attempted to make could not make up for structural problems where labor costs remained high and low cost competition had continued to drive down yields or average fares at leading hub airports. In the last decade, US airlines alone had a yearly average of net losses of $9.1 billion (Coombs, 2011).
If the short haul passenger was the backbone of Southwest Airlines success, then their 737s were the lifelines that supported it. By choosing the 737 as the airplane for all of Southwest's flights, the company saved time and resources in training its employees. The crew could be easily substituted for one another due to the extensive training on the 737. Low costs and, therefore, low fares are an enormous competitive advantage, when combined with their high-quality and loyal workforce. A very unique culture was found at Southwest Airlines among all of its employees.
Use of technology and automated processes to reduce reservation, ticketing and customer services costs. Paperless cockpits, use of e-manuals, electronic ticketing, owning its own in-flight entertainment provider, automated baggage handling are some of the examples where Jet Blue’s use of technology has lowered operating costs.
Southwest Airlines has come from an underdog to being one of the best airlines in the industry. This reputation translates from its strategic management of resources. The Co-founder and former CEO, Herb Kelleher, established a unique corporate culture that leads to high customer satisfaction, employees’ morale, and one of the most profitable airlines in the industry (Jackson et al., 2012). The corporate culture concentrates on empowerment the workforce. It shows through Southwest Airlines core values that “happy employees lead to happy customers, which create happy shareholders” (Jackson et al., 2012). Since its first grand opening in 1971, Southwest Airlines has shown steady growth, and now carries more passengers than any other low-cost carrier in the world (Wharton, 2010). To expand the business operations, Southwest Airlines took over AirTran in 2010 as a strategy to gain more market share for the Southeast region and international flights. However, the acquisition of AirTran brought upcoming challenges both internally and externally for Southwest Airlines. In this case analysis, the objectives are focusing on the change process post the merger with AirTran, and evaluating alternatives to address the impacts of the merger.
To apply and the all ‘ rules of game‘of an business we taking an aviation company known as “Jet Airways” before we get into, here are some intro points about this company.
With regard to product, JetBlue is cornering the marketplace with its productivity, in-flight features, and customer service. Due to the fact that the company only purchases new planes of a single type, maintenance downtime is reduced and it is able to keep its planes in the air. In fact, JetBlue maintains the highest in-air average in the industry. Additionally, JetBlue employs an "operational recovery tool" technology that allows planners to minimize flight cancellations and delays. On board, JetBlue prides itself on treating all customers as equals and providing more comfort than other airlines.
When an airline does not have a sustainable competitive advantage, it does not have any properties of differences from there competitor and turns to a dangerous price war. The sustainable ...
The first initiative that they were able to gain in competitive advantage was the reduction of costs. They have been able to use an online system where consumers can reserve tickets avoiding which avoids using travel agents. Having this systems reduces costs for the company as well because they do not have to hire nearly as many as employees. Along with buying tickets, JetBlue has been able to use other systems to reduce costs which helps them with the maintenance of their planes and organizing information that involves every aspect of their business ranging from their planes to their employees and consumers. The second initiative that JetBlue uses is the creating of new services. By creating their new online services and systems they are able to gain competitive advantage because it allows easier and less expensive accessibility to their services. Not only have they created new services but they are able to differentiate these services from their competitors because of the easiness and quality of the services that they do provide. They not only focus on making their services the best but also the highest level of customer service that they can offer which other airlines struggle to do. Other competitors have realized that JetBlue is beating them in many aspects in the business that they have needed to adjust what they are doing to catch up. Even with the jumps in technology use with the other companies, JetBlue has still been able to enhance their services to continue to gain competitive
The target market of JetBlue airlines is customers who along with low cost seek services. The services provided by JetBlue included in-flight entertainment, TV on every seat, satellite radio, extra leg room, free unlimited snacks, and leather seats. The target market of JetBlue is also the leisure traveler, the low cost ticket seeking traveler, and the cost conscious business traveler. JetBlue has actually, posed a threat to the other low cost airlines like the Southwest Airlines.
As Boeing’s CEO, Frank Shrontz promised to increase earnings and return on equity. Boeing had a history of making money when its competitors did not, but Mr. Shrontz wanted higher returns. The airline industry was characterized by large cash outflows for R&D and manufacturing and long payback periods over long life cycles for each new airframe design. Companies had to have deep pockets to keep the operation going while waiting for a return on their investments. If Mr. Shrontz could increase the return on equity for Boeing, it would increase the likelihood of Boeing’s continued success well into the future.