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David Neeleman, CEO and director began JetBlue in 1999 and flying since 2000 after his previous airline company-Morris Air was brought by Herb Kelleher, the Southwest Airline founder. He signed a 5-year non-compete agreement not to launch another airline. Kelleher hired Neeleman at Southwest but was not happy with the structured environment he did not control and was fired (Essentials of Entrepreneurship p78).
JetBlue's strategy is developed around its core competencies. The company has benefited by being able to start with a clean slate. It has a last-mover advantage and its information technology infrastructure and use has given JetBlue a sustainable competitive advantage.
Starting with a clean slate gave Neeleman and President, COO David Barger the advantage of handpicking a management and supportive staff that reflected their vision.
JetBlue's management has numerous years of airline industry experience. The team members have catered to customers, they've been customers, and they have extensive backgrounds on what it takes to be successful in the industry.
In the early planning process, 20 members of JetBlue's management staff met for two days and settled on five core values: safety, caring, integrity, fun and passion. These five values result in a superior customer and crewmember experience (Motley Fool).
JetBlue is different from other discount airlines. While Southwest and JetBlue use the same type of jet (Boeing 737 for Southwest and Airbus A320 for JetBlue), Jet Blue planes accommodate 162 passengers versus Southwest holds 135 passengers. The use of this plane allows the maintenance costs to stay low. This low maintenance cost is lower than any other carrier in the industry. JetBlue also focuses on longer flights (Essentials).
Neeleman decided to upholster every seat in leather, which costs $15,000 more per plane. The leather surfaces are easier to maintain and last much longer (Essentials).
Another advantage is its workforce is nonunion. Neeleman is not against unionization but he would prefer to avoid them. He feels if management and employees trust one another and if people feel they are compensated fairly, he believes that there's no need for a third party.
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As a last mover, JetBlue has capitalized on competitor's strengths. The company realized Southwest's greatest competencies and implemented them into its strategic plan. JetBlue adopted a corporate culture similar to Southwest where the employees are encouraged to take risks, enjoy themselves and do anything to make the customers happy.
By JetBlue being the leader in the discount airline category, it has not stopped Neeleman from making sure his customers still deserve the best. He gets on a plane at least once a week, talking to customers, asking their opinion. Sometimes he even helps load and unload bags with the baggage handlers. No other airline executive does this (Essentials).
While other airline CEOs are sleeping and counting money, David Neeleman is constantly making sure his customer service is up to par. He asked to be paged if any JetBlue planes are more than a minute late. Other airline employees are structured to deal go by procedure only (Essentials).
Mr. Neeleman is an innovator and so is his airline. He made JetBlue the only U.S. airline to be 100% ticketless (jetblue.com). And with this, the company causes problems for other airlines due to their prices. Neeleman believes the JetBlue can compete on more than price. In some markets, its passengers are willing to pay fares that average $20 more than on American and Song. Also, he installed security cameras at each passenger for customer and crew safety, keeping pilots aware of passengers' activity.
He installed bulletproof cockpit doors in the whole fleet. The cockpits are sealed off with steel doors that only the pilots can open; preventing terrorist attacks on JetBlue planes.
JetBlue's target market was people who would drive or take an expensive coach flight. Catering to passengers was always the key, but they also worked on attracting business professionals and people traveling that are from New York who could pay more but would like to save with compromising their standards (Fast Company).
JetBlue established a brand quickly. The branding strategy was integral part of the startup process and has remained at the forefront.
CEO Neeleman has bigger plans for JetBlue. He wants to vault his startup airline into the ranks of the major airlines. He plans in adding 290 planes and having 250,000 employees within 7 years. JetBlue almost recorded $1 billion in revenue in 2004 but is far less compared to American Airlines ($17.4 billion), United ($13.7 billion), or Delta ($13.3 billion) (Fast Company).
JetBlue is embarking on a big journey. In 2005, they hired 1,700 and 1,800 employees. It's introducing a new plane every three weeks and adding one every 10 days including a second type of aircraft (Fast Company).
One of the latest tools designed to help JetBlue as it grows is an operational recovery system. With this system and during any disruption, like bad weather, it allows selecting various goals before rerouting planes. The software can also come up with a solution for canceled flights or delays beyond three hours and calculate how much it would cost the company to do so.
As JetBlue manages to grow, it must standardize many other things it does to avoid starting from scratch every time. JetBlue developed a checklist of what has to happen whenever it enters a new market. Everyone involved has access to the list on the corporate intranet. Each department sees what has been done, what are left to be done, deadlines and problems.
These efforts improve efficiency as JetBlue tries to balance rising costs for old planes and more senior employees. Low cost remains a constant.
JetBlue wants to differentiate itself through reliability. Two of the most important performance numbers are the proportion of flights that aren't canceled, which JetBlue led the industry in 2004. In the on time arrival department, they ranked second (JetBlue airline).
In many companies, employees never really see who is in upper management. In the case of JetBlue, Barger can also be seen helping clean interior of the plane and loading bags. Other JetBlue management officers are assigned an airline destination called a "Blue City". Once a quarter, he or she visits that operation to meet with crewmembers and work alongside them. The visits help employees in the field form working ties to executives at headquarters. "Not many companies have the kind of culture where you're a customer-service representative and you can pick up the phone and call a VP at the company and get their ear right away," says Vinny Stabile, Vice President of People (Fast Company).
JetBlue's strategy and competencies have allowed them to utilize both of Michael Porter's generic strategies-differentiation and low cost. The company's differentiation comes from new equipment, higher customer service and everything else. While at the same time, they remain competitive, and often the leader, in costs for passengers.
JetBlue's focus on technology has guided the company has guided the company into such opportunities as paperless cockpits, electronic ticketing, Internet booking, the JetBlue Events Management System (JEMS), security features, touch-screen check in, and electronic bagging systems (JetBlue.com).
If airport officials change runway configuration before a plane takes off, pilots and dispatchers have to remain founded until they rework data figures by hand to calculate the weight and balance of the plane.
The company placed Hewlett-Packard notebooks into every flight deck allowing pilots to use the HP technology to make quick recalculation. This keeps flight delays to a minimum. JetBlue estimates that it saves 15 to 20 minutes per flight because of this technology. Airline companies make money only when its planes are in the air. This allows them to reduce costs and increase revenues (Fast Company).
With its current strategy and core competencies and its focus on technology utilization, JetBlue has assured its immediate and short-term success.
The company has set its strategic position. With new ideas and technologically advanced systems in the works, JetBlue may continue stealing away market share from its larger, present competitors.
There are some obstacles that may be a challenge for JetBlue's future. AS employees get older, they may be more likely to demand traditional benefits and pension plans instead of relying on the stock options for their retirement.
As the fleet grows, its maintenance costs will rise. If JetBlue becomes unionized, it would boost labor costs by 25%, erasing the major cost advantage (Essentials of Entrepreneurship).
JetBlue has taken the airline industry by storm. The company's leadership has focused their strategy on providing the highest customer service and the very best physical assets all for the lowest industry costs. JetBlue has assembled the best industry minds and focused them in on cost-cutting efficiency. The company has secured a large sum of capital and has used that money to fund its IT focus. While most airline companies are cutting IT spending, JetBlue continues to increase its funding.
I believe JetBlue should hold off on unionization until they feel it's optimal for the company. If they continue with excellent customer service and upper management getting in touch with crewmembers on a constant basis will moved up into the #1 positions in all categories.
Blue Skies Ahead
"Visionary airline goes paperless and achieves faster gate departures,"
"JetBlue's Top 10: IT investments that the airline bet on,"
The Motley Fool
"And Now the Hard Part"
Salter, Chuck, Fast Company, issue 82, May 2004 pg 67
Essentials of Entrepreneurship and Small Business Management 3rd Edition, p78
Thomas W. Zimmer and Norman Miscarborough; publisher: Prentice Hall 2002