Jetblue Case

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Case Report

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                     Course Number: 78-651-02

                              Submitted to: Dr. Gerry Kerr

                              Submitted by: Group 4

                              Faizan Usmani 104111402

                              Haoyue Hu 104119758

Linfang Zhang 104016136

Mengxi Pan 104101951

Siyang Wang 104112010

Summary

This case study considers the situation facing David Barger, President and CEO of JetBlue Airways, in 2007 as he addresses the airline's need to slow its growth rate in the response to increasing fuel costs and the effects of major operational crisis for the airline in February 2007. In 2005, JetBlue-typically viewed as a low-cost carrier (LCC)-made a move that is often considered antithetical to the LCC model. Specifically, JetBlue moved from a single aircraft type (i.e., the Airbus 320, or A320) to a fleet with two types of aircraft by adding the smaller Embraer 190, or E190. The induction of E190 into JetBlue created problems for the organization because they are were not properly equipped, therefore JetBlue was under cash flow pressure and negative net income starting 2005. In 2006 JetBlue announced that it would slow down rate at which it took airplane deliveries and redouble efforts to sell used aircrafts.

Decision need to be made regarding how the reductions in aircraft capacity growth should be spread across the two plane types, keeping in mind organization competitive priorities as a whole and issues of aircraft efficiency but also on those of operational focus.

Issue

How much Capacity reduction should come from E190 and A320 to slow down the growth rate of JetBlue?

Industry

US, Airline Industry

Strategy

Differentiation Strategy / Low-cost Strategy

External Analysis

Political - Government regulations, political instability in Middle East, Unionization

Political instability in Middle East which is major supplier of oil

Government regulations on air safety travel, certifications and training.

Unionization is usually effect cost structure and ability to make free decisions for companies.

Economic – Recession, fuel prices, Inflation, labor cost

Economic recession directly dampens the demand of airline industry

High fuel prices increases operating cost of airlines

Inflation increases cost for the airlines and decreases disposable income for the customers