JetBlue Airways: Low-Cost Leadership through Value Chain Analysis

The assignment content discusses JetBlue Airways' strategies for increasing work satisfaction and efficiency among customers and employees, including ground crew training and salary and retirement plans. The value chain analysis highlights the airline's competitive advantages, such as using underutilized airports and single-flight aircraft fleets, which result in reduced costs and increased customer satisfaction. The company's focus on providing high-quality services at low fares has led to its success, with passengers appreciating perks like cheap cancellations, free luggage, and direct flights. Overall, JetBlue's mission and vision have enabled the airline to exceed customer expectations while maintaining a strong competitive edge.

JetBlue Airways
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JetBlue Airlines
Table of Contents
1. Introduction..................................................................................................................................1
2. Discussion............................................................................................................................2
2.1 The critical success factors........................................................................................2
2.2 Theory of Constraints...................................................................................................3
2.3 Balanced scorecard......................................................................................................4
2.4 Relevant activities of the value chain...................................................................8
2.5 The concept of customer delivered value.........................................................9
2.6 Cost of controlling quality..............................................................................................10
3. Conclusion.............................................................................................................................10
4. References.............................................................................................................................11
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JetBlue Airlines
1. Introduction
JetBlue Airways Corporation is an American airline known for its low-cost and is the 5th
largest airline in the United States. The company has its headquarters in the Long Island City and
has its main base at the John F. Kennedy International Airport and maintains their corporate
office in Cottonwood Heights, Utah.
The airlines serves it destination within the United States and also has flight to Bermuda,
Colombia, The Bahamas, Costa Rica, Barbados, Dominican Republic, Mexico, Peru, Grenada,
Jamaica, Tobago, Trinidad etc. the company serves 97 destinations in the U.S., Mexico, the
Caribbean, South America and Central America. JetBlue is one of the two airlines in the United
States having four-star rating from Skytrax, another being its competitor Virgin America.
It is the largest carrier in Boston and is also the leading carrier in Hollywood, Los Angeles,
Orlando, New York and San Juan. The flight is known to carry around 30 million passengers
every year to approximately 80 cities in the United States, Latin America and Caribbean with
around 850 flights daily.
The airlines has low fares, new planes, effective business and non-unionized labor, JetBlue has
caught the off-guard big carrier. A coherency and consistency has been seen in the brand
ideology of the company so as to put a human element back into flying which has helped in
resonating with the passengers deeply.
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2. Discussion
2.1 The critical success factors
The critical success factors of the company are indicated as given below:
1. Low-cost advantage – JetBlue is a domestic low-cost carrier flight
therefore it is one of the cheapest airlines in the United States. The
aim of the company was to create a low fare supporting cost structure
without lowering the standards of the services being provided to the
customers. This low-cost structure has helped the company to venture
in to the territory of big companies in the airlines industry and
therefore generates industry leading margins. Various innovative
measures have been adopted by the company on their flights in order
to become a cost leader. For example, no meals are served on the
flight in the trip irrespective of the distance covered and the duration
of the routes. For supporting the decision on order to become a cost
leader (JetBlue Airways Corporation, 2016). Therefore the low cost
advantage has expected JetBlue for delivering leading margins in the
near future.
The firm has been exercising the low-cost carrier system when the
recent plunge in the crude oil prices had further reduced the cost of
the fuel. However, this reduction in fuel prices cannot be considered as
a sustainable option for the long run and these prices can shoot up
whenever the market recovers (Gittell, J. H., & O'Reilly, C. A, 2001).
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JetBlue Airlines
Furthermore, various initiatives has been taken by the airlines
authorities for controlling the operating cost excluding the cost of the
fuel. Therefore the company has decided to invest in the aircraft in a
fuel-efficient manner and therefore it has resulted in the improvements
of operational performance of the company.
2. Focus on high-value markets – the company has launched its premium
services which is widely known as the “mint” for tapping the business
travelers who are flying on the transcontinental routes in the US. Since
the new services were allowed for the airlines in order to enter high-
value locations like San Francisco and Los Angeles, the company
gained a competitive advantage. This has helped the airline to cater to
the corporate as well as the elite passengers for improving the traffic
of their customers. The mint service of the airlines is highly popular
recently as it is highly affordable to get high quality services at low
range whereas the other flights offer expensive and mediocre services.
Higher margins have been earned owing to the premium services
offered by the JetBlue and has helped in improving the overall
performance of the company. The company is continuing its services in
the Caribbean and the Latin America which are one of the most
lucrative and high-value market for all the airlines.
Further the ease of travel restrictions between Cuba and United States
has led the launching of the first weekly flight between New York and
Juba which has resulted in facilitation of travelling (JetBlue Airways
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JetBlue Airlines
Corporation, 2000) in the restricted areas. This particular move has
further led to attraction of the traffic and ultimately has resulted in the
generation of higher revenue.
Therefore it can be concluded that these two factors has led to immense success of the airlines
within the United States by providing customers satisfaction allowing the airlines to start their
international business.
2.2 Theory of Constraints
This is a methodology which helps in identifying the most inhibiting factors
which are inhibiting the improvement and goals of the organization and
therefore helps in improving the constraint until they are no longer
characterized as a limiting factor.
When we look in the study of JetBlue it can be seen as the constraint is the
incurrence of unnecessary cost. This has helped the management to manage
the limiting factor and they came up with various methods for cutting down
the cost in form of elimination of food and the innovation in the aircraft
which uses the less amount of fuel (Perepu, I, 2010).
Furthermore, the next constraint is to get feedback from almost all the 30
million annual travelers to understand the customer satisfaction. The
company needed to serve various internal customers which also included
their front-line staff and their management of around 80 airports along with
the executive of JetBlue and the customer administration. In order to
manage this limiting factor the company has started using tool which can
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identify all the issues which affect the experiences of the travelers using the
customer feedback, transform the data into the actionable insight for JetBlue
which ranges from airports, executives and front-line crew members. It
further links the goals of the employee for stepping up the journey of the
customers. The results were highly beneficial as it helped in empowering the
insights of the customer’s insight team along with the platforms and process
which will guide the company for holding tenth JD Power awards for the
customer satisfaction. This has further helped in improving the experiences
of the travelers by increasing the large volume of data into actionable
feedback and finally has helped in identifying the action for specific
improvements.
2.3 Balanced scorecard
A balanced scorecard is a management system which assists the companies
in clarifying their strategy, mission and vision and finally helps them in
converting them into actions. Continuous improvement of the strategic
performance and results have been seen by usage of the balanced scorecard
which helps in providing a structure to the feedback both internally and
externally in the business processes. There are four perspectives in the
balanced scorecards which are as follows (Wynbrandt, J, 2004): financial
results perspective, internal business processes perspective, customer’s
perspective and learning and growth perspective. The innovation, targets,
margins, objectives, measures and learning are entailed in the balanced
scorecard.
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2.3.1 Financial perspective
Objective Performance
measurement
targets Initiatives
Revenue growth Lesser cost
expense
Lesser cost Innovative
measures for
reducing the cost
Asset utilization High tangible
assets
service capacity
increment
New aircraft
were purchased.
Cost reduction Ticket revenue
Market value
Seat revenue
Increase in sales Introducing
standardize
planes
Opening new
international
routes
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JetBlue Airlines
2.3.2 Customer perspective
Objective Performance
measure
targets Initiatives
Reinforcing the
brand image
Customer
ranking
Ranking change Media marketing
High customer
satisfaction
FAA on time
arrival rating
Customer
ranking
First in industry
Increase in
customer
satisfaction
Mint program
Quality
management
Customer loyalty
2.3.3 Internal business perspective
Objective Performance
measure
targets Initiatives
Cost reduction Operation cost reduction in
consumption of
oil
Monitoring the
changes in price
of international
oil
Flight meal Elimination of
flight meal
Reduction in
flight cost
Cost reduction
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JetBlue Airlines
Payment
convenience
Payment
methods
Increase in sales Cycle time
optimization
Online payment
2.3.4 Innovation and learning
Objective Performance
measure
targets Initiatives
relationship
improvements
with other
countries and the
labor union
The criminal
charges against
labor union
members were
dropped.
Employee
retention and
productivity
Employee
satisfaction
Increase in work
satisfaction and
efficiency in both
customers and
employees.
Ground crew
training
Increase in
salary and
retirement plans
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JetBlue Airlines
2.4 Relevant activities of the value chain
The sequential process of the activities that create the value are termed as
the value chain analysis. The value chain analysis assists in gaining an
insight to the competitive advantage. JetBlue has entered the market by
using various advantages and position of the financial strengths and
leadership capability many of which were uncommon previously in the airline
industry. The company has very clear mission and vision (Perepu, I, 2010)
which were the implementation of a low cost and a differential business level
strategy which has helped the airlines to set out as the leading low-cost
passenger airline which has unfailingly offered high-quality to the customers
with a provision of their geographically diversified flight in the most efficient
manner. The following are being discusses below:
1. Inbound logistics/ outbound logistics – JetBlue focused on the
large metropolitan cities and underserved markets and have fruitfully
utilized the underutilized airports using less congestion. This helped
the company to add an ability of remaining on the ground for lesser
amount of time.
2. Operations – JetBlue has started using a single flight aircraft fleet and
their A320 airbus has also resulted in increase of its seating capacity.
The airlines has a reduced training cost and a fuel efficient system
making it cheaper than the other competitive flights.
3. Ticketless travel or e-ticket – The airlines has provided their
customers with a provision of reserving a flight ticket from their home
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which has resulted in reduced in the office space and further
infrastructure cost. Reduction of paper work, quicker turnaround and
faster takeoffs long with the higher utilization of the aircraft are the
result of a paperless cockpit.
4. Service – no overbooking takes place in the airlines which results in no
bumping of the customers. For example, no passenger has ever been
left behind and no standbys have been seen. Furthermore, the designs
and the layout of the plane have been done in such a manner that the
customers get leg room and are highly comfortable.
2.5 The concept of customer delivered value
For three consecutive years, the airlines has been the pioneer of the
airlines industry in terms of the passenger satisfaction due to the
following facts:
The company tries to focus on the culture of the company for creating
favorable experiences which help in keeping the customers to attract
more. The company has empowered them to makes best decisions when
if the company has to do some activities which are apart from the regular
protocol. Furthermore, the culture of the company helps in framing the
actions as per the embodied values. These values with intense learning
help in enhancing the consistency of the company internally and
externally by offering personalized and friendly services. JetBlue’s
management has been trying to build a friendly and positive environment
by interacting with the customers of their company. The employees are
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very friendly towards their customers and company provides leveraged
Wi-Fi, mobile and other tablets for extending their digital experiences.
The company has therefore been able to exceed the expectations of their
customers. The company is able to match the low cost with high customer
experience and has battled the intense rivalry commendably. The airlines
has exceeded all the expectation by cheap cancellations, free luggage,
cheap change fee, TV entertainment on the plane and direct flights.
2.6 Cost of controlling quality
No controlling cost have been bear by the airlines as the JetBlue is offering
low fares due to the low cost. The passenger traffic has been increased due
to the stimulation of high demand by allow fares. High quality services are
provided within this low fare and provisions like online booking, award
winning website and ticketless travel has been made possible. Therefore the
airlines is economical for production and maintenance of the aircraft
therefore resulting in low distribution cost and operational cost.(Wynbrandt,
J, 2004)
3. Conclusion
The airlines has been seeing a tremendous growth and has held on to its mission and vision
very firmly therefore enhancing the customer retention and customer satisfaction. Along with
the low fares the airlines has been providing various perks like cheap cancellations, free
luggage, cheap change fee, TV entertainment on the plane and direct flights thereby helping
customers. The company has contributing success factors like low fare and focus on high
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market thereby providing high facilities at low cost. The company has further been able to
handle all the constraints in an efficient manner.
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JetBlue Airlines
4. References
Gittell, J. H., & O'Reilly, C. A. (2001). JetBlue Airways: Starting from scratch.
Boston, MA: Harvard Business School Pub.
JetBlue Airways Corporation. (2016).
Perepu, I. (2010). Recruitment and training at JetBlue Airways.
Stewart, C. H. (2008). Lessons learned: How JetBlue Airways used apologia
and new media to survive a crisis
Wynbrandt, J. (2004). Flying high: How JetBlue founder and CEO David
Neeleman beats the competition --- even in the world's most turbulent
industry. Hoboken, N.J: Wiley.
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