Case Study - Jetblue Airlines

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February 20, 2013

JetBlue Airways Corporation Case Study Report
Situation Analysis
History
JetBlue Airways Corporation was created my David Neeleman. His vision was to create an inexpensive, easy way to travel by airplane. He was quoted saying he wants to “bring humanity back to air travel.” David Neeleman was already a seasoned entrepreneur. Two years after dropping out of the University of Utah he established his own business by renting out condominiums in Hawaii. Soon after he established his own travel agency and began chartering flights from Salt Lake City to the islands to bring in more prospective clients to rent his condo’s. In 1984 Neeleman joined forces with June Morris, who owned a large corporate travel agency in Utah, to bring to the world a company known as “Morris Air”. (JetBlue Airways Corporation, 2011) Success followed and the company was bought by Southwest Airlines for $129 Million. Soon after the sale of “Morris Air” Neeleman pioneered the use of “at home reservation agents”. By using their homes as offices the reservation agents were saving money by lowering overhead expenses. He also developed the first electronic ticketing system in the airline industry. (JetBlue Airways Corporation, 2011) Neeleman became the executive vice president for Southwest but realized it wasn’t a good fit. He signed a five year noncompete agreement and was on his way. During his five year agreement he developed the electronic ticketing system he had initiated at Morris Air into one of the worlds easiest airline reservation systems. He called it Open Skies. He then sold this innovation to Hewlett-Packard in 1999. Finally in 1999 the noncompete agreement had reached its expiration and Neeleman launched his own airline. He raised the needed capital with ease and JetBlue became the highest-funded start up airline in aviation history. JetBlue commenced operations in August 2000. For a start up base JetBlue chose John F. Kennedy International Airport (JFK). (JetBlue Airways Corporation, 2011)The company relied on electronic reservation and ticketing to keep costs down. JetBlue was of the first airline companies to issue laptop computers instead of manuals to their pilots. One of their highest selling points aside from price was the in-flight entertainment. The airbus A320’s were complete with 24 live satellite broadcasts (including A&E, Animal Planet, CNBC, ESPN, the Food Network, Home & Garden, and the Weather Channel) at every seat. This kind of entertainment was of the first among airlines. Airlines typically aired taped shows or movies. To help keep costs down the airline provided no meals but did offer gourmet blue potato chips and soda. The seats were equipped with more leg room and were all leather with larger overhead storage compartments. Business grew rapidly in JetBlue’s first year of operations. Reservation agents were receiving calls of up to 12,000 a day and still the company was booking 40% online. In 2001 JetBlue opened a second base in California at Long Beach Airport. JetBlue grew over the years to serve more than 52 destinations in 21 states, Puerto Rico, Columbia, Mexico and the Caribbean. In 2008 they added services to Puerto Plata and St. Marteen. In 2009 they started serving Bogota, Columbia, San Jose, Costa Rica, Montego Bay and Jamaica.

In 2007 JetBlue announced that they were entering into an agreement with Aer Lingus, and Irish flag carrier, to facilitate easy transfers for both airlines’ customers. Unlike traditional code-share alliances, customers could not make one reservation for both airlines if need be. They would have to make two reservations instead. Then only 8 days later, JetBlue announced a code-share agreement with Cape Air. Customers would be able to purchase seats on both airlines under one reservation. A much better fit for convenience.

JetBlue’s growth was becoming harder to fund due to competitive pricing and high fuel prices amongst other growing costs. On February...
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