External Environment Analysis

Topics: Airline, JetBlue Airways, Low-cost carrier Pages: 8 (2270 words) Published: February 25, 2012
External Environment Analysis

JetBlue Airways Corporation (JetBlue) is a company that has focused on low-cost airline transportation service. It is also one of the top major airlines dominating the Domestic Airlines industry. To develop a better strategic business plan the company’s external business market and the effect it has on the business continuity plan must be analysis as well as the general, industry, and competitor environments. Another issue affecting companies is the role business ethics plays in gathering competitor intelligence.

External Business Market

The Domestic Airlines industry is affected by key external drivers, such as corporate profit, world price of crude oil, per capita disposable income, inbound trips by non-US residents, and domestic trips by Unites States residents (IBISWorld, 2011). These drivers also affect JetBlue Airways. JetBlue also affects these external drivers with its low-cost business structure. In the United States domestic flying is contribute to a large portion of business customers. Companies experiencing high profits and strong business activity are more likely to pay for travel. The Domestic Airlines industry moves in line with corporate activity as businesses experience decline and increases so will the Domestic Airlines industry. The industry is largely affected by corporate profit. Even though JetBlue has primarily target leisure travelers the company is increasingly business travelers. The business traveler is a customer who during tough economic times is looking to reduce business expense associated with business travel. As the company’s operating costs increases profitability decreases. One factor affecting operating costs and profitability is the price of crude oil. Unfortunately, companies cannot pass the entire cost of oil to their customers and must decrease their profit gains. JetBlue is not the exception and through its use of hedging is exposed to liquidity issues. JetBlue hedges on a discretionary basis with the purpose to limit the liquidity and profitability risks of harshly rising prices.

Once again a challenging economy plays as a factor in the Domestic Airlines industry with per capita disposable income. This is the amount available to people for consumption spending and savings. Because traveling requires consumers to have high spending income the demand for flying increases or decreases according to disposable income growth or decline. JetBlue has a competitive advantage with the lowest fares in the industry satisfying price-sensitive customers.

The international market is another factor affecting the Domestic Airlines industry. As international tourism increases so does the amount of passengers on domestic airlines. Most often these tourists need to get across the country and in turn will need to use domestic airlines. Two factors that affect JetBlue with international tourism is one having a flagship terminal at JFK International airport. The JFK airport is the busiest international airport in the United States as an air passenger gateway handling more traffic than any other airport. According to the Bureau of Transportation Statistics (2010) JFK had 66,311 international scheduled services in 2010. The second factor is point-to-point routes, 63 destinations in 21 states, Puerto Rico, Mexico, and 11countries in the Caribbean and Latin America, and having major focus cities such as Boston, Fort Lauderdale, Los Angeles/Long Beach, New York, and Orlando.

The level of demand for aviation is largely influence by the number of domestic trips taken by US-residents. According to the Bureau of Transportation Statistics (2011) the total domestic passengers traveling has decrease by almost 8% from 2010. JetBlue has not seen an impact by the decrease in domestic passengers having regenerated on July 2011 an 11.1% airways traffic increase compare to July 2010 (JetBlue Airways Corporation, 2011).

These external factors influence JetBlue’s...
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