DR JACK HUDDLESTON
BUS 599 / STRATEGIC MANAGEMENT
16 APRIL 2011
Discuss the trends in the US airline industry and how these trends might impact a company’s strategy.
Today’s airline companies are faced with substantial challenges in an effort to keep air travel an affordable and viable mode of transporting people in the future. The airline industry continues to feel the pinch from the US economic slowdown and rise of crude oil/jet fuel prices, which have risen to record numbers with no predictable end in sight. The downturned economy is also forcing customers both business and consumer travelers to look for alternatives to save money through cutting back on travel expenditures. The strategies that airline companies pursue for the future in an effort to offset skyrocketing fuel prices, and keep air travel affordable pose perhaps the most significant challenge to ensure success in the future. Rounding out the list of challenges is the threat of increased competition due to the vulnerability of the market to new (small) entrants partially attributable to rising fares and the potential for increased labor costs as a result of the possible future shortage of pilots predicted by studies such as the one performed by the International Air Transport Association. To meet these challenges airlines may find themselves needing to develop and evaluate strategies associated with lowering operating expenses and increasing operational efficiencies through initiatives such as energy conservation measures, scaling back operations, targeting specific markets, pursuing partnerships with other airlines, or even mergers. Other strategies under consideration may include identifying additional ancillary revenue streams. Energy conservation measures being considered are focused on reducing fuel consumption through techniques such as flying at slower speeds, higher altitudes and making airplanes lighter aimed at reducing fuel “burn rate”. Strategies for cutting operational costs may include reducing capacity and service, re-evaluating the use of asset and most assuredly- adopting proven approaches for hedging fuel cost. As anyone who has traveled recently can attest the creation of additional revenue streams is apparent as airlines have passed additional charges to customers in the form of fuel surcharges, baggage fees and charging for amenities that were previously free, all of which impact the customer satisfaction. Affordability and customer satisfaction will always remain a key objective in achieving success and as companies strive to keep these levels high, they may have to redirect their focus on the corporation and business traveler, which are widely known to dominate the air travel market. Discuss Jet Blue’s strategic intent.
Jet Blue’s strategic intent centered on providing the ultimate “best value” scenario by combining the low fares of a discount airline carrier with enhanced customer service and comfort similar to those found in customer’s homes and normally available only with the purchase of a first class ticket. To keep fares low, Jet Blue concentrated on controlling operating cost and using information technology to achieve operational efficiencies in the areas of ticketing and revenue management. Their mission objectives were deeply rooted in customer service, especially on-board service, geared toward never disappointing a customer; because a satisfied customer is a loyal and return customer. This strategic intent flowed from the top down as several examples of the personal deeds of top company officials toward ordinary everyday customers were detailed in the case. Another key component of Jet Blue’s vision was their “employee focused” organizational culture based on the values of safety, caring, integrity, fun and passion. The organizational culture stemmed from a belief that ordinary people can accomplish extraordinary things when given the...