REV: APRIL 1, 2010
ROBERT S. HUCKMAN GARY P. PISANO
JetBlue Airways: Managing Growth
It was May 11, 2007, and David Barger finally had a moment to take in the view from his office window at JetBlue Airways’ modest corporate headquarters in Forest Hills, New York. Less than 24 hours earlier, Barger, previously president and COO of JetBlue, was named the airline’s CEO. JetBlue’s board promoted Barger to the CEO role in the wake of a highly publicized operational crisis in February that led to the cancellation of over 1,100 JetBlue flights and adversely affected the travel plans of thousands of passengers. Though numerous interviews and meetings during the past day allowed Barger to outline his vision for the airline, he realized that he needed to move quickly in implementing that vision to maintain the confidence of customers, employees, and shareholders. Just a few miles outside Barger’s window was John Fitzgerald Kennedy (JFK) Airport, where JetBlue began operations as a low-cost carrier (LCC) in 2000 and, by the beginning of 2007, held a 30% share of domestic departures. Looking beyond the construction site for JetBlue’s new Terminal 5—an $800 million state-of-the-art facility that was scheduled to open in the fall of 2008 and would offer 26 gates and a wide range of passenger amenities—Barger noticed one JetBlue plane, a 100-seat Embraer 190 (E190), taking off. Immediately following it was another JetBlue plane, a 150-seat Airbus 320 (A320). Wrapping up some email responses, Barger was pleased to see other JetBlue planes—some E190s and some A320s—take to the air over the next fifteen minutes. He could not help but appreciate this setting as an appropriate backdrop for some critical short-term decisions that the airline needed to make. In late 2005, JetBlue added the E190 to its fleet, which was then composed exclusively of 85 A320s. This decision was a break with the traditional practice of many LCCs of limiting their fleets to one type of aircraft to streamline operations and reduce costs. JetBlue was in the simultaneously advantageous and risky position of being the launch customer for the E190. By the end of 2006, JetBlue had 23 E190s in its fleet of 119 planes. By late 2006 JetBlue, like other airlines, faced softening demand and higher costs due to increasing fuel prices. Barger played a large role in the airline’s decision at the end of 2006 to slow its rate of growth by reducing its purchase commitments for new planes. In light of the operational challenges faced by JetBlue in February 2007, as well as the unabated rise in fuel costs (Exhibit 1), Barger realized that the airline would need to take further steps to slow its rate of growth. Though convinced JetBlue needed to decrease plane deliveries once again, Barger was not certain as to how these reductions should be distributed across E190s and A320s. The E190 was a promising plane that presented interesting growth opportunities and challenges for JetBlue. At the same time, the A320 was a proven plane that served as the basis for JetBlue’s operations over the ____________________________________________________________
Professors Robert S. Huckman and Gary P. Pisano prepared this case with the assistance of Global Research Group Research Associate Mark Rennella. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2008, 2009, 2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.