JetBlue Airways Case 20
On February 11, 2000, JetBlue Airways launched its first ceremonial flight from New York City to Buffalo, NY, making John F. Kennedy International Airport its official hub. David Neeleman founded JetBlue after raising $130 million from investors and also contributing $5 million of his own money. Neeleman’s idea was to start a company that would combine the low fares of a discount airline carrier with the comforts of a small cozy den in people’s homes. By April, 2002, the airline company had flown over five million passengers, sold public stock at a starting price of $27 a share and acquired LiveTV, LLC, its provider of in-flight satellite entertainment systems. Despite its early promise and strong organizational culture, JetBlue failed to deliver value to its stockholders over a five year period ending in 2006. Because of this, JetBlue was forced to improve their business strategy and make changes that would save their organization from going under.
When JetBlue began its operations in 2000, they realized that it would be nearly impossible to compete with Southwest as the leader of low cost providers. JetBlue also realized that it was crucial to distinguish themselves from other major competitors such as US Airways, American and Continental because they could not compete at their price level because of a lack of name recognition and the loyal customer base advantage that these companies already had. These factors led JetBlue to choose the best-cost provider approach as its operations strategy.
The best-cost provider strategy aims at giving customers, “more value for the money.” The objective of this strategy is to deliver superior value to buyers by satisfying their expectations on key quality, features, performance, service attributes and beating their expectations on price (given what rivals are charging for much of the same attributes). JetBlue was successful with this strategy because it was able to offer many unique and...
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