Group 3

Mark Bourgoin – Reilly Kindred – Matthew Misitano – Karla Schaapveld – Jeremy Smith – Jeffrey Stanton – Diego Elizalde

Valderrama

Strategic Management

Larry W. Dudley

April 13th, 2011

JetBlue Airways Inc.JetBlue Airways Inc.Board of DirectorsBoard of Directors

Joel Peterson

Chairman

David Barger

Director

CEO

President

Peter Boneparth

Director

David Checketts

Director

Robert Clanin

Director

Dr. Christoph Franz

Director

Virginia Gambale

Director

Frank Sica

Vice Chairman

Stephan Gemkow

Director

Gen. Stanley McChrystal

Director

JetBlue Airways Inc.JetBlue Airways Inc.Top ManagementTop Management

David Barger

Chief Executive Officer

President

Director

Ed Barnes

Executive Vice President

Chief Financial Officer

Joseph Eng

Executive Vice President

Chief Information Officer

Joanna Geraghty

Executive Vice President

Chief People Officer

Robin Hayes

Executive Vice President

Chief Commercial Officer

James Hnat

Executive Vice President

Corporate Affairs

General Counsel

Corporate Secretary

Rob Maruster

Executive Vice President

Chief Operating Officer

Standing Board Committee CompensationStanding Board Committee Compensation

DirectorDirector Audit CommitteeAudit Committee Compensation Compensation CommitteeCommittee

Corporate Corporate Governance and Governance and Nominating Nominating CommitteeCommittee

Airline Safety Airline Safety CommitteeCommittee

David BargerDavid Barger

Peter BoneparthPeter Boneparth

David CheckettsDavid Checketts

Robert ClaninRobert Clanin

Dr. Christoph FranzDr. Christoph Franz

Virginia GambaleVirginia Gambale

Stephan GemkowStephan Gemkow

Joel PetersonJoel Peterson

Ann RhoadesAnn Rhoades

Frank SicaFrank Sica

Chair:Chair: Member:Member:

Matt Misitano Section III A and BMatt Misitano Section III A and B

III. External EnvironmentIII. External Environment  A. Natural EnvironmentA. Natural Environment  

1. Potential of more severe snowstorms 1. Potential of more severe snowstorms like the one that hit in February 2007.like the one that hit in February 2007.

  2. Severe snowstorms and other severe 2. Severe snowstorms and other severe weather conditions exist globally.weather conditions exist globally.

B. Societal EnvironmentB. Societal Environment

1. Economic1. Economic

2. Technological2. Technological

3. Political-Legal3. Political-Legal

4. Sociocultural 4. Sociocultural

1. Economic1. Economic  a. Unstable economic conditions, the country is a. Unstable economic conditions, the country is

in a recession cycle but there are signs that in a recession cycle but there are signs that show the economy is trending into the show the economy is trending into the recovery stage which will increase consumer recovery stage which will increase consumer spending. (O)spending. (O)

  b. Increasing fuel costs will increase operating b. Increasing fuel costs will increase operating

expense. (T)expense. (T)  c. Bankruptcy protection allowing competitors to c. Bankruptcy protection allowing competitors to

slash prices. (T) slash prices. (T)   d. Increased number of LCC’s flooding the d. Increased number of LCC’s flooding the

market lowering fare prices. (T)market lowering fare prices. (T)

2.2. TechnologicalTechnological  a. Ability for employees to work from home using a. Ability for employees to work from home using

voice-over-Internet protocol cuts down on voice-over-Internet protocol cuts down on operating costs. (O)operating costs. (O)

  b. Paperless cockpits, automation processes, b. Paperless cockpits, automation processes,

automatic check-in and electronic baggage automatic check-in and electronic baggage tagging minimize labor costs. (O)tagging minimize labor costs. (O)

  c. Installation of bullet proof, deadlock cockpit c. Installation of bullet proof, deadlock cockpit

doors. (O) doors. (O)   d. Ownership of LiveTV. (O)d. Ownership of LiveTV. (O)  e. Increasing Internet functionality decreasing e. Increasing Internet functionality decreasing

need for business travel. (T) need for business travel. (T)

3. Political-Legal3. Political-Legal

a. Government bailout programs allowing a. Government bailout programs allowing growth. (O)growth. (O)

  

b. Potential for conflicts in the Middle East b. Potential for conflicts in the Middle East which result in fuel increases. (T)which result in fuel increases. (T)

  

c. Global warming laws restricting the use of c. Global warming laws restricting the use of fuels and oil. (T)fuels and oil. (T)

  

d. Terrorist threats on American soil. (T)d. Terrorist threats on American soil. (T)

4. Sociocultural4. Sociocultural   

a. Baby boomers retiring eliminating business a. Baby boomers retiring eliminating business travel and reducing their income therefore travel and reducing their income therefore reducing leisure travel. (T) reducing leisure travel. (T)

  

b. Economic recovery leads to business growth b. Economic recovery leads to business growth increasing travel demand. (O) increasing travel demand. (O)

c. Consumers demand on entertainment and c. Consumers demand on entertainment and media. (O)media. (O)

JetBlue Airways External Factors Analysis SummaryJetBlue Airways External Factors Analysis Summary

C. Task EnvironmentC. Task Environment

• Threat of new entrants

• Bargaining power of buyers

• Threat of substitute products or services

• Bargaining power of suppliers

• Rivalry among competing firms

• Relative power of unions, governments, special interest groups, etc.

(External Environment cont.)

Threat of new entrantsThreat of new entrants

• AirTrans (2003, Atlanta)AirTrans (2003, Atlanta)

• Song (2003, JFK)Song (2003, JFK)

• Ted (2004, Western Routes)Ted (2004, Western Routes)

• AirTrans and Frontier combine (2006)AirTrans and Frontier combine (2006)

Bargaining power of buyersBargaining power of buyers• Lower faresLower fares• Leather seatsLeather seats• Free snacks and drinksFree snacks and drinks• Personal satellite televisionsPersonal satellite televisions• Passenger complaints lowest in industry Passenger complaints lowest in industry

(early 2000’s)(early 2000’s)• Baggage handling errors lowest in industry Baggage handling errors lowest in industry

(early 2000’s)(early 2000’s)• However – customer service fiasco (Feb. However – customer service fiasco (Feb.

2007) removes JetBlue from Customer 2007) removes JetBlue from Customer Service Champs list in Service Champs list in Business WeekBusiness Week magazinemagazine

Threat of substitute products or servicesThreat of substitute products or services

Low Cost Carriers already established included:Low Cost Carriers already established included:

•SouthwestSouthwest

•Spirit AirlinesSpirit Airlines

•America WestAmerica West

•Frontier AirlinesFrontier Airlines

Bargaining power of suppliersBargaining power of suppliers• Fleet of brand new A-320s (1999)Fleet of brand new A-320s (1999)

• New JFK terminal (2003)New JFK terminal (2003)

• Ordered 100 Embraer-190s (2003)Ordered 100 Embraer-190s (2003)

• One Airbus delivered every three One Airbus delivered every three weeks (2004)weeks (2004)

• Sold five A-380sSold five A-380s

• Deferred delivery of twelve A-Deferred delivery of twelve A-380s for three years(2006)380s for three years(2006)

Rivalry among competing firmsRivalry among competing firms

Carriers respond to JetBlue’s entrance to the Carriers respond to JetBlue’s entrance to the Atlanta hub in 2003:Atlanta hub in 2003:

•Delta raises capacity and lowers prices on the Atlanta/L.A. routeDelta raises capacity and lowers prices on the Atlanta/L.A. route

•Delta adds other routes to the region, dominating CA destinationsDelta adds other routes to the region, dominating CA destinations

•AirTran leases new planes, increasing capacityAirTran leases new planes, increasing capacity

•After seven months, JetBlue forced to withdraw from Atlanta After seven months, JetBlue forced to withdraw from Atlanta (Dec. 2003)(Dec. 2003)

Relative power of unions, governments, special Relative power of unions, governments, special interest groups, etc.interest groups, etc.

• One of the first airlines to increase One of the first airlines to increase safety of aircraft after Sep. 11th.safety of aircraft after Sep. 11th.

• First carrier to install bulletproof, First carrier to install bulletproof, deadbolted flight deck doors deadbolted flight deck doors beforebefore FAA mandated use.FAA mandated use.

D. Summary of External FactorsD. Summary of External Factors

Thanks Matt!!

IV. Internal Environment: IV. Internal Environment: Strengths and Weaknesses Strengths and Weaknesses

(SWOT)(SWOT)C. Corporate ResourcesC. Corporate Resources

44 The company is currently in a process of re-The company is currently in a process of re-

structuring its operations in order to remain structuring its operations in order to remain competitive. This process is a clear objective of competitive. This process is a clear objective of the organization, as they are under new the organization, as they are under new leadership.leadership.

The company’s route structure has seen changes The company’s route structure has seen changes under the re-structuring initiative, mainly as a under the re-structuring initiative, mainly as a vehicle to decommission low-profit routes.vehicle to decommission low-profit routes.

The airline appears to have managed purchasing The airline appears to have managed purchasing effectively throughout its short life, as evidenced effectively throughout its short life, as evidenced by the lack of major aircraft order changes.by the lack of major aircraft order changes.

A new terminal was built at JFK, which opened A new terminal was built at JFK, which opened more than 20 new gates for its operations.more than 20 new gates for its operations.

44

The operation, as all other air carriers, is extremely The operation, as all other air carriers, is extremely sensitive to natural disasters, weather events, and sensitive to natural disasters, weather events, and outside interference, such as terrorism.outside interference, such as terrorism.

The organization has utilized workforce management The organization has utilized workforce management and labor savings as a key component of cost reducing and labor savings as a key component of cost reducing technique, as evidenced by examples such as having technique, as evidenced by examples such as having pilots help with cleaning up aircraft between take offs.pilots help with cleaning up aircraft between take offs.

The company’s cost structure was short of brilliant at The company’s cost structure was short of brilliant at first. A fleet of new aircraft (all A320s), labor first. A fleet of new aircraft (all A320s), labor rationing, etc. Some long term planning was lacking, rationing, etc. Some long term planning was lacking, and certain costs increases were unanticipated, such and certain costs increases were unanticipated, such as aging aircraft maintenance.as aging aircraft maintenance.

The company operations strategy has been its sole The company operations strategy has been its sole competitive advantage provider. competitive advantage provider.

55 These employees utilized some of the early These employees utilized some of the early

VOIP systems to complete their VOIP systems to complete their assignments, denoting a tendency to assignments, denoting a tendency to innovate in technical fields.innovate in technical fields.

At some point it was mentioned that At some point it was mentioned that employee raises were being issued. Based employee raises were being issued. Based on this we can deduce that turnover rate is on this we can deduce that turnover rate is low. This reflects high levels of employee low. This reflects high levels of employee satisfaction.satisfaction.

55 The company relies heavily on The company relies heavily on

employee dedication and employee dedication and attitude.attitude.

We can assume that these are We can assume that these are organizational values that are organizational values that are being passed down from higher being passed down from higher management.management.

The organization is open to new The organization is open to new ideas in order to promote a ideas in order to promote a better work environment and better work environment and cost savings, as practiced by cost savings, as practiced by allowing telephone allowing telephone representatives to work from representatives to work from home.home.

66 The information within the case study suggests The information within the case study suggests

that the company IT culture can be reactive in that the company IT culture can be reactive in nature. Many of the advances they have nature. Many of the advances they have achieved have been a direct product of achieved have been a direct product of operational need.operational need.

This strategy to IT implementation can be This strategy to IT implementation can be extremely cost effective, as it eliminates extremely cost effective, as it eliminates superfluous projects that have no operational superfluous projects that have no operational value.value.

The study outlines recent database overhauls The study outlines recent database overhauls and utilization of proprietary data to improve and utilization of proprietary data to improve efficiency.efficiency.

66 The company’s heavy reliance on their website The company’s heavy reliance on their website

to execute sales and ticket re-issuing has been to execute sales and ticket re-issuing has been an important contributor of efficiency, and costs an important contributor of efficiency, and costs savings consequently.savings consequently.

Airlines are generally in a positive position to Airlines are generally in a positive position to utilize their information systems to creatively utilize their information systems to creatively develop competitive advantage. Their develop competitive advantage. Their operations require detailed data gathering, operations require detailed data gathering, which, under the proper database management, which, under the proper database management, can provide invaluable insights into its customer can provide invaluable insights into its customer base and their needs and behavior patterns.base and their needs and behavior patterns.

The company’s online presence is well establish, The company’s online presence is well establish, as evidenced by their customers heavy use of as evidenced by their customers heavy use of this resource to conduct their transactions.this resource to conduct their transactions.

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