A strategic management case study presentation on Jet Blue Airways (2005).

1. JETBLUE AIRWAYS
CORPORATION - 2005
A Strategic Management Case

2. Outline
2
Introduction
Strategy Formulation Stage
Vision & Mission Formulation
SLEPT Analysis
CPM, EFE, IFE
SWOT, SPACE, Market Focus Matrix
IE, Grand Strategy Matrix
QSPM
Strategy Implementation Stage
Recommendations
Annual Objectives and Policies
Strategy Evaluation Stage

3. Introduction
3
 High competition in US airline industry.
 JetBlue
 Established in 1998 and started service in 2000
 Goal has been to establish itself as a leading low-fare, low-cost
passenger airline by offering customers high-quality customer
service and differentiated products.
 Focus on underserved markets.
 108 flights in 2002 and 316 in 2005 serving 32 destinations.
 By mid 2005, fleet of 77 new Airbus A320 Aircraft
 Stock price $20 in 2002 and peaked at $26.4 in 2005.

4. Introduction
4
 JetBlue Facts Sheet
 First and only US to launch with more than 100 million in capital
 First and only to offer 24 channels of live satellite free at every seat.
 First and only to broadcast the Olympics live at every seat.
 First to introduce “paperless cockpit” technology.
 Only US to be 100% ticketless.
 First to install bulletproof cockpit doors.
 First and only to install security cameras.
 Major Competitors
 American
 Southwest
 United

5. Vision & Mission
5
PROPOSED VISION
At JetBlue our vision is to be the best regional air carrier by providing
low-fare, low-cost, enjoyable and safe flight experiences to our
passengers.

6. Vision & Mission
6
Proposed Mission Statements
Jet Blue’s mission is to be the leading low-fare, low-cost passenger
airline offering high quality customer service to underserved
markets and customers who are looking for the best value in their
flight. We have the newest most advanced planes that are reliable,
safe, fuel efficient, utilizing advanced technologies, and unique in
multimedia entertainments. Our philosophy is to give customers
the best price value for their ticket and maintaining distinctive
services. At JetBlue we hire highly motivated employees and train
them to reach a high level of competency to provide better
experiences to customers. We believe that our high-value, high
quality service philosophy will lead the way to becoming the
number one in the industry.

7. External Opportunities and Threats
7
SLEPT Analysis
SLEPT Influences External Opportunities External Threats
Social 200 million passengers will be Obese passengers contributing
carried in 2005 (4.1% increase to high fuel consumption costs
than previous year) (275 million additional cost to
High demand for air travel airlines)
Legal Increase in labor wages Union labor contract & strikes
Bankruptcy of many rival Mergence of competing airlines
airlines New regulations
New regulations
Environmental and Ethical None High oil prices
Availability of Jet fuel
Political None Rising security rules and
obligations.
Technological Utilization of the internet for Reliability of the internet and
sales system downtime.
New airplanes fleet

8. Competitive Profile Matrix (CPM)
8
High Demand
Weight JetBlue High Sales
American Southwest United
Market 0.10 3.00 3.00 4.00 1.00
Capitalization
Employees 0.10 4.00 1.00 3.00 2.00
Quarterly Rev 0.12 4.00 2.00 2.00 1.00
Growth
Revenue 0.10 4.00 4.00 4.00 4.00
Gross Margin 0.10 4.00 3.00 4.00 2.00
Net Income 0.12 3.00 2.00 4.00 1.00
EPS 0.10
High Efficiency
3.00 1.00 4.00 1.00
Low cost
P/S 0.08 4.00 1.00 4.00 1.00
Expense 0.18 4.00 2.00 2.00 2.00
Passenger
Miles
Total 1.00 3.68 2.12 3.30 1.68

9. External Factor Analysis
9
Factors Weight Rating Weighted Score
Opportunities
Rapid growth of discount airlines due to bankruptcy of rival airlines 0.06 3 0.18
200 million passengers will be carried in 2005 (more than the year before by
4.1%) 0.08 3 0.24
Air travel is much safer than other means of transportation 0.05 4 0.2
Emergence of new federal laws enhancing security in airports 0.04 3 0.12
Threat 0
High oil or jet fuel prices 0.08 4 0.32
Union labor contracts, wages, benefits & strikes 0.09 4 0.36
Fierce competition from other rival airlines 0.07 3 0.21
Availability of jet fuel 0.09 3 0.27
Market is maturing 0.07 3 0.21
Rapid growth of discount airlines 0.05 3 0.15
Emergence of new US federal laws (e.g., change in daylight saving time) 0.07 2 0.14
Pricing is weak 0.05 4 0.2
Obese passengers contributing to high fuel consumption & negative
environmental impact 0.06 3 0.18
Rising security rules and obligations 0.08 4 0.32
Rising breakeven load factor 0.06 3 0.18
Total Weighted
Total weight 1 Score 3.28

10. Internal Factor Evaluation
Factors 10 Weight Rating Weighted Score
Opportunities
Deployment of technology in terms of paperless tickets (i.e., e-commerce) 0.08 4 0.32
Attention to security in terms of bullet-proof in cockpit cabin and cameras in
passenger cabins 0.09 4 0.36
JetBlue fleet maintains a new fleet of aircrafts 0.06 4 0.24
JetBlue offer in-flight entertainment 0.06 3 0.18
JetBlue hires the best crew in terms of skills and employees 0.08 3 0.24
Jet Blue has a very well clear strategy in terms of leadership 0.09 4 0.36
JetBlue offers exceptional training physical resources to company employees 0.08 4 0.32
Availability of customer service management 0.07 3 0.21
JetBlue has the lowest labor wages compared to other rival airlines ($3.13 with
each seat flown) 0.05 4 0.2
JetBlue has a loyalty program, named TrueBlue, which rewards program
members 0.03 3 0.09
JetBlue maintains a higher net income ($39.24M) compared to industry ($27.61) 0.03 2 0.06
JetBlue maintains a higher revenue ($1.35B) compared to industry ($1.24B) 0.03 2 0.06
JetBlue maintains a higher operating margin (7.84%) than its industry (6.86%) 0.02 3 0.06
JetBlue has a high market capitalization ($2.19B)compared to industry ($536.6M) 0.02 2 0.04
JetBlue maintained a higher P/E ratio (59.21) compared to industry (14.16) 0.03 3 0.09
JetBlue has a high P/S ratio (1.63) compared to industry (0.42) 0.03 2 0.06
JetBlue maintained a high gross margin (36.12%) compared to industry (23.08%)
and other rival airlines 0.03 3 0.09
JetBlue has a higher quarterly revenue growth (29.5%) compared to industry
(20.4%) and other rival airlines 0.03 2 0.06
Threat
JetBlue reported a high PEG ratio (3.90) compared to industry (0.93) 0.04 1 0.04
JetBlue reported low EBITDA (191.54) compared to industry (154.38M) 0.05 2 0.1
Total Weighted
Total weight 1 Score 3.18

11. Internal-External Matrix
11
4 3 2 1
I II III
3
IFE
IV V VI
2
VII VIII IX
1
EFE

12. SPACE MATRIX
12

13. Grand Strategy Matrix
13

14. SWOT analysis
14
STRENGTHS WEAKNESSES
Constant financial growth over past 3 years. Relatively new company.
Low operating cost and labor cost due to Serving only 13 States.
strong utilization of resources. Low fares could mean less profit.
High service passenger airline. Lower percentage of full time employees
Comfortable accommodation. compared to competitors.
Product differentiation due to unique in-flight Lowest in market cap among competitors.
digital entertainment systems. Single fleet of planes (77 Airbus A320 Aircraft
Known for being efficient and on time. only).
Dedicated staff due to their strong hiring Relying mostly on word of mouth advertising.
process. Higher percentage of airborne time and
75.4% online reservation – Effective use of higher number of diverted flights than
website. competitors.
100% ticketless.

15. SWOT analysis
OPPORTUNITIES THREATS
Northwest may be heading for Risk of strikes (Trade Unions)
Chapter 11. Fuel price and fuel availability.
Demand in air travel predicted to Risks of hedging fuel.
increase by 4.1%. Break-even load factor is increasing.
Possibility of senate approving Rapid growth of discount airlines.
daylight savings hitting competitors in Strong competitions as competitors
EO market. move to Cost leadership strategy.
Using luggage tracking technology Some competitors are merging to rival
could help in the lost luggage with discount airlines.
department. New taxes from govt.
Security & Terrorism
15

16. SWOT analysis
16
SO STRATEGIES WO STRATEGIES
Market Penetration: Expand and offer flights Raise fares slightly but keep it lower than
to Europe and market their superior price value competitors.
to Europe. Advertise on TV to increase customer
Market Penetration: Capture markets of awareness.
airlines heading for Chapter 11. Market Penetration: Start flying internationally
Set up TV adds to advertise Jet Blue low price to increase profits.
and their product differentiation. Product Development: Add new fleet of
airplanes.
ST STRATEGIES WT STRATEGIES
Horizontal Integration: Take over emerging Revise/optimize their flight schedule, timings
discount airlines. and destinations to improve the number of
Introduce programs to build confidence of diverted flights and to improve the high break-
trade unions. even load factor.
Raise awareness on their security measures
(bulletproof cockpit).

17. Market Focus Matrix
17
Embryonic Growth Mature Aging
Dominant
Defend position
Fast Grow Defend Position
Fast grow Focus
Attain cost leadership Attain cost leadership
Start up Renew
Renew Defend position Renew Defend position
Grow with industry
Fast Grow Attain cost leadership Find niche
Start up
Strong
catch-up renew, focus Hold niche
differentiate
attain cost leadership differentiate Hang-in
fast grow
differentiate grow with industry Grow with industry, harvest
Favorable
Differentiate Harvest, catch-up
Start up
focus hold niche. Hand-in Retrench
differentiate
catch-up turn around Turn around
focus
grow with industry focus, grow with industry
Harvest, catch-up Harvest
Tenable
Start up Divert
hold niche. Hand-in turn around Retrench
grow with industry
turn around find niche
focus
focus, grow with industry retrench
Find Niche Turn Around Withdraw divest
catch-up Retrench
Weak
grow with industry Withdraw

18. Quantitative Strategic Planning Matrix
QSPM
STRATEGY 1 STRATEGY 2 STRATEGY 3
Expand Acquire
Buy new
Marketing United
Fleet
channels Airlines
External Factor Evaluation 1.31 1.27 1.87
Internal Factor Evaluation 3.42 3.23 2.64
TOTAL SCORES 4.73 4.5 4.51
18

19.  Manufacturer: Airbus  Seating capacity: 180 passengers  Fuel Efficiency
 Cost: $85 million  Range: 6,000 km  CR
 Competitors: Boeing 717  Speed: 871 km/h  Complexity
& 737  Cargo capacity: 40 m3

20. Recommendation
20
As per the Strategy formulation, we recommend 3 strategies:
Strategy 1: Market Development
Add domestic locations and fly internationally, extend flights to major hubs in Europe to
start off, then as that takes off, offer flights to Asia, Australia, etc. The new planes will
mitigate risk of losing customers due to unplanned delays.
Cost: $600 million for 7 planes, fuel for a year and maintenance & hiring costs.
Strategy 2: Market Penetration
By increasing advertising and Expand to Other Media. JetBlue could advertise on TV,
Radio, and Online to boost revenues and popularity of the airline instead of heavily
depending on word of mouth.
Cost: About $4,000,000.
Strategy 3: Related Diversification:
Build Partnership Travel Website. In this website, users can look up information about
different travel destinations, find hotels, restaurants, hot spots, etc, and book a flight
through JetBlue all while comparing prices from other airlines.
Cost: About $30,000 to start off, then about $60,000 per year to maintain (for a small site).

21. Recommendation
21
How to Play?
JetBlue should implement these strategies in three stages.
Introductory Phase – Implement new advertising campaigns to raise
awareness in target markets simultaneously adding 7 new planes to
their fleet.
Middle Phase – Start the travel website to help attract new people to
JetBlue, get them to fly, and build a reputation.
End Phase – Start flying internationally. Once customers know JetBlue
and JetBlue gains a reputation for high quality and low prices, people
will want to fly them no matter where they go.
Horizontal Integration in the Long Term.

22. Annual Objectives
Deliver the Decade
8-10% Sales 10%+
Growth
Profit 13%
Growth
+0.6% Margin
pts/yr Improvement TSR
Cash Flow
45% GM Asset Growth 60 P/E
1.78c CL
Efficiency
90%

23. Strategy Evaluation
Over the next decade, JetBlue strategy will be
evaluated annually based on 4 perspectives:
 Financial performance
 Customer Knowledge
 Internal Business Processes
 Learning & Growth
23

24. THANK YOU
for flying with us
24