Jetblue Essays

Jetblue Essays Jetblue Essay Jetblue Essay JetBlue Beginnings and Operational Methods Steve Brindza Ohio Dominican University This section details the history of JetBlue, focusing on the activities of founder, David Neeleman. JetBlue Airways, based in Forest Hills, New York, was founded in February, 1999, by David Neeleman, the son of Mormon missionaries. He was born in Sao Paolo, Brazil, but raised in a tightly-knit Mormon family (GaJilan, 2003). After serving as a Brazilian missionary during college, Neeleman returned to his familys base in Salt Lake City and began an enterprising condominium rental business. As a tenacious seller, Neelemans approach caught the eye of June Morris, a major Utah corporate travel agency owner. With her assitance and funding, the two founded Morris Air in 1984. This charter air service modeled itself after Herb Kellehers Southwest Airlines (GaJilan, 2003), looking to keep flight costs low and speeding up airplane readiness. Perhaps Neelemans most prolific step at this time was utlllzlng stay-at-nome u n matrlarcns to work as nls reservations. customers rarely discerned that the order-taker was situated in her living room, with PC software provided by Morris Air (Friedman, 2007). In 1992, Morris Airs cost containment processes and procedures caught the eye of Herb Kelleher at Southwest. A deal was struck, and Southwest purchased Morris Air for $129 million. At the time, June Morris was beginning treatment for breast cancer, so David Neeleman knew he would be taking on more responsibility with whatever new venture he undertook (GaJilan, 2003). After the buyout, he stayed on at Southwest for six months; upon leaving, he signed an industry noncompete agreement spanning five years (JetBlue, n. d). Neeleman next created Open Skies, an e-ticketing and booking agency, that he founded with his friend, David Evans. This venture kept Neeleman in the airline business, but not as a air carrier, and he did not violate his non-compete agreement (JetBlue, n. d). Evans and Neeleman promoted their software to smaller airlines with enough success to gain Hewlett-Packards attention. Months after the non-compete timeframe expired, Evans and Neeleman sold Open Skies to the computer giant, and Neeleman began raising capital for his own airline (GaJilan, 2003). Neeleman next utilized his knowledge of the airline industry, and his time at Southwest airlines (GaJilan, 2003), and with the aid of his attorney friend, Tom Kelly in 998, he raised $160 million in capital from investors such as Weston Presidio Capital and J. P. Morgan Partners. JetBlue was formally founded in February, 1999 (Barney and Hesterly, 2010). By years end, working with financier, George Soros, Neeleman had acquired a small fleet of Airbus320 Jets (JetBlue, n. d), and JetBlue achieved 75 spots at John F. Kennedy International Airport, which now served as the company hub (Barney and Hesterly, 2010). Growth continued at a brisk pace, even after the 9/1 1 attacks, and the JetBlue initial public offering occurred in 2002. By 2003, the company was growing at a rate of six new employees per day (GaJilan, 2003). JetBlue added nine new destinations in 2004, including Boston, which lacked a low-cost carrier (JetBlue, n. d). This service helped JetBlue regain some of the luster lost in 2003 when it provided the U. S. Department of Justice with information on 1. 1 million passengers (JetBlue, n. d). Cost containment at JetBlue This section features some of the measures Neeleman implemented to helf JetBlue attain low-cost carrier (LCC) status. Like with Morris Air, JetBlue focused on cost savings wherever it could. Sometimes initial outlays were for higher-quality components that would return their cost in the long run. In depth research (and Neeleman cleaning too many urine-soaked seats (GaJilan, 2003)) determined that installing liquid-repelling leather seats would cost twice as much as fabric, but also last twice as long (Barney and Hesterly, 2010). Neeleman opted to go with the luxury passenger seating. Similarly, Neeleman investigated meal service and found that customers would be satisfied with light snacks and sodas in lieu of lunch and dinner entrees. JetBlue saved roughly $3 per assenger by cutting out meal service (Barney and Hesterly, 2010), but selected premier-label snacks, such as Terra Blue potato chips (GaJilan, 2003). I ne notaDle cost-saver was utlllzlng Tllgnt crews to clean alrllne caDlns arter eacn flight, which was inspired by the similar team player culture found at Southwest. Special cleaning crews were not needed, and JetBlue was able to speed airplane turnaround time to 35 minutes. This number was substantially below the industry average of one hour, and the quicker turnaround was implemented largely to sell more flights daily (GaJilan, 2003). Neeleman utilized his knowledge of electronic ticketing and Internet-based reservations to further reduce staff engaging in customer transactions. A major operational cost saving involved entering the major air industry with a new fleet of Airbus aircraft. Although European made, Airbus was chosen due to their fuel efficiency, easier maintenance, and five-year warranty (GaJilan, 2003). Neeleman realized that quick turnaround time was a crucial factor in maximizing profits by simply keeping the new planes in the air longer than the competition. Because JetBlue worked largely out of secondary airports (Midway vs. OHare), its lights avoided more congestion than larger airlines; these airports also struck better terminal lease deals than larger airports, and JetBlue benefitted from those savings. In 2001-2002, JetBlue had an 80-percent on-time record, compared to the 72-percent industry standard (Barney and Hesterly, 2010). The firm drew on the success of Morris Airs work-from-home ethic. Call center operators, were often able to be stationed at home and provided support services via voice-over-internet technology (Barney and Hesterly, 2010). JetBlue culture JetBlue company culture is noticeably more relaxed than at other multi-billion ollar firms. Former CEO Neeleman used to stand out because he traded in suits for khakis (Gajilan, 2003). Corporate annual reports list full names of C-level staff, but include their informal, preferred version, too. Davids are known as Daves, and Martins are listed as Martys. Some noticeable differences include the mimicking of Southwests contribution of employees to clean up the planes after flights. The company works to hard to keep all team players enthusiastic because customer feedback noted energy and good attitudes of JetBlues employees (Barney and Hesterly, 2010). Former CEO Neeleman used to stand out in the business world because he traded in suits for khakis and greeted customers as they exited (GaJilan, 2003). Such staff were rewarded with bonuses, and most staff could take advantage of profit sharing plans (Barney and Hesterly, 2010). JetBlue distributed gift vouchers if there was an hour-plus long delay, even when the delay occurred due to uncontrollable factors (Barney and Hesterly, 2010). By 2003, the employee culture had gotten so much good press that analysts noted that it was harder to land a Job at JetBlue than to get into an Ivy League college. That year, over 135,000 applicants competed for 2,000 Jobs (GaJilan, 2003). Targeted markets JetBlues leaders knew that as a late-90s start-up and a LCC (low-cost carrier) they would not be able to compete with full-service carriers, especially in the ability to fly tne entlre contlnental u s. Instead, It aoanaonea tne traaltlonal nun model ana new only point-to-point flights (Barney and Hesterly, 2010). This service initially focused on the 19 million potential customers in a 60-mile radius of New York City, and Neeleman utilized the frustrations of New York state legislators who had noted poor, xisting service from New York City to Albany and other update locales (GaJilan, 2003). These routes expanded to the more lucrative New York-to-Florida routes, even targeting passengers post 9/1 1 who did not want stopovers on longer flights (Barney and Hesterly, 2010). But JetBlues foray into the American south did not always go smoothly. In the wake of 9/1 1, other airlines had lost hundreds of millions and were operating under Chapter 11 bankruptcy protection. By 2004, when these firms regained much of their market share, they had found ways to utilize the government bailout money and overnmental protection. At this time, Continental and American Airlines became more aggressive in defending their markets, especially defending their hubs. JetBlue began increasing its service from Atlanta to Los Angeles in 2003, and Delta Airlines did not appreciate this encroaching on Deltas primary hub (Atlanta). In response, Delta challenged JetBlue by quickly adding additional flights and lower prices from Atlanta to the West Coast. Delta took the unusual step of leasing planes to handle the its new, higher capacity. This new business strategy put so much pressure on JetBlue that the airline was forced to cease its Atlanta-west coast service by 2003 years end (Barney and Hesterly, 2010). Notable staff Aside from the David Neelemans preeminance, JetBlues other main executive has been former president, David Barger. On May 10, 2007, Barger succeeded Neeleman as CEO; however, Neeleman remained chairman of the board until May, 2008. (JetBlue, n. d). Barger came to JetBlue after having served at Continental Airlines. His ascendence to CEO came Just months after the notorious incident in February, 2007, where passengers at the JFK hub were stranded on the tarmac for 11 hours (A Change in the cockpit, 2007). Barger had served as JetBlues chief operating officer, but was replaced by Russell Chew, a former COO with the Federal Aviation Administration (A Change in the cockpit, 2007). At present, Bargers brother, Mke Barger, is a top-level JetBlue staff member, holding the positon of SVP, Fleet Operations; Chew left the company in 2009. (JetBlue, n. d). Presently, Joel Peterson is serving as the companys chairman. Peterson, along with Vice Chairman, Frank Sica, both were named to the board in May, 2008 (JetBlue appoints, 2008). Current offerings and challenges JetBlue has worked hard to regain its do-no-wrong image after the February, 2007 stranded passenger fiasco. The company drafted and then published the Customer Bill of Rights, which specifies dollar amounts JetBlue will pay to flyers who incur departure/arrival delays or overbookings. This bill of rights provides the option ofa full refund or a recommendation of a forthcoming JetBlue flight (Barney and Hesterly, 2010). JetBlue also strives to keep its rate per-passenger-per-mile low, at one point acnlevlng 6 43 cents per mile, wnlcn was second only to soutnwesrs 6 33 cents per mile (Gajilan, 2003). In 2010, David Neeleman began a Brazilian airline start-up, Azul. Although he retains several million dollars in JetBlue stock, Neeleman wishes to return to the land of his birth and incorporate Brazilian-made planes into his fleet. Azul uses 18 midsize Embraer Jets, with 28 more forthcoming (Sellers, 2010). JetBlue received unwanted attention in 2010 when flight attendant, Steven Slater, either provoked or was agitated by an unruly passenger in August. Slaters departure from the airplane, accompanied by drinks in hand as he slid down the emergency exit chute, put focus on the stress that flight attendants endure, even at a company nown for its team-player culture. JetBlue has not formally announced that there would be changes in how customer care is handled or whether there is the possibility for new training for its in-flight staff (JetBlue, n. d). References Barney J. B. , Hesterly, W. S. (2010). Strategic management and competitive advantage: Concepts and cases, (3rd ed. ). Upper Saddle River, NJ: Pearson/Prentice Hall. A Change in the cockpit at JetBlue. (2007, May 11). Business Week Online. Source Business Source Complete. Friedman, T. L. (2007). The world is flat: A brief history of the twenty-first century. New York: Farrar, Straus and Giroux. GaJilan, A. T. (2003, May). The Amazing JetBlue. FSB: Fortune Small Business, 14(4), 51. Retrieved from Business Source Complete. JetBlue. (n. d. ). In Hoovers online. Retrieved from http://subscriber. hoovers. com. ezproxy. ohiodominican. edu/H/company360/ overview. html? companyld=99674000000000 JetBlue Appoints Chairman as Part of Succession Plan. (2008, May 22). Wall Street Journal Eastern Edition, 251(120), 87. sellers, P. (2010, July 26). The Next JetBlue. Fortune, 162(2), 97-100. Retrieved from Business Source Complete.