JetBlue Airways Strategic Audit Strategic Management Larry W. Dudley April 13th, 2011 Group 3 Mark Bourgoin – Reilly Kindred – Matthew Misitano – Karla Schaapveld – Jeremy Smith – Jeffrey Stanton – Diego Elizalde Valderrama

JetBlue Airways Inc. Board of Directors

JetBlue Airways Inc. Top Management

Standing Board Committee Compensation Director Audit Committee Compensation Committee Corporate Governance and Nominating Committee Airline Safety Committee David Barger Peter Boneparth David Checketts Robert Clanin Dr. Christoph Franz Virginia Gambale Stephan Gemkow Joel Peterson Ann Rhoades Frank Sica Chair: Member:

Matt Misitano Section III A and B III. External Environment   A. Natural Environment 1. Potential of more severe snowstorms like the one that hit in February 2007. 2. Severe snowstorms and other severe weather conditions exist globally. Natural environment includes, weather related events, storms, sea levels rising and falling, and solar winds. In this case JetBlue faces; (read #1) Future threats do exist globally; (read #2) 5

1. Economic 2. Technological 3. Political-Legal 4. Sociocultural B. Societal Environment 1. Economic 2. Technological 3. Political-Legal 4. Sociocultural The Societal Environment includes four major forces, they are: (read slide) each of these forces can present either a opportunity or a threat to the corporation. 6

1. Economic   a. Unstable economic conditions, the country is in a recession cycle but there are signs that show the economy is trending into the recovery stage which will increase consumer spending. (O) b. Increasing fuel costs will increase operating expense. (T) c. Bankruptcy protection allowing competitors to slash prices. (T) d. Increased number of LCC’s flooding the market lowering fare prices. (T) Economic forces in JetBlue’s case include; (read slide). 7

2. Technological   a. Ability for employees to work from home using voice-over-Internet protocol cuts down on operating costs. (O) b. Paperless cockpits, automation processes, automatic check-in and electronic baggage tagging minimize labor costs. (O) c. Installation of bullet proof, deadlock cockpit doors. (O) d. Ownership of LiveTV. (O) e. Increasing Internet functionality decreasing need for business travel. (T) The technological forces in this case are: (read slide) 8

3. Political-Legal a. Government bailout programs allowing growth. (O)   b. Potential for conflicts in the Middle East which result in fuel increases. (T) c. Global warming laws restricting the use of fuels and oil. (T) d. Terrorist threats on American soil. (T) Political and Legal forces are; (read slide) 9

4. Sociocultural   a. Baby boomers retiring eliminating business travel and reducing their income therefore reducing leisure travel. (T) b. Economic recovery leads to business growth increasing travel demand. (O) c. Consumers demand on entertainment and media. (O) Sociocultural forces are; (read slide) 10

JetBlue Airways External Factors Analysis Summary Talk about EFAS table (external opportunities and threats). 11

C. Task Environment Threat of new entrants Bargaining power of buyers (External Environment cont.) C. 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.

Threat of new entrants AirTrans (2003, Atlanta) Song (2003, JFK) Ted (2004, Western Routes) AirTrans and Frontier combine (2006)

Bargaining power of buyers Lower fares Leather seats Free snacks and drinks Personal satellite televisions Passenger complaints lowest in industry (early 2000’s) Baggage handling errors lowest in industry (early 2000’s) However – customer service fiasco (Feb. 2007) removes JetBlue from Customer Service Champs list in Business Week magazine

Threat of substitute products or services Low Cost Carriers already established included: Southwest Spirit Airlines America West Frontier Airlines

Bargaining power of suppliers Fleet of brand new A-320s (1999) New JFK terminal (2003) Ordered 100 Embraer-190s (2003) One Airbus delivered every three weeks (2004) Sold five A-380s Deferred delivery of twelve A-380s for three years(2006)

Rivalry among competing firms Carriers respond to JetBlue’s entrance to the Atlanta hub in 2003: Delta raises capacity and lowers prices on the Atlanta/L.A. route Delta adds other routes to the region, dominating CA destinations AirTran leases new planes, increasing capacity After seven months, JetBlue forced to withdraw from Atlanta (Dec. 2003)

Relative power of unions, governments, special interest groups, etc. One of the first airlines to increase safety of aircraft after Sep. 11th. First carrier to install bulletproof, deadbolted flight deck doors before FAA mandated use.

D. Summary of External Factors Thanks Matt!!

IV. Internal Environment: Strengths and Weaknesses (SWOT) C IV. Internal Environment: Strengths and Weaknesses (SWOT) C. Corporate Resources

4 The company is currently in a process of re-structuring its operations in order to remain competitive. This process is a clear objective of the organization, as they are under new leadership. The company’s route structure has seen changes under the re-structuring initiative, mainly as a vehicle to decommission low-profit routes. The airline appears to have managed purchasing effectively throughout its short life, as evidenced by the lack of major aircraft order changes. A new terminal was built at JFK, which opened more than 20 new gates for its operations.

4 The operation, as all other air carriers, is extremely sensitive to natural disasters, weather events, and outside interference, such as terrorism. The organization has utilized workforce management and labor savings as a key component of cost reducing technique, as evidenced by examples such as having pilots help with cleaning up aircraft between take offs. The company’s cost structure was short of brilliant at first. A fleet of new aircraft (all A320s), labor rationing, etc. Some long term planning was lacking, and certain costs increases were unanticipated, such as aging aircraft maintenance. The company operations strategy has been its sole competitive advantage provider.

5 These employees utilized some of the early VOIP systems to complete their assignments, denoting a tendency to innovate in technical fields. At some point it was mentioned that employee raises were being issued. Based on this we can deduce that turnover rate is low. This reflects high levels of employee satisfaction.

5 The company relies heavily on employee dedication and attitude. We can assume that these are organizational values that are being passed down from higher management. The organization is open to new ideas in order to promote a better work environment and cost savings, as practiced by allowing telephone representatives to work from home.

6 The information within the case study suggests that the company IT culture can be reactive in nature. Many of the advances they have achieved have been a direct product of operational need. This strategy to IT implementation can be extremely cost effective, as it eliminates superfluous projects that have no operational value. The study outlines recent database overhauls and utilization of proprietary data to improve efficiency.

6 The company’s heavy reliance on their website to execute sales and ticket re-issuing has been an important contributor of efficiency, and costs savings consequently. Airlines are generally in a positive position to utilize their information systems to creatively develop competitive advantage. Their operations require detailed data gathering, which, under the proper database management, can provide invaluable insights into its customer base and their needs and behavior patterns. The company’s online presence is well establish, as evidenced by their customers heavy use of this resource to conduct their transactions.

Questions and Comments