Posted: May 1st, 2022

JETBLUE AIRWAYS was founded by former Southwest Airlines (SWA) employee

(JetBlue)
JETBLUE AIRWAYS was founded by former Southwest Airlines (SWA) employee David Neeleman in 1998. Mr. Neeleman became part of SWA in 1992, when SWA acquired Morris Air, an airline he founded in 1984 at the age of 25. Morris Air was a low-fare airline that pioneered many of the activities, such as e-ticketing, that later became standard in the industry.
When Neeleman designed JetBlue, he improved upon the SWA business model to enable his new company to provide tickets at even lower costs than SWA. JetBlue reproduces many of SWA’s cost-reducing activities such as flying point-to-point to directly connect city pairs. It also predominantly uses one type of airplane, the Airbus A320, to lower its maintenance costs. In addition, JetBlue flies longer distances and transports more passengers per flight than SWA, further driving down its costs. Initially, JetBlue enjoyed the lowest cost per available seat-mile in the United States.
JetBlue also attempts to enhance its differential appeal, thus driving up its perceived value. JetBlue founder Neeleman argues that the airline combines high-tech to drive down costs with “high-touch” to enhance the customer experience. Some of JetBlue’s value-enhancing features include high-end 100-seat Embraer regional jets with leather seats, individual TV screens (with 20th Century Fox movies, LiveTV, Fox TV, and DirectTV programming), 100 channels of XM Satellite Radio, and free in-flight Wi-Fi capabilities (offered in partnership with BlackBerry and Yahoo), along with friendly and attentive on-board service
and other amenities. (JetBlue ads invite customers to hit the in-cabin “call button.”)
While JetBlue offers a highly functional website for reservations and other travel-related services, some customers (about 30 percent) prefer speaking to a live agent. Rather than outsourcing its reservation system to India, JetBlue employs stay-at-home parents in the Rocky Mountain states. The company suggests this “home sourcing” is at least 30 percent more productive than outsourcing. More importantly, customers value their reservation experience much more, which the carrier believes more than makes up for the wage differential between the U.S. and India.
In early 2007, however, JetBlue’s reputation for outstanding customer service (“we bring humanity back to air travel”) took a major hit when several flights were delayed due to a snowstorm in which the airline kept passengers on board the aircraft, some sitting on the tarmac for up to nine hours. Many wondered whether JetBlue was losing its magic touch. In May 2007, David Neeleman left JetBlue. He founded Azul (which means “blue” in Portuguese), a Brazilian airline in 2008.

After reading the case study JetBlue and discussing with your group members, you need to answer three questions:

1. What type of generic business strategy is JetBlue pursuing: cost leadership, differentiation, or integration?

2. What challenges is JetBlue facing with its chosen business strategy? What is the cause of these challenges?

3. What do you recommend JetBlue’s top management should do to improve the airline’s competitiveness?\

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(JetBlue)
David Neeleman, a former Southwest Airlines (SWA) employee, launched JETBLUE AIRWAYS in 1998. Mr. Neeleman became part of SWA in 1992, when SWA acquired Morris Air, an airline he founded in 1984 at the age of 25. Morris Air was a low-fare airline that pioneered many of the activities, such as e-ticketing, that later became standard in the industry.

When Neeleman designed JetBlue, he improved upon the SWA business model to enable his new company to provide tickets at even lower costs than SWA. JetBlue reproduces many of SWA’s cost-reducing activities such as flying point-to-point to directly connect city pairs. It also predominantly uses one type of airplane, the Airbus A320, to lower its maintenance costs. In addition, JetBlue flies longer distances and

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