Why does JetBlue want to go public too early and during the worst period of the airline industry? Management: JetBlue, the low-fare airline has a skilled management team. David Neeleman, the CEO, has extensive experience with airlines start-ups: managed low-fare flights developed the e-ticketing system when working with a couple of other airlines including Southwest Airlines. JetBlue has a modeled its business similarly to Southwest which is very profitable. It has also developed a strong brand based on a high quality of customer service and low-fare air tickets.
Noticing the lack of services from other airlines in the “low cost” field, it took over the new market with unbeatable prices “up to 60% in savings compared to the competitor” as mentioned in the article. To maintain its position, the company also built good partnerships with travel agencies and worked them out as a second-option selling channel with complementary purchasing conditions for customers without credit card, for example. Consequently AirAsia expanded its reach and kept increasing in the market. The macro environment factors that have influenced the strategy developed for AirAsia are mainly economic, political and technological aspects. By the time Tony Fernandes´s airline was founded, the Malaysian population were passing over a “curious” moment; although a growing economy and rising incomes, the population couldn´t enjoy flying that much because of unaffordable prices practised for the national carrier.
Ancillary revenues, which accounted for 20.3% of company’s total operating revenue in 2009, led to increase sales, while reducing unit costs (Johnson et al.). Even though all these imposed fees usually work in Ryanair’s favor, there are examples where series of charges make company’s flights more expensive than the closest rivals (Sunday Times). In order to keep the biggest market share some of the fees have to be withdrawn as the price burden might become just too big. Ryanair CEO Michael O’Leary is that rare value, with huge enterprise and business knowledge, which made company so successful. Under O'Leary's management, Ryanair thoroughly developed the low-cost model originated by Southwest Airlines (CNN).
Ryanair’s objective was to firmly establish itself as Europe’s leading scheduled passenger airline through continued improvements and expanded offerings of its low-fares service. They aim to offer low fares that generate increased passenger traffic while maintaining a continuous focus on cost-containment and operating efficiencies. Some of the strategies that Ryanair targeted was increased focus in low fares, customer service, frequent point-to-point flights on short-haul routes, low operating costs, and enhance the operating results through ancillary services (20F). These strategies, set forth by top management attacked every area that would contribute to the success or failure of the company. So far, Ryanair has been able to successfully accomplish many, it not all of these strategies by various means.
High cost of entry into industry Potential Competitors: Low - Rivalry among existing firms is intense, which affect the profits to be low. It¡¦s unattractive to the potential competitors. - High initial investments and fixed costs such as lease a fleet of safe and reliable aircraft, negotiate reasonable gate access and landing fees as well as high labor and fuel costs. - There are the price competitions in the airline industry, which some major airlines offer the low-price fares that is very difficult for new entrants to gain enough profit to cover the investment and fix cost in this industry. Rivalry among Existing Firms: High - Currently, there are many major airlines such as Delta, United and American that exist in the same market as Jet Blue.
Most airline customers travel for vacation or holiday, and plane fares are a more important criterion rather than product/service differentiation between the airlines. New entrants may be not be able to provide customers with lower rates. Established airlines are also able to provide better fare discounts for regular passengers (mostly geared towards retaining loyalty from business travellers). The huge capital needed to enter into the airline industry is a high barrier to clear for new entrants. The computerized system for online reservations that are used by travel agents or ticketing offices was developed by the already established airline companies.
Management used the fall in air traffic to their advantage by serving the needs of a new niche market, people who want basic service at a good fair, not luxury. They accomplished this by cutting cost and raising efficiency using a single fleet, secondary airports, and fast turnarounds. Also, they simplified operations and cut cost, such as cleaning crews and some amenities. • Identify three points at which managers changed what the organization does and how it works. It changed its business strategy several times, finally deciding to serve a group of flyers who wanted a functional and efficient service, rather than luxury.
INVESTMENT, PRICING & STRATEGY ANALISIS For the last years Airborne Express has shown that it is possible to compete with the big competitors that have powerful funding and influence in the industry. We have been able to compete with FedEx and UPS by becoming the low cost provider of air express service. Industry has shown to be moving toward decentralized structures and intense technology reliability. Operations Airborne Express biggest advantage in the competitive market is its low cost operations. We are the only express service to own an airport which allows for flexibility on operations and the infrastructure and saving the cost of landing or service fees.
JetBlue's core strategy is to “provides high-quality customer service at low fares primarily on point-to-point routes" (“JetBlue”, 2005). Offering alternative choices to customers such as point-to-point routes to areas that are not catered to by most airlines as well as large metropolitan areas that have had” high average fares” is another part of their strategy. Differentiating their product and service is another part of the plan. Items like new aircraft, leather seats, free LiveTV at every seat and pre-assigned seating are just a few things that make JetBlue different (“JetBlue”, 2005). I would say that JetBlue would fall under both customer intimacy and product leadership customer value proposition.
In doing so, Classic will come closer to meeting the company’s goal of increasing shareholder wealth and global growth. The purpose of this paper is to facilitate management’s decision on how to implement the required changes to keep the company on the leading edge of aviation innovation. By addressing Classic’s situation, shareholder perspectives, end-state vision, and accurately defining the problem, the paper will provide a reasonable foundation for making the necessary decisions. Describe the Situation Issue and Opportunity Identification Classic’s Rewards Program is failing to attract new customers and failing to retain current customers. A 19% measured decrease in the number of new members and a 21% decrease in flights per new members highlight the level of dissatisfaction.