...Case #3 Jet Blue Airways A Cadre of New Managers Takes Control Strategic Management BUS 599 051*VA016*1122*001 Dr. Russell Handlon January 15, 2012 Case 3: Jet Blue Airways Question 1 Discuss the trends in the U.S. airline industry and how these trends might impact a company’s strategy. The trends in the United States airline industry is high prices on gas, oil, maintenance, risks of terrorism, and less travelers flying rather its for personal or business. When these things happen it costs the airlines to make some changing by charging customers for checking their luggage, food, pillows, blankets, and leisure entertainment in order to meet the high spending cost of the airline business. Some airlines had to change their flight schedule to meet the needs of the customers during high peak time in popular vacation spots or other locations customers like to fly too by charges them lower fares. Some airlines have is shortage of pilots because the school of flying does not have enough instructors to train new pilots (Thompson, Strickland, & Gamble, 2010). Question 2 Discuss Jet Blue’s strategic intent. The founder of JetBlue Airway is David Neeleman, he wants to “bring humanity back to air travel.” Mr. Neeleman announced JetBlue’s “Passenger Bill of Right” is a policy for United States airline companies regarding vouchers, refunds in case of delays, cancellations, and other inconveniences (Thompson, Strickland, & Gamble, 2010). JetBlue Airways exists to...
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...Question I 1. Types of information system used [4] In this study case, JetBlue uses the Transaction Processing system, which is a computerized system that performs and records the daily routine transactions necessary to conduct the business. 2. Business function of information system [8] JetBlue has the ability to provide a luxurious flying experience with leather seats, each equipped with personal TV screens, while at a budget price. Some airlines have to invest heavily in the quality of service that they offer, both on the ground and in the air. Ticket-less travel, new interactive entertainment systems, and more comfortable seating are just some of the product enhancements being introduced to attract and retain customers. JetBlue is now ahead of the game due to the initiative that it took and by using the information systems to automate key processes, such as ticket sales, and baggage handling. By using the Transaction Processing system, JetBlue was able to create “paperless processes”. Question II 1. Description of JetBlue’s business model [4] JetBlue airline is lauded for its lean operating structure. The company lived up to “paperless processing” by directing its customers to do most of their transaction online, and only dealing with employees when there is an issue. They offer low fares and point-to-point rather than a network service, and are focused on second-tier airports rather than going head to head against established hub. 2. Uses of information systems...
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...------------------------------------------------- MARKETING ------------------------------------------------- CASE ANALYSIS JETBLUE * SYNOPSIS This case illustrates the success that JetBlue Airline has achieved since founded in 1999, though it had trouble in 2007 during Valentine´s day and a few more, it managed to overcome the issue and become one of the most known companies for excellent customer service. The author mentions that JetBlue truly cares about the customer because JetBlue doesn´t sell just airplane tickets and its customers neither seek for airplanes tickets when buying at JetBlue. They buy the whole experience in which each detail included in the service made the customer feel special with things such as ´´legroom seats´´, plenty of food and drinks and a zone for entertainment which seeks to satisfy the client while they wait for their flight even though if its delayed among other tangible elements that the company offers. All the actions of JetBlue are encouraged to reflect their slogan “Happy Jetting”. Furthermore, another topic highlight in the case is the culture that the company professes, the way they treat each other, “the human side of the equation”. An example of this is the opportunity to workers to do their job from home. Employees are so satisfied with the company that they care for it, which reflects in how they do their job and their attitude towards clients. As the CEO communicated, “everything can be copied, except the culture”. All this combination...
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...University of Law and Economics Case Study 26 “JetBlue Airways IPO Valuation” Lecturer: Kou Lim Hong Prepared By: 1. Ms. Khoun Davy 2. Ms. Khoun Dalin 3. Ms. Chiem Sothana 4. Mr. Soksithika 5. Mr. Oag Sothearith 6. Mr. Mov Vandara MFM, Group 2 team 6 2011-2012 Outline of The Presentation I. II. Introduction of Case Study Main Problem III. Literature Review IV. Case analysis V. Conclusion Outline of The Presentation I. II. Introduction of Case Study Main Problem III. Literature Review IV. Case analysis V. Conclusion Introduction of Case Study JetBlue Airway Background JetBlue airways are a low cost airline established in July 1999 by David Neeleman. David Neeleman was experienced in the operations of airline and start up airlines. The airline was to provide new levels of service in the airline travel industry, concentrating on customer service and low fares. Introduction of Case Study JetBlue Airway Background David Neeleman plan was to commit to innovation in people, policies and technology to keep the companies planes full and thus the company profitable. To ensure this goal and the company’s future David Neeleman assembled and impressive management team and group of investors. JetBlue’s COO was to be David Barger ex-vice president of Continental Airlines. John Owen who was executive vice-president and treasurer of Southwest Airlines agreed to become JetBlue’s CFO. Introduction of Case Study JetBlue Airway Background David Neeleman...
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...JETBLUE AIRWAYS IPO VALUATION Teaching Note This case examines the April 2002, decision of JetBlue management to price the initial public offering of JetBlue stock during one of the worst periods in airline history. The case outlines JetBlue’s innovative strategy and the associated strong financial performance over its initial two years. Students are invited to value the stock and take a position on whether the current $25–$26 per share filing range is appropriate. The case is designed to showcase corporate valuation using discounted cash flow and peer-company market multiples. The epilogue details the 67 percent first-day rise in JetBlue stock from the $27 offer price. With such a backdrop, students are exposed to one of the well-known finance anomalies—the IPO underpricing phenomenon—and are invited to critically discuss various proposed explanations. The case provides opportunities for the instructor to develop any of the following teaching objectives, • Review the institutional aspects of the equity issuance transaction. • Explore the costs and benefits associated with public share offerings. • Develop an appreciation for the challenges of valuing unseasoned firms. • Hone corporate valuation skills, particularly using market multiples. • Evaluate the received explanations of various finance anomalies, such as the IPO underpricing phenomenon. Study Questions 1. What are the advantages and disadvantages...
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...Module 3 Discussion Read Case 4-1 (“JetBlue Airways: Regaining Attitude”) in Corporate Communication and respond to the following: •Clearly and concisely identify what was the most significant business problem JetBlue faced and support your claim. •Assess and identify the critical constituency issues. •Articulate what you believe are the three most desirable outcomes. •Discuss at least three communications best practices implemented by JetBlue. Post your initial response to the discussion question no later than Thursday 11:59 PM EST/EDT. Post responses to at least two classmates no later than Sunday 11:59 PM EST/EDT The most significant business problem JetBlue faced during the 2007 crisis was inadequate communication. In this case JetBlue CEO David Neeleman stated, “Among the primary culprits: inadequate communication protocols to direct the company’s 11,000 pilots and flight attendants about where to go and when; an overwhelmed reservation system; and a lack of cross-trained employees who could work outside their primary area of expertise during an emergency” (Argenti, 2011, p.105).JetBlue spokesperson Sebastian White stated, “We thought there would be these windows of opportunities to get planes off the ground, and we were relying on those weather forecasts” (Argenti, 2011, p.104). This risk taking by JetBlue ultimately lead to several critical constituency issues. Nine JetBlue jets were forced to sit idle on the tarmac for more than six hours....
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...Strategies for Growth and Value Creation Case Analysis: JetBlue – Managing Growth Prepared by, Alexander Martinus Christian (1342980602) Dina Sandri Fani (1342981574) Muhammad Irsan (1340001263) Puntin Kulmongkon (1342980514) BINUS BUSINESS SCHOOL BINUS UNIVERSITY JAKARTA 2015 I. Case Synopsis JetBlue Airways, Inc. (JetBlue) is a low-cost carrier (LCC) that is based in New York’s John F. Kennedy International Airport. The founder, David Neeleman, developed JetBlue’s business plans in 1998, and established the company in February 1999 after raising the needed financial resource to create the airline. JetBlue started its operations in February 2000, with its first flight from JFK to Fort Lauderdale airport in Florida. The September 11, 2001 terrorist attacks caused a very devastating time for the airline industry. Even though this occurred only a year after JetBlue started as a LCC, the company was one of three airlines to produce a profit at the end of 2001. Their performance in this year alone showed many other airlines that JetBlue was a big competitor in the airline industry who couldn’t be ignored. In the following years JetBlue grew substantially as one of best-rated airlines in the industry for customer satisfaction. In May 2007, JetBlue now decides to change its command structure. David Neeleman is being replaced by David Barger, former chief operating officer (COO) and president of the company, as chief executive officer (CEO). After gaining...
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...Memorandum TO: FROM: DATE: September, 27 2013 RE: One-Page Memo on JetBlue Case Study The purpose of this memorandum is to discuss the JetBlue case study, and review my answers to the specified questions. I will elaborate as to which price I believe JetBlue should choose for their initial public offering (IPO), and why JetBlue should choose that price. The first step in determining JetBlue’s IPO price is analyzing specific ratios of publicly traded competitors in JetBlue’s industry. I analyzed the Price-to-Earnings multiples, Cash Flow multiples, Total Assets multiples, and the Revenue multiples of the direct competitors of JetBlue. JetBlue’s direct competitors include; AirTran, Alaska Air, American West, MidWest, and Southwest. JetBlue’s relative stock prices are as follows: |JetBlue's Stock Prices Implied By Different Multiples | |Airline |P/E Multiple |CF Multiple |TA Multiple |Revenue Multiple | |AirTran |$36.41 |$23.71 |$45.20 |$9.24 | |Alaska Air |$47.23 |$27.64 |$30.69 |$8.92 | |American West |$29.04 |$30.82 |$26.24 |$8.39 | |MidWest |-$15.60 |-$11.42 |$39...
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...JET BLUE - CASE STUDY EBS 5103 STRATEGIC MANAGEMENT Analyzing Strategic Management Cases “JETBLUE AIRWAYS” UFUK CANDAR FOYA BAHÇEŞEHİR UNIVERSITY Table of Contents INTRODUCTION 3 BRIEF SUMMARY 3 ENVIRONMENTAL ANALYSES: 4 VALUE CHAIN ANALYSIS: 10 FINANCIAL ANALYSIS: 13 SWOT ANALYSIS: 19 SPACE MATRIX: 21 TOWS MATRIX: 24 QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM): 25 CONCLUSION: 26 INTRODUCTION Within case analysis assignment, the JetBlue case is analyzed strategically in this document to set answers for following basic questions: * To make a set of recommendations based on the analysis, * To describe exactly what need to be done for success, * To explain why the proposals will solve the problems, * To suggest how best to implement the proposed solution After giving a brief summary regarding the case of JetBlue has and drawing a general picture of the company, several strategic analysis methods will be used to analysis JetBlue. BRIEF SUMMARY The economic downturn in the late 1990s and 9/11 terrorist attacks in 2001 have severe consequences on airline industry. The demand for air travel dropped and led to decrease in flights and revenue. The security costs increased. Airlines significantly reduced capacities. As a result low-cost strategies with new route services became important. Rebounding of economy by the end of year 2003, the demand for business and leisure travel was expected to grow in low-cost competition...
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...ead Case 4-1 (“JetBlue Airways: Regaining Attitude”) in Corporate Communication and respond to the following: Jose Elizondo Discussion Question #3-JetBlue Saint Leo University Dr. Rose November 5, 2014 February 14, 2007 marked a turning point for Jet Blue and their commitment to one of their core values and building blocks: guest experience. Since their inception in 1999, Jet Blue experienced a level of success unprecedented in the airline industry. Build on the foundation of “bringing humanity back to air travel. Its founder David Neeleman focused on exceptional customer service, extended leg room and free satellite TV feeds in every seat. By 2005, JetBlue ranked highest among all airlines. The customer experience in turn resulted in profits for an impressive 16 consecutive quarters. On February 14, 2007, JetBlue made the executive decision to stay true to their values of a customer experience by keep flights schedules on time even though weather conditions were not conducive to flying. Unfortunately, this strategy did not go as intended and resulted in extremely irate customers and a potential loss of $45 million between cancelled flights and flight vouchers to impacted customers. So what went wrong? JetBlue was not experienced and prepared in multiple crisis management strategies to deal with the influx of customer questions and concerns. This lead to minimal communication to their customers as they would not be able to reach any of the reservation agents due...
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...Jet Blue In February 2000, JetBlue started flying daily to Fort Lauderdale, Florida, and Buffalo, New York, promising top-notch customer service at budget prices. The airline featured new Airbus A320 planes with leather seats, each equipped with a personal TV screen, and average one-way fares of only $99 per passenger. JetBlue was able to provide this relatively luxurious flying experience by using information systems to automate key processes such as ticket sales (online sales dominate) and baggage handling (electronic tags help track luggage). Jet Blue prided itseft on its "paperless processes." JetBlue's investment in information technology enabled the airline to turn a profit by running its business at 70 percent of the cost of larger competitors. At the same time, JetBlue filled a higher percentage of its seats, employed non-union workers, and established enough good will to score an impressive customer retention rate of fifty percent. Initially, JetBlue flew only one type of plane from one vendor: the Airbus A320. This approach enabled the airline to standardize flight operations and maintenance procedures to a degree that resulted in considerable savings. Chief information officer Jeff Cohen used the same simple-is-better strategy for JetBlue's information systems. Cohen depended a1most exclusively on Microsoft software products to design JetBlue's extensive network of information systems. (JetBlue's reservation system and systems for managing planes, crews, and scheduling...
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...edition of Barron’s, a tag line in the “Marketweek” column reads, “Airlines and other money-losing companies.” 1 This tag line reflects the intense rivalry and the massive financial losses undergone in the airline industry in the past few months due to the economic recession and the 9/11 terrorists attacks. Amidst this airline industry malaise, however, JetBlue Airlines (”JetBlue”) launched service in February 2000 and generated over $41 million in profits in 2001.2 In this report, we explore the question, “Is JetBlue’s strategy conducive to sustaining profitability?” The answer is a resounding “Yes”. At the one thousand foot level, we believe that even in the unattractive airline industry in which companies try to differentiate on qualities other than price -- but in the end often compete on price -- JetBlue has a unique formula for success. It competes head-to-head with the majors, particularly Southwest Airlines (“Southwest”), on price, cost structure, features, and customer satisfaction. However, the company has carved a niche in which a “live and let live” strategy should prevail. Indeed, a rival attempting to bankrupt JetBlue may well cause more harm to itself than to its target. Airline Industry Overview Background At one time the airline industry resembled the utility industry to the extent that regulators determined what firms could and could not do. In the 1970s, a time of runaway inflation, and rising unemployment, many agreed that something had to change. In 1978 Congress...
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...JetBlue Fuel Hedging Case by Mengni Huang David Niedrauer . 1. the high price of jet fuel at the end of 2011, JetBlue should hedge its fuel costs for 2012. JetBlue’s approach to fuel hedging was to enter into hedges on a discretionary basis without a specific targets. As you can see from Exhibit 1 in the Appendix, it hedged less in 2009 when oil prices were low and increased the percentage hedged again in 2010 and 2011. Dynamic strategies were based on the idea that oil prices followed a mean-reverting process. Ideally, airlines wanted to lock in prices at the low point in the cycle while capping prices at the high end but take advantage of eventual price declines. Besides, the hedge value H is given by the relationship, H = ρ * σ [spot] / σ [futures] where ρ is the correlation between the spot jet fuel price and selected futures contract, σ is the standard deviation, or volatility, of each respective contract. If the price of jet fuel price increases, the hedge ratio will also increase, which means the percentage hedged should be increased. 2. Looking back from 2007 through 2011, heating oil moved closely with the price of jet fuel. The results from question 3 shows that the price of jet fuel moved more closely with price of heating oil than other two fuels. ...
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...COMPANY Case JetBlue: Delighting Customers Through Happy Jetting In 2007, JetBlue was a thriving young airline with a strong reputation for outstanding service. In fact, the low-fare airline referred to itself as a customer service company that just happened to fly planes. But on Valentine’s Day 2007, JetBlue was hit by the perfect storm—literally—of events that led to an operational meltdown. One of the most severe storms of the decade covered JetBlue’s main hub at New York’s John F. Kennedy International Airport with a thick layer of snow and ice. Small JetBlue did not have the infrastructure to deal with such a crisis. The severity of the storm, coupled with a series of poor management decisions, left JetBlue passengers stranded in planes on the runway for up to 11 hours. Worse still, the ripple effect of the storm created major JetBlue flight disruptions for six more days. Understandably, customers were livid. JetBlue’s efforts to clean up the mess following the six-day Valentine’s Day nightmare cost over $30 million dollars in overtime, flight refunds, vouchers for future travel, and other expenses. But the blow to the company’s previously stellar customer-service reputation stung far more than the financial fallout. JetBlue became the butt of jokes by late night talk show hosts. Some industry observers even predicted that this would be the end of the seven-year-old airline. But just three years later, the company is not only still flying, it is growing, profitable, and...
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...Mavis Lei JetBlue Airways IPO Valuation Introduction and Recommendation In July 1999, David Neeleman had announced his plan to launch a new airline company that would bring “ humanity back to air travel” despite the fact that U.S. airline industry had lot failures over the past 20 years. JetBlue had target its strategy and operating philosophy by offering customers low –fares tickets, high performance of customer service, providing new aircrafts and focused on point-to-point service to large metro areas. JetBlue’s operating strategy had produced the lowest cost per available-seat-per-mile of any major U.S. airline in 2001- 6.98 cents versus an industry average of 10.08 cents. JetBlue’s early success was often attributed to his extensive experience with airline start-ups. In 2002, Southwest airline was the pioneer in low-fare air travel. It was also the fourth-largest carrier in America and in the world. JetBlue remained profitable during the recession in the airline industry in the terrorist attacks of September 2001. To support the company’s growth, management was ready to raise additional capital through a public equity offering. With co-lead manager Morgan Stanley, the initial price range for JetBlue shares, was $22 to $24. The demand had excess the supply, 5.5 million of shares planned for the IPO while management had recently filed an increase in the IPO range ($25 to $26). The most recent IPOs among low-fare airlines were of non-U.S. carriers. Ryanair, WestJet...
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