CONFIDENCE IN AIRLINE PERFORMANCE IN DIFFICULT MARKET CONDITIONS: AN ANALYSIS OF JETBLUE'S FINANCIAL MARKET RESULTS

Journal of Air Transportation, 2005 by Flouris, Triant, Walker, Thomas

JetBlue's strategy is to combine common sense with strategic and operational innovation through the use of the most appropriate technology to "bring humanity back to air travel" (Gittell & O'Reilly, 2001, p. 2). To accomplish this, JetBlue aimed to be one of the first completely paperless airlines, deploying information technology for every single aspect of its operations from flight operations and maintenance to ticketing and reservations. The two pillars of JetBlue's strategy are efficiency and service. According to its founder, David Neelman, "We like to think of ourselves as customer advocates. We believe that all travelers should have access to high quality airline service at affordable fares" (Gittell & O'Reilly, 2001, p. 2). JetBlue's hub city, New York City, represents a very large population center at the heart of several underserved markets. More specifically, New York City lacked the service by a low-cost carrier; therefore, fares were, on average, quite high and its true traffic potential unrealized. JetBlue chose JFK, a slot controlled and heavily used airport, as its hub, which was quite an unconventional choice for a low-cost, start-up carrier that would normally opt for a smaller airport as its basis of operations. When JetBlue moved to JFK, the slot controls were only in effect from 3:00 p.m. to 8:00 p.m., while the rest of the day JFK was underutilized. Furthermore, more terminal space was opening up at the airport due to TWA's reduction of operations at JFK. Thus, JetBlue was able to secure slots, through political concessions, without going through the process of purchasing them from one of the airlines already holding these slots.

JetBlue operates a single-type aircraft, the A320 series made by Airbus Industries. Through the use of a single-type aircraft, JetBlue realizes operational savings in the areas of maintenance and crew training. Every JetBlue mechanic can work on any aircraft and every pilot can fly any of JetBlue's planes. JetBlue's operational strategy includes quick aircraft turnarounds, which help in improving operational performance and, thus, efficiency by maximizing aircraft utilization. JetBlue keeps its planes in the air longer than any other airline, more than 12 hours a day. Only SWA comes close to this, with about 11 hours of block time.

JetBlue's cost per available seat mile in 2002, seen on Figure 1, was 5.3 cents. This was the lowest in the U.S. airline industry. For example, the cost for US Airways was more than double (11 cents), United 10.4 cents, and American 9.2 cents. These three topped the chart and two of them (US Airways and United) filed for bankruptcy protection under Chapter 11 in the months following 9/11. The cost for Northwest was 8.2 cents and Continental 7.9 cents, the two conventional-cost airlines that we used for the baseline comparison. SWA had the second lowest cost per available seat mile to JetBlue with 6.3 cents.

JetBlue has built its corporate culture, discussed on its Web site at http://www.jetblue.com/workhere/culture.html, around five core values: Safety, Caring, Integrity, Fun, and Passion. The airline is non-unionized. This is quite an unconventional practice in the U.S. airline industry, 80 percent of which is unionized. JetBlue follows a customized human resource management approach that tailors jobs, pay, and benefit packages to the different needs of distinct employee groups rather than the more conventional, universal type human resource management system.