Jet Blue in Recent Years, Case Study

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This came as result of the firm's cost-cutting efforts after it lost $85 million in 2008 amid the start of the downturn and skyrocketing fuel prices. The company had also turned a profit in 2007 (MSN Moneycentral, 2010). Clearly, the company has been able to adapt to its circumstances and meet its financial objectives. Revenues, however, shrunk in 2009, no doubt as the result of cutting routes in order to trim costs.

JetBlue does not derive a competitive advantage from its cost structure. The reason is not that JetBlue has poor control over its costs, because it does. The reason is that other discount airlines follow the same policies and achieve the same results -- the competitive advantage JetBlue may once of have on cost was not sustainable and now other airlines match their cost-cutting efforts. Organizational structure does provide JetBlue with some advantages. The firm is able to control its costs well, and make route adjustments where necessary as the result of its organizational structure. These advantages are also not sustainable.

The most sustainable element of JetBlue's competitive advantages is the corporate culture. JetBlue aims to provide a high level of service along with the discount flight cost. Both a low cost strategy and a high customer service tactic require a strong corporate culture. The company's employees need to be jointly committed to cost cutting as a way of life and the delivery of high levels of customer service. It is too easy to sacrifice service in the name of cost-cutting, but JetBlue has not taken this approach. An example would be the JetBlue Customers' Bill of Rights, which is a significant statement of intent from the company that compels its employees to live up to the high service standards set therein.

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JetBlue has set relatively modest strategies for the coming years. The company intends to reduce hedging and make small adjustments to its routes. This comes as a response to the uncertain operating environment. While the price of jet fuel is expected to only rise slightly, the company believes that fuel cost certainty can be achieved with less hedging than has been undertaken in the past. The continued economic weakness in the U.S. is expected to suppress demand for fuel, keeping price increases moderate for the coming year. This strategy is likely to succeed, unless a strong rebound in the economy sends fuel demand soaring. Even with that, JetBlue would see increased revenues that may offset the impacts of its relatively low level of hedging.

With respect to routes, cost control and other strategic elements, JetBlue is in a holding pattern. The company is making very few changes. In addition to being a very easy strategy to execute, this is also a good strategy for the coming year or two. The economy is expected to make a slow recovery, which will limit the number of new opportunities for the company. JetBlue has already made significant cost cuts, and is now in a position of making steady profits while waiting for the economy to improve so it can begin the next phase of its expansion.

There is no evidence to suggest that either of JetBlue's core strategies will not be a success. The company is facing a difficult operating environment but nevertheless turned a profit in 2009. By remaining calm and awaiting the right opportunity, while making small changes to the hedging strategy and route selection, JetBlue is making the right choice.

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