JetBlue Airways: Growing Pains?

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Case Details:

Case Code : BSTR277
Case Length : 18 Pages
Period : 2000-2007
Pub Date : 2008
Teaching Note : Available
Themes: Business Strategy
Organization : JetBlue
Industry: Aviation
Countries : USA

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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A Change of Guard at Jetblue Contd...

The airline's slow reaction to the adverse weather had left thousands of passengers stranded at the airports.

In addition to having serious financial repercussions, this fiasco harmed JetBlue's image as a customer-friendly airline and tarnished its reliability record. Analysts greeted the leadership change positively.

For several years after it was set up, JetBlue had been one of the most successful airlines in the US, rivaling Southwest Airlines (Southwest)⁴ in profitability and growth. However, it began facing various problems, both internal and external, in 2005-2006.

Several analysts were of the opinion that JetBlue's growth in its early years had been too fast and unsustainable in the longer term, and that it was because of this that things started to come undone at the airline when the business environment changed.

Background

Business plans for setting up JetBlue were developed by Neeleman, along with his lawyer Tom Kelly, in 1998. Neeleman raised $160 million⁵ in capital from top investors like Weston Presidio Capital, J.P. Morgan Partners, and Soros Private Equity Partners, and founded the airline in February 1999.

In September 1999, JetBlue was awarded 75 landing and takeoff slots at the John F. Kennedy International Airport (JFK) in New York, which was to serve as its base...

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4] Southwest Airlines, set up by Herb Kelleher in 1978, was the pioneer of low cost airlines in the US. The airline was headquartered in Dallas, Texas, and was known for its profitability record (it had posted profits for the 34^th consecutive year in January 2007).

5] Eryn Brown, "A Smokeless Herb JetBlue Founder David Neeleman…,"Fortune, May 28, 2001.