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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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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Growth and Expansion

JetBlue was founded during one of the most turbulent times in the history of civil aviation in the US. The September 11, 2001 terrorist attacks had hit the industry hard and many of the major airlines had either gone into bankruptcy protection, or were on the verge of doing so.

In 2001, JetBlue planned to launch an IPO to fund its expansion plans. The IPO had to be postponed in light of the terrorist attacks, but JetBlue continued with its expansion plans using its share of the $15 billion bailout ($5 billion in direct compensation and another $10 billion in loan guarantees) the US government granted to the aviation industry, and a fresh infusion of funds from its original investors...

Turbulent Times

JetBlue's performance in all the quarters of 2005 was considerably poorer than the corresponding quarters of 2004, and in the fourth quarter of 2005, it posted a quarterly loss for the first time since its IPO. JetBlue ended the year with its first annual loss of $20 million on revenues of $1.7 billion...

The Return to Profitability Plan

In April 2006, soon after announcing the first quarter loss, Neeleman and Barger announced a recovery plan for JetBlue called the 'Return to Profitability' plan (RTP). The main aims of the RTP were revenue optimization, improved capacity management, cost reduction, and retaining the commitment to deliver high quality service on every flight.

As a part of the revenue optimization goal, JetBlue announced that it would reduce the number of long-haul flights and shift its focus back to short to medium routes...

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