JetBlue airlines’

Unit VIII Project

Introduction

            In business, it is crucial to strike a balance between obtaining high revenues and charging affordable prices. Cheap prices are mostly associated with low revenues. It is, therefore, commendable when a business manages to offer affordable and quality services while maintaining high-profit margins. This is the case with JetBlue Airways Corporation. The airline has managed to be a low-cost airline while still being the sixth-largest based on the number of passengers flown (David and David, 2016). Attaining this feat in the face of stiff competition associated with the industry requires proper management and employees guided by a strong mission. A look at the internal and external issues shows the challenges that the corporation deals with as well as the factors that contribute to its success.

Internal Issues

Internal issues within JetBlue Airways Corporation include their organizational structure, vision/mission, finances, and segments. The airline’s structure consists of the Chief Executive Officer who has eight top executives working under him. These include the Chief Financial Officer, Chief Accounting Officer, and Chief Information Officer. Other top positions include the founder, David Neeleman, the President, and the Chairman. Additionally, there are Executive Vice Presidents (EVPs) for operations, people, commercial and planning, corporate affairs, and customer experience. The corporation’s mission is to provide superior service in every aspect of their customers’ air travel experience (David and David, 2016). On matters of finance, the company has managed to increase its income considerably. In the financial year 2018 ending December 31, JetBlue managed an operating income after tax of $590 million. However, this was a step down from the previous year, which reported an amount of $658 million after-tax (JetBlue, 2019). The return on invested capital was also commendable at 8.6% for the year 2018. The corporation’s revenue as of 2018 exceeded $7.6 billion, which secured it the 399th spot in the Fortune 500 list of companies–a comprehensive annual list that ranks the 500-largest US corporations based on their fiscal year’s revenue (JetBlue, 2019). Another internal issue is segments. JetBlue has two segments which include revenue from passengers and ancillary amenities. Additionally, the airline introduced baggage fees in 2015, further increasing its revenue.

External Issues

External issues faced by the airline include market segmentation, airline pollution concerns, airline taxes, hoarding cash by airlines, and domination of the industry by mergers. When it comes to segmentation, passengers are generally divided into several groups including coach, first-class, business class, and freight (David and David, 2016). Notably, coach passengers account for up to 80% of the revenue. Another external issue is the hoarding of cash by airlines. It is common for airlines to keep substantial cash balances in fear of economic downturns. Airline pollution is a major concern in light of the increased greenhouse effect. Several measures such as the use of biofuels have been suggested but not fully adopted. Some of the other measures such as baggage fees tend to be costly for the passengers with few results (David and David, 2016). An increase in airline taxes is constantly proposed by various administrations. Such increases are aimed at improving the airline industry and raising federal revenue. However, this tax is passed down to the passengers who bear the burden. Another external issue facing JetBlue is mergers dominating the industry. Such mergers reduce competition and are hence able to raise ticket prices, a great disadvantage to the passengers.

Competition

JetBlue faces stiff competition from other airlines. Although the corporation has managed to grow and increase its revenue, it is still no match for bigger airlines such as American Airlines, Delta, Southwest, and United Airlines, which take a much larger market share. Key metrics used in the comparison of airlines include the number of employees, revenue, the net income, and market capitalization (David and David, 2016). The company uses its financial statements as the tools for measuring success, mainly the statement of comprehensive income and the balance sheet. By comparing the financial results of the current and previous year, the management can make decisions about the future of the company.

The Future Outlook for the Organization

            JetBlue airlines’ management has several plans for the future. The airline has been operating mainly on the east coast of the US. However, they plan to expand services to Europe (JetBlue, 2019). This move will be accompanied by the introduction of Airbuses suitable for the long flight. The airline’s management hopes to take advantage of the market gap created by mediocre services offered by some of the European Airlines. If successful, then this is a move that will see JetBlue rise from the sixth-largest airline in the US to compete with dominators of the industry such as Delta Airlines (David and David, 2016).

Conclusion

JetBlue airlines, has both internal and external issues that it faces. Some of the internal issues include their organizational structure, segments, finance, and vision/mission. External issues, on the other hand, include pollution by airlines, hoarding of cash by major players in the industry, mergers which reduce competition, and airline taxes. Additionally, the corporation faces stiff competition associated with the industry. Despite all these issues, the company has managed to be among the top airlines and headed for a great future.

References

David, F. R., & David, F. R. (2016). Strategic management: A competitive advantage approach, concepts and cases. Pearson.

JetBlue (2019). JetBlue Announces Q4 2018 Results. Retrieved from http://blueir.investproductions.com/investor-relations/financial-information/quarterly-results/24-01-2019