JetBlue

JetBlue: Starting from scratch

Company Background

• Established in early 1999• Founded by David Neelman• Initial investment - $130 million• Best funded startup in US aviation history• “ We like to think of ourselves as customer advocated. We

believe that all travelers should have access to high quality airline service at affordable fares.”

Strategy

• Build on the Southwest Airlines model• Use of technology to improve passenger experience and

increase employee and aircraft productivity• ‘Paperless’ airline• Use new airplanes, offer great personal service, create state

of the art revenue management system, single class of service• Fares averaging 65% less than competition

Top Management • David Neelman, Chairman and CEO - Saltlake City, Utah and

Westchester, NY• Thomas Kelly, Executive VP and general counsel – Saltlake City, Utah• Dave Barger, President and COO – Manhattan, NY• John Owens, CFO – Darien, Connecticut• Ann Rhoades, Executive VP (HR) - Phoenix, Arizona• “Create something new, unencumbered and fun”• “Chance to do it right from the start”

JetBlue: Critical Decisions

• Where would the new aircraft be based?• What type of aircraft would it fly?• How efficiently could JetBlue leverage technology?• How to deliver a low-cost service experience to

customers?

Critical Decisions: Home Base• JFK Airport, NY• Pros

• Under-served routes to New York City • Slot control only from 3 PM to 8 PM – otherwise underutilized• Potential 2.5 million population living within 10 miles• New space opening up in Terminal 6

• Cons• Heavily used and slot controlled• Costs - Need to purchase departure slots from existing airlines

• Strategy – Secure revenue base of approximately $60 million revenue, no congestion issue

Critical Decisions: Aircraft Type

• Boeing 737 vs. Airbus A320• Why Airbus?

• Fuel efficient• Better cabin technology• Wider cabins• Extra inch per seat• Loved by passengers

Critical Decisions: Operations• ‘Paperless’ airline• Laptops provided to pilots preloaded with flight and operating manuals• Self pre-flight checks by pilots in 4 minutes• Computerized maintenance logs• Used technology to achieve “perfect 30-minute turnaround” – improved

aircraft utilization beyond 13.5 hours per day• 0.6 complaints (avg. 2.9) per 100,000 passengers• 80% on-time flights (avg. 74%)

HR: Values

• Safety• Caring• Integrity• Fun• Passion

• Part of Blue Book given to all employeess

HR: Non Union Environment

• “We need to daily create the positive environment to keep this place union-free. We don’t need unions. If our people think we need unions, boy have we failed.”

HR: Customized employment packages

• No probationary period• Options for flight attendants• Option 1

• 1-year employment contracts• Medical coverage + $500 per month of additional pay – young people

• Option 2• Job sharing for 2 people• Balance between work and family responsibilities


• Option 3• Full time flight attendant position• $20 per hour (upto 70 hours per month) – the highest in the

industry• $30 per hour (more than 70 hours per month)• Pay does not increase with seniority


• Outlying airports – part time employees• Medical, 401k and profit sharing benefits• Double pay for working on holidays• Pilots

• Paid industry average• 20 days off per year• Stock options


• No central reservation center• Agents

• Minimum 20 hours per week @ $7.5 per hour• $1 per hour extra to take calls when needed

• Waiting list of 2500 interested applicants• “People don’t complain when they have a choice”

HR: Hiring Policies

• Behavior in line with 5 company values• Pilots – high comfort level with computers and cultural fit• Happy pilots helped recruit friends from competing

airlines• Pilot training investment approx. $38,000 per pilot

Other HR Practices• Emphasis on initial orientation• Three things to be successful

• Show up and be productive• No drugs or alcohol allowed• Customer oriented

• 320 degree performance management process• Avoid culture of blame• Power of language – “Crew members” (employees), “Coaches”

(supervisors), “Customer” (With a capital C)

Case Problem

• Maintain success through long periods of sustained growth

• Intended growth trajectory• Twelve months• Ten new aircrafts• Recruitment of 1000 new employees• 900 pilot applicants in 2001/02/03• Target - 5000 new employees by 2004

Case Analysis

Case Solution

Documents

JetBlue