Managing Growth

Question 1

How would you describe JetBlue's

operations strategy prior to the
November 2005 adoption of the E190?
 Offer low fares (65% lower than legacy competitor) and point-
to-point model.

 Connecting Large, typically northeastern, US cities and more

long haul flights.

 Single type of plane, its fleet consisted entirely of A320.

 Reservation policy – tickets to be purchased via company’s

website or through part-time employed reservation agents.

 Differentiation to other LCC: Comfort features such as

assigned seats, leather upholstery, and satellite TV on individual
screens in every seat.

 Key operating principle was that flight cancellations should be

avoided at all cost.
 Question 2
Compare the economics of the E190
and A320 for JetBlue.
What are the key drivers of
profitability for each type of plane?
• Compare CASM, E190 is 12% higher than
A320, 34% less than typical RJ. Compare
revenue available seat mile (RASM), E190 is
higher than A320. From Exhibit 9, we could
calculate E190 RASM is about 30% higher than
A320.
 Key drivers of profitability of E190
 Cost per available mile (CASM) for E-190 is 34% less than that for a
typical Regional Jet (RJ).
 Owing to greater range and seating capacity relative to RJ’s E-190 could
target wider range of profitable destinations.
 Higher utilisation of 10 to 11 hours a day compared to an average of 8
hours per day for RJs.
 Higher RASM, easy to get breakeven point because of the low capacity of
passenger. (break even load of 75% to 80% was much lower on E-190 than
A320).
 Lower acquisition costs. ($30-40 Million).
 Increase the range of choices available to JetBlue passengers by feeding
customers to connecting A320 flights.
 Transfers at focus cities would also improve the utilization of existing
airport facilities, increasing productivity and reducing downtime for airport
crew members.
 Key drivers of profitability of A320
 Lower CASM. (E-190 operated at 12% higher CASM).

 Larger capacity. (150 against 100 of E-190).

 High fuel efficiency.

 Medium & Long-haul routes.

 Standardized training & Servicing Processes: A320 was a

proven plane that had served as basis for JetBlue’s operations.
The company had developed a high level of comfort with it.
 Question 3
Do you agree with JetBlue’s decision
to add the E190 to its fleet?
Be prepared to state the rational for
your decision.
 Yes, We agree
 Since E190 feed customers to connecting A320 flights, it resulted in
higher loads and improved economics for JetBlue.

 Transfers at focus cities would also improve the utilization of existing

airport facilities, increasing productivity and reducing downtime for
airport crew members.

 This synergy between the E190 and A320 resulted in utilization of

E190s of 10 to 11 hours a day, significantly more than average of 8
hours per day for RJs.

 Number of passengers required for a flight to meet the typical

“breakeven” load of 75% to 80% was much lower on the E190 than the
A320, E190 made it easier for JetBlue to introduce service in new
markets.
 Question 4
How should JetBlue slow down the
growth of its fleet?
Should it cut growth in A320 capacity,
E190 capacity, or both?
 JetBlue should slow down the growth of its fleet.

 This cut should be across both in A320 and E-190 planes.

 Reasons:

 E190 as a unique plane that could be used as an engine for future

growth.

 A320 is a proven aircraft around which JetBlue had standardized

its training and operating activities.

 In addition, E190 and A320 could inter-activate utilization. So it

is not fit to cut growth in only A320 capacity or E190 capacity.
THANK YOU