Background information

JetBlue was founded 1998 in Delaware and started its operations in 2000 with its major services in New York the J. F. Kennedy airport, since then the company as joined the global market and operated routes in other countries. The company runs 650 flights a day in 56 cities  in 19 states this has expanded its revenue up to a tune of1.35 billion us dollars thus making it one of the leading airline in United States in the air market. The company has 11000 employees thus making it achieves the best customer service. The company core values are commitment to safety of its customers and the crewmembers, ensures respect between the passengers and crew members, achieving passion this is by striving to meet the needs of passengers and the crew members and integrity this is by honesty demonstration mutual trust and commitment to JetBlue improvement. The company is ranked tenth in the United States airline by traffic.

The company top management is made up of CEO ( David Bager), Rusell Chew and President &COO, Chief Financial Officer, Executive VP and CAO(  Edward Barnes), head of legal department and Ex. VP of corporate affairs( James Hnat), Sr VP of customer services(Rob Maruster).

Problems/ strategic issues

Labor unions contract has been the major complication that the airlines are facing. The labor unions objective is maximizing the welfare of the members thus they end up taking a long period of time negotiating for better remuneration of the members. If the results of the negotiation are below the expectation of the labor unions the labor union officials may result in requesting their members to participation in industrial action

The cost of fuel and consumption has been rising annually this has been due to increased number of flights and increased oil prices. The level of obesity as also contributed to the high cost of fuel and consumption. There is an extra cost of handling obese passengers since the cause the airplanes to consume 350 gallons more of fuel due to the additional weight exerted. The fuel cost may rise further because customers may have more luggage .This additional fuel causes environmental problems since it ejections 3.5 million tons of carbon dioxide in the atmosphere as illustrated by the chart and the table.

 

 

 

 

A chart showing increase in price per gallon

A table illustrating increase consumption of fuel as at 31^st December

	2008	2007	2006
Number of gallons consumed	453000000	444000000	377000000
Total cost of gasoline	$1352000000	$929000000	$752000000

 

Terrorism has been a concern in air security in the United States the congress has taken charge for airlines security.in November 2002 the transportation security administration (TSA) took charge of all the airports. The (TSA) installed detectors of explosives in the airports.

Almost all airlines worldwide experience delays in their flights, for one reason or the other. Some of reasons attributed to the delay include, airport congestion, flight maintenance, bad weather conditions, unsafe environment and emergencies on the tarmac.

Financial analysis of the company

Analysis of the company financial statement is essential in order to ascertain the financial soundness of the company. Under this section we will carry out a ratio analysis in order to analysis the financial health of JetBlue Airways Corporation.

Profitability analysis

Profitability analysis assist in determining whether the firm has the ability of generating profits on the funds invested.

The gross profit margin for the company in April 2009 was 26.18%. This is an indication of the firm returns on costs, as compared to the industry it shows that the firm sales have the highest capability in the industry of generating sales, since the industry gross margin is 22%.

Liquidity analysis

The company has quick ratio of 0.82 while the recommend ratio is 1:1, therefore, this figure is shows that the company can be able to meet its current obligations as the fall due. This led the company to be rated third out seventeen players in the market.

Investor’s analysis

This is an analysis of relative value of the firm and returns expected by the owners of the firm. The company earning per share is – 0.336 as compared to its main competitors Southwest airlines Inc, which is 0.24 implying that a common stock holder of southwest airlines has return expectation for every dollar than JetBlue investor

Financial Leverage analysis

This analysis will help to analyses the financial risk the company is facing, i. e. this is the probability that a firm will not honor its debts. According the financial statement the company is not in facing in financial risk that is the firm will be able to honors its debts when there are due.

SWOT Analysis

Strengths

JetBlue Airways Corporation has a low cost advantage over other airliners thus branded as low-cost airline.  JetBlue has been branded as low-cost airline by offering high quality services for consider low charges for the services this has made its popularity to grow tremendously, thus increased the number of customers. Also the company efficiently uses aircrafts thus reducing the cost of operations.

Another strength that jet blue airline possess is the ability to differentiate its product. JetBlue has designed its product to match the needs of its clients. JetBlue offers tailor made services to the customers which are of high quality.

The company also has a customer oriented culture, where the needs of the customer are always considered first thus gaining the loyalty of the existing customers as well as attracting new customers.

In addition, to JetBlue Airways Corporation have the most experienced and highly skilled personnel, who are well conversant with their work, thus inculcating a strong work ethic. Apart from this, the employees are able to increase the overall productivity of the organization, this partly due to the reason that the employees are highly motivate.

The products and services offered of high quality thus offering the firm a competitive advantage over other firms in the industry.

Weakness

Although the company has experienced tremendous growth and even securing options contract to hedge against fluctuations of gasoline prices. The company has not been able to shield itself against the rising cost of oil and the increased consumption of gasoline.

Threats

The company has enjoyed an influx of customers due to the high quality product and services but our competitors are improving their products thus increasing the competition in the market.

The other threat is future acts of terrorism could negative affect the number of travellers travelling overseas. This due to the increased security requirements while one is travelling thus significantly reducing the number of travellers.

An outbreak of an environmental disaster of outbreak of disease such as swine flu in 2009 could adversely impact on the demand of the JetBlue products and services; therefore, an outbreak of any disease to the imposition of travel bans could adversely affect the demands of airline services.

Opportunities

The company has a history of having the largest capital bases in the airline industry at its commencement, this large capital bases offers resources to expand the company operation worldwide.

The company also has an opportunity to attract and maintain highly skilled and experienced personnel. The company is one of the few companies that focuses on improving the employees welfare as well as motivate them, this attract more workers to the company.

Porter Five Forces Analysis

Michael porter postulated the Porter five forces analysis that aims at influencing the competitive intensity and attractiveness of a company in the market. The five forces as delineated by Michael includes

Bargaining power of customers

The airline offers products that are highly differentiated, thus posing them as unique to the market. This offer customers a low bargaining power.

The availability of other cheap, flexible and relatively fast transport modes of such as rail transport offers the customer a higher bargaining power.

There is increased demand of airline products, thus making the volume of buyers to increase thus lowering the bargaining power of customers.

Threat of new competition

The company offers highly differentiated products makes the customer to loyalty to their brand thus minimizing chances that they will be swayed away by new entrant in the market.

In order to join the airline industry one requires large amount of capital. This inhibits new potential joiners in the industry who do not have a large amount of capital

Bargaining power of suppliers

The presence of strong and functional workers labor unions, which have consistently advocated for improvement employees welfare, have increased the bargaining power of employees.

An absence of substitutes for gasoline has made the bargaining power of inputs suppliers increase significantly.

Threat of substitutes of products or services

There are various mode of transport that substitutes the airline services. For example rail transport had undergone revolution to match the needs of the modern mode transport thus making many customers to opt for this kind of transport which consider being safe, convenient, flexible, reliable and cheap.

Intensity of competitive rivalry

The company has a powerful advertising strategy where apart from using newspapers, other media channels it embarked at advertising its products through the “word of mouth”. This is where the company is using its customer in advertising.

In addition the company has a very high level of innovativeness and creativity; this portrayed where it fixed it aircrafts with satellite TV and leather seats.

Recommendations

• The company does not have a mechanism to shield itself from losses emanating from currency from fluctuation. The management should develop and implement measure that would mitigate losses emanating from currency fluctuations such currency swap and purchase futures contract.
• The company needs to proper hedge or enhance it hedging ways in order to shield the company from the ever rising cost of fuel such issuing air fuel derivatives.
• Although, in the past company has expanded its operation to country like Jamaica and Mexico there is need to venture in other international routes so as to increase the company returns.
• The company should also aim at maintaining sufficient working capital so as to enhance its liquidity.
• The company should reduce its finance charge cost on loans by embracing interest swap and other interest rate derivatives.
• The company should diversify its asset portfolio as measure of risk management

Changes in JetBlue since 2008

The company has expanded its operations, thus widening its markets in Boston and Latin America. The company has expanded its partnership such travel agency, thus increasing the number of customers and balancing off-peak and peak travel times. In reference to employees the company has implemented flexible and prolific rules that enhance productivity. The company has also introduces new payment methods that are convenient and cost effective. The company has adopted new measures to hedge against the fuel prices by issuing air fuel derivatives. In conclusion the capital base of the company has increased significantly from $1.35 billion to $7.071 billion

 

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