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 dont 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

HR: Customized employment

packages
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

HR: Customized employment

packages

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

HR: Customized employment

packages
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 dont 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