Marketing Plan of JetBlue Airways Airliner

5430 words (22 pages) Business Assignment

12th Jun 2020 Business Assignment Reference this

Tags: Business AssignmentsAirlineMarketingAirbusMarketing Plan

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Abstract

The following paper contains information regarding the marketing plan of JetBlue Airways Airliner. JetBlue Airways is one of the largest airline companies that currently operate mainly in the US with some operations to Central and South America. JetBlue plans on marketing a new service route to Canada. This new route from Boston to Vancouver and Halifax will be seasonal and will be a success to the JetBlue company. The purpose of this paper explains what processes is involved in adding a new route such as understanding the fees associated with going into a new territory, the current market situation, as well as how it will affect competition and who they are.

Contents

Introduction………………………………………………………..1

Executive Summary………………………………………………….2-

Current Marketing Situation……………………………………….2-5

Market Description………………………………………………..2-3

Product Review………………………………………………….3-4

Competitve Review………………………………………………..4-

Channels and Logistics Review…………………………………………5

SWOT Analysis-8

Strengths……………………………………………………….6

Weaknesses-7

Opportunities……………………………………………………..7

Threats…………………………………………………………8

Objectives and Issues…………………………………………………9

First-Year Objectives………………………………………………..9

Second-Year Objectives………………………………………………9

Issues

Budget………………………………………………………….10

Controls-11

Action Plans-12

References

Introduction

It’s hard to think of the flight industry without thinking of Jet Blue. The company has made huge leaps and bounds in the flight industry and has proved beyond a shadow of a doubt that it is efficient in its marketing strategy. The company is highly recognizant of its consumers and their needs as far as the flight industry is concerned. While most airlines have numerous tribulations of long lines and flight delays, not to mention horrible customer service, JetBlue has persevered its brand and image successfully. The company has stood behind its own marketing strategy of inspiring humanity. Through this calculated approach, JetBlue has been able to hold its place in the airline industry as a beloved brand. JetBlue was incorporated in August 1998 in Delaware by Founder David Neeleman. After the announcement of the JetBlue airline, JetBlue placed the first order of four billion dollars for 75 new aircraft and leasing of another eight aircraft. The unique service JetBlue wanted to provide was 24 channels of live satellite TV(JetBlue 2017), which was a first for the airline industry. JetBlue wanted to focus on flying out of New York, so in September 1999, JetBlue received 75 take off and landing slots that John F Kennedy International Airport offered JetBlue. In the following year 2000, JetBlue launched its first airline operation which was from JFK to Fort Lauderdale.

Certainly, JetBlue has been able to maintain it position as top brand in the flight industry through various core principles and values which have been part of its marketing strategy. The four pillars of Jet Blue’s marketing strategy include flight etiquette, humanity in service, diversity and brand campaigns (Team, 2019). These four marketing strategy pillars have been able to allow the company to maintain its competitive resolute. As a whole, the airline industry has taken their brand image seriously. Coupled with their driven market strategy, here’s how JetBlue has managed to hold its spot.

Executive Summary

JetBlue Airways Corporation is preparing to expand its international destinations by serving two Canadian cities: Halifax, Nova Scotia and Vancouver, British Columbia. Both cities will be served by non-stop flights from Boston-Logan International Airport. Although Air Canada already has direct routes going into both of these cities from Boston, JetBlue Airways Corporation is still a growing Low Cost Airline, and aims at growing the company to better serve the flying public by offering a more affordable travel option into Canada from our main hub in Boston. By offering this new option between Canada and the United States for both Canadian and U.S. travelers, the company slogan, “You above all”, will be shown as being a statement that the Airline truly stands by. (JetBlue Airways Corporation, 2010) The Primary Marketing Objective, besides turning a profit, is to create a demand for current and potential JetBlue customers. The initial aircraft that will be utilized for these routes will be the Airbus 320; then afterwards the Airbus 321.

Market Description

Halifax and Vancouver are prominent cities in Nova Scotia and British Columbia provinces respectively. The two cities experience numerous flights in and out of them frequently. The airline market in Canada can be characterized as a duopoly with the main airlines dominating the Canadian market, Nova Scotia and Vancouver included, being Air Canada and Canadian Airlines International. The Canadian airline industry was able to generate almost eight billion in operating revenues not to mention the fifty-three thousand people who are employed in the industry. In addition, cargo transported by Canadian carrier’s accounts for twenty percent of the airline industry’s revenue ton Kilometers (Madore & Shaw, 2019).

As such, the Canadian airline industry is hugely dominated by passenger carriage which consists of international and domestic scheduled flights. International traffic accounts for only forty-four percent of market travel while domestic travel stands at a good fifty-six percent of revenue total. The United States is noted to be the largest single market for Canadian carriers meaning that the United States offers Canada its largest size of flight customers. The demand for trips round trip to Canada and the US can also be noted to be highly seasonal and therefore unique. The Canadian airlines normally experience extremely low traffic in the trough months and experience twice the traffic in the in the peak months. The market or airline industry responds heavily to cycles in the general economy and as such this means that small increases or decreases in traffic lead to dramatic increases in profit and losses for the industry (Madore & Shaw, 2019).

Product Review

JetBlue initiating a new flight from Boston to Halifax and Vancouver is a great contribution to the market. Currently, the airlines that have undertaken and which hold a large market share of flights to Canada and to The United States is Air Canada and Canadian Airlines international. However, it’s important to note that the United States is the number one destination for Canadians and its equally important to note that the United States also give Canada the most revenue through numerous passengers from America to Canada. As such, the product is already in demand and can incur significant income for JetBlue airlines as soon as their flight route passes all legislations.

In addition, JetBlue is known for its excellent customer service during flights and the perfect flight environments it creates for its customers using JetBlue. JetBlue is expected to provide exceptional services and create a conducive environment for its passengers travelling from Boston to Halifax and Vancouver and the consequent return flights. More so, JetBlue is expected to introduce its fleet consisting of the Airbus A320, Embraer 190 and Airbus A321 which can all carry a passenger load of up to three hundred passengers (Madore & Shaw, 2019).

The flight is also expected to be extremely comfortable due to JetBlue’ core offer of leather seating across its fleet. In addition, the flight to Halifax and Vancouver will of course have complimentary Wi-Fi, complementary entertainment screens with American satellite service, Direct TV and Sirius XM Radio not to mention movies, complimentary snacks and non-alcoholic drinks. The flight is also expected to have JetBlue’s premium flight service called ‘Mint’ which includes full lie flat seats some of which had sliding panels for more privacy. As such Jet Blue can be expected to do once their product launches into their market (Madore & Shaw, 2019)t.

Competitive Review

The route to Halifax and Vancouver will undoubtedly bring in great competition from the already established airlines which hold the majority market share in these regions. Air Canada holds the majority market share in this route from the United States to Halifax and Vancouver. When it comes to the success of Air Canada versus JetBlue, the operating costs per output which are determined by wage rates and employee productivity cannot particularly define efficiency and superiority in the market. The more successful airline between Air Canada and JetBlue, is the airline with a larger network and consequently more traffic density. It is important to review Air Canada’s traffic density to evaluate whether JetBlue has any competitive advantage (Madore & Shaw, 2019).

First, Air Canada has thirteen registered aircraft as of February 2019 which consists of its main fleet; Airbus A319, Airbus A320, Airbus A321, Airbus A330, Boeing 737, and Embraer 190/195. Jet Blue on the other hand, consists of three aircrafts; Airbus A320, Airbus A321 and Embraer 190/195. Air Canada flies to sixty-four domestic destinations and one hundred and fifty-eight international destinations across Asia, Europe, the Americas and Oceania. JetBlue travels to one hundred and two destinations in North, Central and South America. In addition, JetBlue has recently launched the Airbus A220 to Europe. Air Canada is the bigger airline, however, JetBlue gains its competitive advantage from the fact that it dominates the lion’s share of the American market which is what Canada considers its most revenue generator in the country. In addition, Jet Blue has brand power in the American regions which can ensure that it gains more customers from this region (Sargen, 2016).

Channel and Logistics Review

JetBlue in its approach to undertake this new flight route will be impeded by numerous channels and logistics which will obstruct new entry. One logistical obstacle must be the CRS (computer reservation system) Apollo, which is dominant in the country. The CRS is controlled by the main air carrier in Canada namely Air Canada. To avoid this situation, Air Canada will be prioritized in comparison to JetBlue. In addition, Air Canada may impose predatory pricing (unreasonably low pricing) to push Jet Blue out of the market. Jet Blue should start with their standard Embraer 190 which carries one hundred passengers in total, which will compete favorably with any predatory pricing behaviors from Air Canada’s monopoly (Sargen, 2016).

In addition, Jet Blue should use aviation intelligence tools to predict when to add more aircraft to the standard flights to Halifax and Vancouver. JetBlue needs to establish a connecting hub at the two destinations from its main hub at the John F. Kennedy Airport. JetBlue will also have to source an aircraft which will be assigned permanently to the new route. JetBlue will have to depend on local traffic mainly to ensure its success in the new route. Additionally, JetBlue will have to hire more cabin crew. They may find it more productive to hire more Canadian staff or balance out American and Canadian cabin staff to create a better flight experience. All in all, JetBlue has potential for penetrating the oligopoly market and experiencing immense success.

SWOT Analysis: JetBlue

Strengths:

  1. Customer Service: J.D. Power and Associates has rated JetBlue as the “Highest in airline Customer Satisfaction Among Low-Cost Carriers” for the ten consecutive years leading up to 2014. This is just one of the many accolades JetBlue has received over the years, to include the “Best Airline For North American Travel” in 2017, from Business Traveler USA. JetBlue has an acting “Customer Bill of Rights” that strives to keep the company grounded in “humanity”. This is accomplished by having a standard customer compensation scale for avoidable and unavoidable customer inconvenience. JetBlue is the only major US airline to implement such a policy.

(JetBlue Airways Customer Bill of Rights. 2017, June 01)

  1.  The JetBlue Experience: JetBlue is unrivaled in the customer experience aspect of air travel, when it comes to low-cost carriers. JetBlue boast the most leg room in the main cabin among all major us airlines. Jet Blue provides Direct TV access, with 36 channels, complimentary on E190s and E320s, and over 100 channels on A321 flights. Customers have access to free snacks and non-alcoholic beverages in flight. These top notch free amenities have help attract new customers and increase profit.

Weaknesses:

  1. Fuel Price and Earnings: The fluctuating nature of fuel prices in the airline industry poses problems to a company like JetBlue, which operates as a low cost carrier. Up to 36% of the company’s expenses come from fuel. Even at this number the company has been able to turn a profit. In the last decade oil prices hit the highest that they have ever been at 97.98$ a barrel in 2013. The price of oil per barrel has dropped to 55 percent of that number but there is no guarantee that the prices will remain this low. The company will have a hard time turning profit if those numbers reach a similar height. The low fares could come into jeopardy, affecting the company’s business model in an ultra-competitive industry. Baker, M. B. (2018, October 23).
  2. Debt: In 2017 at the end of the first quarter Jetblue had a debt level of 1.3 billion dollars. That number fell from 1.8 billion dollars at the end of Q1 the year prior. The company has paid upwards of 440 million dollars of regularly scheduled debt. These debts are accrued through the lease of aircraft, operating equipment, terminal access and office space, making them necessary company expenses. The likely-hood that jet blue will continue to borrow and pay out long term interest remains high.

Opportunities:

  1. Penetrating Existing Markets: JetBlue has placed a high level of interest in expanding the travel from existing location in Fort Lauderdale and Boston. The company is looking to expand international travel from these locations. Connecting JetBlue customers to Latin America, The Caribbean and Canada. By turning these two airports into hubs for international business travel. Continuing to offer low air fare for international travel through these locations can increase the market share and compete with other international air carriers.
  2. Premium Packaging: JetBlue looks to expand opportunity past the limitations of the “cost conscious traveler”. The company recently introduced the “Mint” package. These flights travel from New York to multiple locations in California and the Caribbean. The package includes fully reclining seats, inflatable seat cushions and a mint only lavatory. These flights begin at 599.00 dollars which still remains competitive with other airlines and keeps with the spirit of the companies advanced amenity packaging. The company looks to create a higher profit margin through the introduction of these packages.

Threats:

  1. Competition: JetBlue continually faces a highly competitive market. Airlines face high fixed costs and low profit margins. JetBlue’s biggest competitors are Delta and South West Airlines, both, larger companies with greater financial resources. It can be expected that the companies move into new markets will create higher price competition among the existing regional competitors. These companies will look to pressure JetBlue out of the market by match prices or offering even lower fares. The airline industry is also subject to company mergers and company purchases that can shake up the industry for smaller companies like JetBlue.
  2. Geographical Expansion: JetBlue currently does not travel to Asia, a particularly unsaturated market. The Company is however looking to continue expansion into Latin American and Canada. Some of the Latin American nations are still developing countries, which pose certain complications, both economic and political.

Conclusion

JetBlue is the leader in customer satisfaction of the “Low-Cost Carrier” airlines that exist in the US. The company sets itself apart through this unrivaled service. Free snacks, satellite television access and industry wide best leg room keep customers coming back to the company and a steady influx of new customers as well. JetBlue is subject to the same weaknesses and threats that remain industry wide. High debts and fluctuating fuel prices are the industry norm in commercial aviation. JetBlue must maintain a tight balance between low cost amenities and dealing with the fixed cost associated with the airline industry. Treating the customers with the best service possible and an emphasis on humanity is what can continue to give the airline the edge over the competition.

Objectives and Issues

JetBlue Airways Corporation has set highly ambitious yet achievable objectives for penetration into the Canadian Market for the first and second years. The goal is to make these cities regularly scheduled seasonal routes for the summer months; between the dates of June 21st and September 23rd.

First-Year Objectives: During the initial year, in order to attract both U.S. and Canadian travelers, JetBlue Airways plans to incorporate a promotional pricing strategy by selling tickets for the summer between the dates of June 1st and June 22nd. The primary goal is to create enough awareness and demand to fill up our Airbus 320, this year, so that next year we can start profitably using our Airbus 321 alongside our Airbus 320.

Second-Year Objectives:JetBlue Airways will incorporate a bundle pricing strategy by including vacation deals with their tickets to both Halifax and Vancouver. The goal this year is to start penetrating the Market into Halifax from New York-LaGuardia utilizing the Embraer 190.

Issues: Entering the Canadian market, we will be competing against United Airlines, American Airlines/ American Eagle, and Air Canada. The biggest competitor will be Air Canada because they are the only Airline that has direct flights into both Halifax and Vancouver from both New York-JFK and Boston.  Air Canada does not fly to New York-LaGuardia. (Air Canada, 2019) United Airlines will be our second biggest competitor because they only go to Vancouver direct from New York-La Guardia. However, United Airlines utilizes the Boeing 737-800, which is a direct competitor in both capacity and range to the Airbus 320. (United Airlines, 2019) American Eagle will be our third biggest competitor because they only go to Halifax directly from New York-LaGuardia. American Eagle only utilizes the Embraer 170 and 175 for this route. (American Airlines, 2019)

Budget for JetBlue Airlines

JetBlue had an operating revenue of seven billion dollars according to the 2017 financial statement, with the average fare starting at 157.07 (appendix 3) which was 0.07 cents lower than last year. Total operating expenses came to six billion dollars. The operating income was one billion dollars which is the operating revenue minus the operating expenses.

A new route to Canada from Boston, JetBlue will have the following fixed costs. the average fuel cost was 1.72 per gallon(see appendix 1) and for an A320 it can hold 41285 gallons of fuel. In addition, general terminal fees came out to 1106.87 (appendix 2), landing fees total 86.87(appendix 2), airport improvement fees (maintenance and repair of runway and other features) which came to 3138.30 (appendix 2). In total, it comes out to about 75,341.84 for one flight.  Typical flights to Canada range around 198 dollars from different competitive carriers such as Delta and Air Canada. For a break-even analysis, the costs to install a new route results in 396 tickets must be sold in a typical month to break even, which will be possible because of the demand to fly to Canada.

75341/(157.07+33.34)=396.44( See Appendix 2 and 3)

Controls

First, JetBlue should closely monitor the Boston/Vancouver/Halifax route throughout the year to ensure and control the competition flying to Canada. Currently, the main competition includes Air Canada and Delta. To create leverage, JetBlue plans to monitor what customers want that these major carriers are not providing as well as the difference in pricing. Understanding fuel pricing and the tendency of fuel price fluctuation will be a key component because it is a fixed cost that is essential to the operation of aircraft. In addition, keeping track of revenue and sources of income will be key as well. Being a new carrier entering a whole new market, there should be plans to prevent a “price assault” so that competition does not attack and try to push JetBlue out the market as well because there is very high potential of being successful in Canada.

Action Plans

This new promotional route will be presented from June 21 to September 23. Leading up to those months, the following programs and tasks will be completed for the first ever JetBlue Flight from USA to Canada.

January- Communicate with representatives of Halifax and Vancouver to receive approval as well as buying a terminal spot for JetBlue to fly. After being approved, JetBlue will have representatives prepare commercial and advertisements for the new JetBlue routes without revealing the route itself, to create suspense. This sudden suspense will cause passengers to want to know of the new route JetBlue is providing. The advertisements will be throughout social media with the date 02/03/2018 using the strong social media presence JetBlue has in Facebook, Twitter, YouTube etc.

February- During Super Bowl Half time commercial, the sudden reveal of the new route JetBlue will be serving through Canada. JetBlue representatives will forecast this route and its success. Also researching and analyzing competitors pricing and costs for the coming weeks.

March- Finalizing a deal with the airports that will be utilized for the fees and getting final approval that the aircraft route meets standards. Marketing campaigns to the local Canadians as well as local people in Boston to lure them into traveling to Canada and vice versa.

April- JetBlue coders and mathematicians will begin creating the programs and applications so that people can begin purchasing online tickets next month. Also creating marketing events such as fairs to promote flights to Canada.

May- Announcing ticket sales opening in the first week of May all over social media and television ads. Finalizing deals with services to make sure everything will be set for the following month.

June- JetBlue will set up fliers and displays in the Halifax and Boston airports. JetBlue representatives will advertise a promotional marketing period between the dates of June 1st and June 22nd to create awareness and demand. In the first flight, a ceremony will be held to commemorate the first flight to Boston. With a bunch of hats, key chains, and more being given out as well as raffles and other things to promote Canada flights during the 3-month operation.

August- A group of JetBlue representatives will talk to people who have flown with JetBlue to Canada for feedback on how they enjoyed their experience. Also, mobile ads will be implemented through social media as well as emails being sent out to encourage people to catch a trip to Canada.

September- Finalizing ticket sales for the final trips to Canada. Marketing more for the final trips through TV ads and social media. Promoting a “clearance” of flights that encourages people to “Fly before we Fly away for the season”.

Appendix 1

General Terminal Charges
Domestic Arrivals (per seat) $7.06
Non-Domestic Arrivals (per seat) $8.82
Landing Fees
[(per 1,000 kg) of maximum permissible takeoff weight, as stated in the aircraft’s registration documents (“MTOW”)]
Aircraft in excess of 19,000 kg (based on arriving MTOW)1 $17.19
Fixed wing Aircraft 19,000 kg or less (flat rate per arriving movement) $300.00
Helicopter (all times) $50.00
Apron Fees (Active and Inactive Apron Fee)
  • Based on aircraft code, see Schedule A below

 

 
Deicing Facility Fee2  
Aircraft in excess of 19,000 kg (based on arriving MTOW) (per 1,000 kg) $1.62
Aircraft 19,000 kg or less (based on arriving movement) $30.00
Additional Ad Hoc Charges
The following are additional fees which are chargeable in the event of certain circumstances:
Liquidated Damage   
  • Failure to maintain gate cleanliness standards

 

$100.00/bag of waste
Airport Improvement Fees (per passenger)  
Non-Connecting Passenger $25.00
Connecting Passenger $4.00
Slot Coordination Fee (per slot)3 $1.15
 
All amounts are in Canadian dollars.
All above fees do not include applicable taxes (including HST)
All weights refer to Maximum Takeoff Weight (MTOW), in kilograms (rounded up to the nearest 1,000 kilograms). Conversion rate 1 kilogram = 2.2046 pounds.

References

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