External Environment: Opportunities and Threats for Jetblue Airway

External Environment: Opportunities and Threats for JetBlue Airway

Societal environment

After September 2001, air travel decreased sharply and major airline companies had lost the money. This makes those airline companies to increase the debt by tapping their credit lines and/or issuing bonds. These actions were vital to help the carriers survive the dramatic decline in passenger levels and fares, and the sharp increase in losses, but left most of the major airlines burdened with huge debt loads .

Moreover, there are some airline companies that offer low-fares services such as JetBlue and Southwest. They are the airline companies that still growth during 2001 and make the huge profit during 2001 especially JetBlue because they serve in the market that most major airline companies were ignoring. Today, this push major airlines companies such as Delta, Northwest, and many other major airline companies had filed for bankruptcy to stop the debt that they created from 2001 and lost some market share to other low-cost and low-fare airline companies.

Although, the oil price has increase in year 2002 and keep increasing until today because of too much consumption in U.S and China and war in Iraq affect as well as the hurricane. This makes the oil price to clime up more than usual. We estimate that fuel costs absorbed about 19% of total airline revenues in 2004, up from 15% in 2003 and 13.6% in 2002. We also estimate that fuel costs are likely to rise to about 24% of total revenues in 2005 .

PorterÐŽ¦s Approach to Industry Analysis for Jet Blue Airway

Potential Competitors: Low

Ñ"ж Rivalry among existing firms is intense, which affect the profits to be low. ItÐŽ¦s unattractive to the potential competitors.

Ñ"ж High initial investments and fixed costs such as lease a fleet of safe and reliable aircraft, negotiate reasonable gate access and landing fees as well as high labor and fuel costs.

Ñ"ж There are the price competitions in the airline industry, which some major airlines offer the low-price fares that is very difficult for new entrants to gain enough profit to cover the investment and fix cost in this industry.

Rivalry among Existing Firms: High

Ñ"ж Currently, there are many major airlines such as Delta, United and American that exist in the same market as Jet Blue.

Ñ"ж Those airline companies have used similar strategies as JetBlue. United and American Airline flies to the same cities as Jet Blue and appeal to the business travelers who have the least sensitivity on price.

Ñ"ж Airline industry is extremely sensitive to economic cycles. Mature industry life cycle.

The Bargaining Power of Buyers: Medium to High

Ñ"ж Internet gives the power to the customers to search for the low fares.

Ñ"ж Leisure travelers who are not sensitive with the price and most of them are loyalty to the particular industry that offer the best service and offer the best flying experience.

Ñ"ж There are many airlines in the market that offers the same flying experience in the low-price.

Bargaining Power of Suppliers: High

Ñ"ж Boeing