Case Analysis on Jet Blue Airways Part 2

Corporate Structure: Chairman Board of Directors Chief Adviser Mangling Director and CEO Executive Vice President/ Senior Vice President Vice President Senior Asst. Vice President Asst. Vice President Senior Officer Officer Junior Officer Corporate Culture: Employees of JetBlue Airways share certain common values that help to create a JetBlue corporate culture.  Fast customer service.  Search for professional excellence.  Openness to new ideas and new methods to encourage creativity.  Proper decision making.  Flexibility and prompt response.  A sense of professional ethics. Corporate Resources: All departments are responsible to increase the organizations activities and performance. The departments are Marketing, Finance, Human Resource and Information System (IS). Marketing: JetBlue marketing is committed to the success of its customers utilizing the latest online marketing technology and the best of traditional advertising. On April 8, 2008, JetBlue introduced a new "Happy Jetting" brand campaign. The marketing campaign, developed in partnership with JWT New York, emphasizes competitive fares, service and complimentary onboard amenities such as free satellite television and radio, snacks, and leather seat It served customers in a wide variety of system over a period of almost 17 years. JetBlue offers a variety of in-flight entertainment such as DirecTV with 36 channels of free programming. Thus far, no other airline offers such live satellite TV option for free. The company is planning to increase the number of channels from 36 to 100+ channels. The aircraft are equipped with an in-seat digital entertainment system. Each individual seat has a monitor with armrest remote with channel and volume controls. It bring experience, maturity, ethics, history and the newest technology to the company to serve all their customer’s needs. Finance: Strong financial status is the reason for any organizational development. Behind labor, the second largest operating expense for airlines is fuel. JetBlue enters into crude oil option contracts and swap agreements to partially protect itself against significant increases in fuel prices. To develop the financial condition the full support provided by the board of directors and sincere dedication of the banks officials. The total asset is $5,598 million in 2007 and $6,023 million BDT was in 2008. The operating profit of BRAC Bank in the year of 2007 is $169 million and in 2008 is $109 million. Human Resource: In 2009 JetBlue has 11,00 employee in their organization and at present they have 20,000 present Human Resource Department of JetBlue is considered as a popular HRD system of Us Airlie industry. The Hunan Resource Department of JetBlue airways are an effective tool to influence employees; as a result this Airways position is top 3rd in the ways of market capitalization in US. Information Technology Jetblue airways always use the modern technology. They are the first company who use satellite tv in such a low flight cost. The percentage of JetBlue’s total sales booked on their Web site averaged 77 percent forth year ended December 31, 2008. In 2008, their bookings through global distribution systems, or GDSs, and online travel agencies, or OTAs, became their second largest distribution channel, accounting for 13 percent of our sales. Value Chain analysis JetBlue analysis is presented below. Value chain activity Primary: Inbound logistics How does JetBlue create value for the customer? Web-based booking instead of booking through ticketing agents gives greater control on managing seat sales. Customers won’t get bumped. Operations Paperless cockpit, no meals served, no paper tickets--all reduce time and costs. Single aircraft type keeps training costs low and manpower utilization high. Outbound logistics New A320s are larger and more fuel-efficient. Less congested airports help quicker and on-time flight departures. Marketing and Sales Web-based ticketing as a distribution channel. Market segment properly identified i.e., business travelers flying point-to-point. Effective pricing. Constant communication with customer to keep them informed of changes or inconveniences. Customers are refunded sometimes when there are inconveniences. CEO travels regularly to get customer feedback first-hand. Investments in training for service orientation. Service Secondary: Procurement Technology development. Human resource management General Administration Well-conceived aircraft procurement plan to support growth. Investments in technology from the beginning of the airline. Process initiatives such as automated baggage handling, web-based ticketing, paperless cockpit etc., Non-unionized workforce, reward systems such as stock-option plans, profit sharing, innovative recruitment policies and culture promoting camaraderie…employees called ‘crewmembers’. Top management with expertise in airline business, ability to coordinate and integrate activities across the value system, and highly visible to inculcate organizational culture,reputation and values. Internal Factor Evaluation (IFE) Factors Strength Deployment of technology in terms of paperless tickets (i.e., e-commerce) Attention to security in terms of bullet-proof in cockpit cabin and cameras inpassenger cabins JetBlue fleet maintains a new fleet of aircrafts JetBlue offer in-flight entertainment JetBlue hires the best crew in terms of skills and employees Jet Blue has a very well clear strategy in terms of leadership JetBlue offers exceptional training physical resources to company employees Availability of customer service management JetBlue has the lowest labor wages compared to other rival airlines($3.13 with each seat flown) JetBlue has a loyalty program, named True-blue, which rewards program members JetBlue maintains a higher revenue ($3.39B) compared to industry ($1.24B) JetBlue has a high market capitalization ($1.35B)compared to industry ($536.6M) JetBlue maintained a higher P/E ratio (59.21) compared to industry (14.16) JetBlue reported high EBITDA (304.00m) compared to industry (90.07m) JetBlue maintained a high gross margin (36.12%) compared to industry (23.08%)and other rival airlines JetBlue has a higher quarterly revenue growth (29.5%) compared to industry(20.4%) and other rival airlines Weakness JetBlue reported a high PEG ratio (3.90) compared to industry (0.93) JetBlue reported low net income -76.00m where as industry leader (luv) has 178.00m. Total weight Weight Rating Weighted score 0.08 0.09 4 4 0.32 0.36 0.06 0.06 0.08 0.09 0.08 0.07 0.05 4 3 3 4 4 3 4 0.24 0.18 0.24 0.36 0.32 0.21 0.2 0.03 3 0.09 0.03 0.02 2 2 0.06 0.04 0.03 0.03 0.03 3 2 3 0.09 0.06 0.09 0.03 2 0.06 0.04 0.05 1 2 0.04 0.1 1 Total 3.18 whted score A summary step in conducting an internal strategic-management audit is to construct an Internal Factor Evaluation (IFE) Matrix. This strategy-formulation tool summarizes and evaluates the major strengths and weaknesses in the functional areas of a business, and it also provides a basis for identifying and evaluating relationships among those areas.Assign a 1-to-4 rating to each factor to indicate whether that factor represents a major weakness (rating = 1), a minor weakness (rating = 2), a minor strength (rating = 3),or a major strength (rating = 4)Note that strengths must receive a 3 or 4 rating and weaknesses must receive a 1or 2 rating. Ratings are thus company- based, whereas the weights in step 2 are industry-based. Multiply each factor’s weight by its rating to determine a weighted score for each variable. Sum the weighted scores for each variable to determine the total weighted score for the organization. Regardless of how many factors are included in an IFE Matrix, the total weighted score can range from a low of 1.0 to a high of 4.0, with the average score being 2.5. Total weighted scores well below 2.5 characterize organizations that are weak internally, whereas scores significantly above 2.5 indicate a strong internal position. Comment: As we know the highest possible total weighted score for an organization is 4.0 and the lowest possible total weighted score is 1.0. The average total weighted score is 2.5. A total weighted score of 4.0 indicates that an organization is responding in an outstanding way to existing opportunities and threats in its industry. Here we see that the total weighted score is 3.18.If score 4 means outstanding performance than we can say 3.18 is a good score to obtain. Basic Financial Ratios Financial ratios are computed from an organization’s income statement and balance sheet. Computing financial ratios is like taking a picture because the results reflect a situation at just one point in time. Comparing ratios over time and to industry averages is more likely to result in meaningful statistics that can be used to identify and evaluate strengths and weaknesses. But industry average is not very easy to found .Its need 100 years or more historical data t make industry average..Also industry average is not available for all ratios in online. So here we decide to compare between two years.(2007 to 2008). (All amount is in Million) Current Ratio Current Ration = Current Assets / Current liabilities 2007 2008 1116/1256 962/1081 0.889times 0.890times Quick Ratio Quick Ratio = (Current Assets- Inventories)/Current liabilities 2007 2008 Debt-to-Total-Assets Ratio 1116 – 26 / 1256 968 – 80 / 1081 0.868 times 0.821 times Debt-to-Total-Assets Ratio=Total debt/Total assets 2007 2008 .815 / 5598 .791 / 6023 .0001 .0001 Debt-to-Equity Ratio Debt-to-Equity Ratio=Total debt/Total stockholders’ equity 2007 2008 0.815 / 1036 0.791 / 1261 .0007 .0006 121 / 5598 151/ 6023 0.0216 .0251 Total Assets Turnover Total Assets Turnover= Sales/Total assets 2007 2008 Operating Profit Margin Operating Profit Margin= Earnings before interest and taxes (EBIT)/Sales 2007 2008 41 / 121 76 / 151 0.3389 0.5033 18 / 121 -76 / 151 14.88% -50.33% Net Profit Margin Net Profit Margin= Net income/Sales 2007 2008 Return on Total Assets (ROA) Return on Total Assets (ROA)= Net income/Total assets 2007 2008 18 / 5598 -76 / 6023 .32% -1.26% Return on Equity (ROE) Return on Stockholders’ Equity (ROE)= Net income/Total stockholders’equity 2007 18 / 1036 1.737% 2008 -76 / 1261 -6.027% Earnings Per Share (EPS) Earnings Per Share (EPS)= Net income/Number of shares of common stock outstanding 2007 2008 18 / 181.59344 -76 / 271.763139 9.91% -.27.97% Comments: Coma ring ratios to 2007 to 2008 we see that in 2008 every ratios are going lower. There revenue ,Net income is not up to the mark. Below we are giving some competition statistics. Competition Competition is stronger than ever in many medium- to long-haul connecting markets, where major carriers compete for passengers over their respective hub-and-spoke networks. The domestic airline industry generally is characterized as having low profit margins, high fixed costs, and significant price competition. Below in table compare some direct competitors Conclusion: As we are doing this case in the year 2009,in that time Airline industry facing a sudden big problem. That is, the fear of a swine flu outbreak shocked the airline industry and airline stocks dropped by almost 16 percent. JetBlue’s stock slipped by 7 percent to $4.91. A bad outbreak could be disastrous for this industry because most airlines already are suffering from high unemployment, slow economic growth, and significant drops in business and leisure travel. But by calculating overall factors as- IFE ,EFE ,Porters five factors ,VCA we the position of JetBlue Airways is good in Market .But in Ratio analysis we that Ther net income ,profit margin is not in good condition .Its maybe because of that swine flu effect. In that time Airlie’s industry is experiencing a very situation.