JetBlue Airways began its operation in the beginning of 2000 as the low cost carriers (LCC). After 5 years in the airlines industry, JetBlue has become the 9th largest passenger carriers. By the year 2007, it held 30% of the domestic departures. JetBlue break the traditional practices by typical LCCs by adding another type of flight in its operation. A typical LCCs company is normally limited their flight to one type. By breaking these traditional practices, JetBlue put at simultaneously at advantages and risky position.
From the case study, we perform an external environmental analysis of the firm using various frameworks/methods (i.e. PESTEL framework, Porter's Five Forces). We also analyse the competitive environment of JetBlue Airways.
PESTEL is a framework used to categorized and analyse an important set of external forces that might impinging upon firm. The external forces being analysed are; political, economic, social cultural, technological, ecological, and legal.
Political factor is any process or actions of the government bodies that influence the decisions and behaviour of the firm. Economic factor that is important in this framework is growth rate, interest rate, level of employment, price stability, and currency exchange rate. Social cultural is the society's cultures, norms and value. Ecological is another force that is analysing in the PESTEL framework which concern broad environmental issues such as the natural environment and global warming. The last force is legal. Legal environment captures the official outcomes of the political processes as manifested in laws, mandates, regulations, and court decisions.
Below is the analysis of the external environment of JetBlue based on the case study.
1. Political issues
a) September 11, 2001 terrorist attack.
After September 11, the airlines industry has experienced troubles. The domestic airline yields dropped almost 20% in the aftermath of the attack and remained below pre-attack levels until 2005.
b) Political stability.
The Valentine's Day crisis highlighted the need to reconsider JetBlue's long-standing operating principle of not cancelling flights. The crisis has lead to the introduction of JetBlue's Customer Bill of Rights.
c) Competitive Airline Industry.
JetBlue is often compared to Southwest Airlines due to the emphasis on the low fares and its decisions to avoid the hub-and-spoke architecture of legacy airlines.
The airline industry was rocked by the deregulation, fare wars, over capacity and the terrorist attack of September 11.
2. Economic issues
a) Rise in inflation
By late 2006, JetBlue face soft earning demand like other airlines. Analysts from Barclays have warned that once the price per barrel of oil reaches $150 this would trigger inflation in both developed and developing economies. They foresee a 2.7 percent increase in inflation in developed countries and a 4.5 percent increase in inflation in developing countries.