The management has been negligent in matters of control. The company has made a loss in 2005 after profit in 2004 (Form 10 K, 2005). The operating margin crashed in 2005 to less than 3% after touching almost 9% the previous year. The poor results of 2005 were with 85% capacity utilization. Strategy implementation will fail without adequate and appropriate controls (Hitt, Duane Ireland, and Hoskisson, 2005). Jet Blue has a viable strategy but has failed to implement it judiciously and effectively. It requires a standard costing system as well as controls on funds flow if it is to keep its corporate head above water!
The company should immediately discontinue the practice of filling seats without recovering generic fuel cost increases. Culture, Innovation, and Entrepreneurship The management is prone to high risk taking with poor financial controls (Form 10 K, 2005). It is amazing that the company should invest in doubling seat capacity by acquiring new aircraft with such an unstable financial performance. There is considerable strength in customer service, and the company has excelled by making a quick mark in a very competitive environment. However, there is little business sense in doing this without generating cash.
The corporate culture is appropriate for an emerging market with high growth potential, but is not the best for a mature market as prevails in United States civil aviation. Innovation in marketing without concern for economics is not suitable for a business environment. Similarly, reckless entrepreneurship without concern for obvious contingencies does not bode well for people and institutions with significant investments in the future of the company. The overall company culture is immature and not what is required when a new entrant hopes to make a sustained mark in a competitive environment. Social Responsibility and Ethics
Jet Blue meets all safety and security regulations (Form 10 K, 2005). It is the official sponsor for the Boston Marathon (About Jet Blue, 2007). The company is adequately aware of its ethical responsibilities, and is a caring corporate citizen as well. Conclusion Jet Blue is vulnerable because of its high and growing fixed costs (Form 10 K, 2005). It has taken share from traditional network and regional carriers, but they can hit back with low fares and deals of their own, and take back passengers at any time. The company does not have the financial resources to withstand such attacks (Voelpel, Davenport, and Leibold, 2006).
It will become even more suspect when it has to service interests costs of new aircraft deliveries, and is danger of going under. However, it is not too late to make lasting improvements. The company needs to add professional financial management resources to its marketing flair, and prepare for the days ahead when it will have to service enhanced investments with the arrival of new aircraft. Costing, capacity utilization economics, and pricing of service upgrades, are especially important areas for the airline to address, in order to prevent further losses.
About Jet Blue 2007, company web site, retrieved February 2007 from: http://www.jetblue.com/about/