JetBlue Skies Ahead
The founders of JetBlue Airways use IT as the backbone of their "high-tech, high-touch" startup. Can you say, "last-mover advantage"?
CIO — Like everyone else in the airline industry, JetBlue Airways saw business drop in the aftermath of September 11--the day the startup was scheduled to unveil its initial public offering. But unlike most others, JetBlue rebounded by year’s end and continued to climb.
The low-cost carrier’s income statement flew against travel industry trends. JetBlue posted a profit of $38.5 million on $320.4 million in revenue in 2001, a year in which the U.S. airline industry lost $7.7 billion. In the first quarter of 2002, the company registered a $13 million profit on $133.4 million in revenue when major airlines lost another $2.4 billion. JetBlue kept on hiring employees, continued to buy jets and upped its IT investments.
And seven months after the scrapped IPO announcement, JetBlue went public on April 12, 2002, posting 67 percent gains in the first day of trading -- the best performing stock debut on Wall Street in more than a year.
So how has this startup airline managed to take off when some of the industry’s biggest names have struggled to stay aloft? What makes JetBlue grow in a field where more than 100 new ventures have failed since deregulation in 1978? And how can it manage its future in an industry characterized by low profit margins and high fixed costs, in which a minor revenue shortfall can have a disproportionately major effect on finance (the four-day shutdown after 9/11 providing the most extreme example)?
Call it starting with a fresh canvas. Call it last-mover advantage. And call IT central to the plot.
JetBlue, started four years ago by a duo of airline industry veterans who amassed $160 million in capital, began with a simple
plan to offer high-end customer service at low-end prices (averaging $99 each way). So while passenger-facing elements emphasize service and comfort -- JetBlue boasted a new fleet of Airbus A320 planes with all-leather upholstery and seat-back TVs when it first flew in 2000 -- executives have invested heavily in automation, from ticket sales that stress direct-sale Web purchases to electronic tagging on bags.
"They’ve redefined what is expected of a startup airline," says Stuart Klaskin, a Coral Gables, Fla.-based aviation consultant. "They said, Let’s completely wipe the slate clean. And from a technology standpoint and a customer service standpoint, they have done things that most other people in the airline industry have only thought about."
So far, that combination of being a late arriver and early adopter is serving JetBlue well. The airline operates at 70 percent of the cost of the biggest carriers, while flying significantly fuller planes. It remains a nonunion shop. JetBlue also sees half of its customers return to fly again; and 20 percent of passengers make up 50 percent of the airline’s revenue. And there’s that matter of profits.
