Robin Hayes (JetBlue CEO) – How JetBlue Does It (Apr 2017)

Chapters

Abstract

JetBlue Airways: A Study in Sustainable Growth and Cultural Innovation

Cultivating Resilience and Customer Loyalty

JetBlue Airways, under the leadership of CEO Robin Hayes, demonstrates a sustainable business model, marked by robust operating margins even in economic downturns. A key measure of the airline’s success is its consistently high Net Promoter Score (NPS), evidenced by 12 consecutive years of J.D. Power awards in customer satisfaction. These accolades underscore the airline’s focus on maintaining customer loyalty and high service standards, despite industry challenges. The airline’s focus on culture and customer satisfaction has driven superior returns for shareholders. Despite not having a large network, JetBlue has achieved high levels of customer satisfaction and employee engagement. JetBlue emphasizes the importance of maintaining a culture that values innovation and piloting new ideas. The company invests in JetBlue Ventures, its investment firm in Silicon Valley, to foster innovation and stay ahead of industry trends.

Unique Corporate Culture and Innovative Practices

Analysts often highlight JetBlue’s distinct personality, attitude, and ‘niceness’, factors that differentiate it in a competitive industry. The airline’s strong corporate culture, where mutual respect and liking are prevalent, is central to its operational success. This culture is nurtured through practices like training every new employee at JetBlue University and emphasizing hospitality. The airline’s innovative approach is evident in features like seatback TVs in the cabin, enhancing passenger experience. JetBlue’s CEO, Robin Hayes, personally participates in cleaning planes and serving snacks to passengers, setting an example for the entire workforce. The company refers to its employees as “crew members” and emphasizes the importance of safety and customer delight. All new JetBlue crew members undergo a comprehensive training program that includes a session with the CEO. The company invests in hospitality training for its airport crew members to provide them with the tools they need to succeed. JetBlue’s approach to customer service is rooted in the belief that the company is a customer service company that happens to fly airplanes. The airline provides its crew members with the tools and training they need to deliver exceptional service.

Growth Strategies and Market Adaptation

JetBlue’s decision to not pursue the acquisition of Virgin America, despite initial interest, marked a strategic pivot towards organic growth. This shift included the purchase of 30 additional airplanes, entailing a significant investment. The launch of the Mint service, featuring lie-flat seats and personalized service, was a strategic move to diversify and capture the premium market segment. However, this initiative sparked internal controversy, challenging JetBlue’s traditional egalitarian approach. The board is concerned about diluting the company’s culture as it grows. JetBlue’s measured growth approach helps maintain its culture and avoid dilution. JetBlue’s strategic positioning between ultra-discount and long-haul network carriers is a calculated balance of offering premium services at competitive prices. This approach extends to enhancing the core economy seating experience. Despite the focus on expansion and market diversification, JetBlue remains committed to preserving its unique culture, which has been integral to its high employee morale and shareholder returns. JetBlue’s pricing power comes from factors beyond price, such as frequency, convenience, airport experience, and customer service. The JetBlue experience aims to foster loyalty among customers.

Balancing Expansion and Cultural Integrity

To address the challenges incumbents face as they become more successful and have more to lose, JetBlue focuses on keeping its culture and innovation alive, which it believes will allow it to continue innovating and competing effectively. JetBlue’s cost advantage strategy continues to disrupt the market, as seen in its entry into routes like Boston-LaGuardia, significantly reducing fares and stimulating market growth. JetBlue acknowledges the potential for disruption in the travel sector, similar to what happened in ground transportation and lodging. The airline aims to be part of potential disruptions rather than be caught off guard. JetBlue has invested in companies like Flyer, exploring innovative pricing models for airlines. JetBlue maintains a low-cost structure to compete effectively and offer affordable fares. This strategy has allowed JetBlue to expand its network and routes, such as offering low-cost flights between Boston and New York.

Leveraging Technology for Operational Excellence

JetBlue Technology Ventures reflects the company’s proactive stance towards technological integration. This venture capital subsidiary is focused on tech-enabled solutions to enhance operational efficiency and productivity. JetBlue’s approach to technology is not seen as disruptive but as an opportunity for incremental improvements, which includes leveraging Silicon Valley’s innovation for advancements like ground equipment tracking and exploring new pricing models with Flyer. JetBlue recognized the need for innovative thinking in the airline industry to stay competitive. The primary goal of establishing tech ventures was to gain a foothold in the technology landscape and capitalize on emerging ideas. These ventures aim to improve efficiency, productivity, and innovation within the airline. For instance, new technology is used in contact centers to interact with customers through their preferred channels (social media, phone, email). Advanced tracking systems for ground equipment enhance safety and efficiency. JetBlue moved its digital development team to the New Lab in the Brooklyn Navy Yard to incubate a startup-like environment within JetBlue.

Public Policy Advocacy and Industry Leadership

CEO Robin Hayes actively engages in public policy discourse, advocating for reforms like the modernization of air traffic control through public-private partnerships and expansion of Open Skies treaties. His stance on deregulation, aimed at fostering competition and reducing customer fares, highlights his vision for the industry. Additionally, Hayes’ perspective on TSA operations includes a push for transparency, efficiency, and the exploration of privatization under TSA oversight. Air traffic control: US can learn from Britain’s mixture of ground-based and satellite-based air traffic control system, operated by an independent company. Open Skies treaties: Expanding opportunities for airlines to fly to other countries. Deregulation: Reducing regulations that restrict how airlines distribute products, set prices, and include taxes in ticket prices. Challenges with TSA: Customers’ dissatisfaction with TSA pat-downs and long wait times. Improvements: PreCheck program as a successful partnership between TSA, Customs, and Border Protection. Transparency: Increased transparency in reporting TSA wait times at major airports. Privatization: Exploring the option of privatizing TSA operations at certain airports, but with concerns about maintaining consistency and effectiveness.

JetBlue’s Challenger Mindset and Future Directions

As JetBlue grows, sustaining its ‘challenger’ brand identity, characterized by customer-centricity and continuous innovation, remains a priority. Hayes contrasts this mindset with that of incumbent carriers, emphasizing the importance of staying true to core values in the face of competition. The airline’s future directions include a stronger digital presence and ongoing digital transformation. JetBlue emphasizes the importance of innovation and maintaining a great company culture. The airline’s commitment to innovation is evident in its achievements, such as flying the first regularly scheduled flight from Fort Lauderdale to Havana. Distinction from British Airways: JetBlue’s focus on being a challenger brand, challenging the status quo and seeking growth opportunities, in contrast to British Airways’ focus on defending its established position. Sustainability of the Challenger Brand Approach: Questioning how long JetBlue can maintain its challenger brand mentality and whether it will eventually adopt a more incumbent mindset. JetBlue criticizes legacy airlines (United, American, and Delta) for charging high fares and not responding adequately to market dynamics. JetBlue’s low-cost structure and innovative approach allow it to disrupt the market and drive down fares, benefiting consumers.

JetBlue’s Commitment to Innovation and Customer Satisfaction

JetBlue Airways’ journey is a testament to the effectiveness of combining a strong, respectful corporate culture with strategic innovation and customer-centric practices. The airline’s ability to adapt to market changes while maintaining its core values and operational integrity showcases a successful model in the dynamic aviation industry. As JetBlue continues to evolve, its commitment to innovation, customer satisfaction, and sustainable growth remains central to its mission and future endeavors.

Notes by: OracleOfEntropy