COMPANY PROFILE

JetBlue Airways
Corporation

REFERENCE CODE: 0380FC57-15E8-4230-B463-61ED4CF31135

PUBLICATION DATE: 13 Feb 2015
www.marketline.com
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JetBlue Airways Corporation

TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................3
Key Facts...............................................................................................................3
SWOT Analysis.....................................................................................................4

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Company Overview

COMPANY OVERVIEW
JetBlue Airways Corporation (JetBlue or the company) is a low-cost passenger airline that provides
customer service primarily on point-to-point routes. The company primarily operates in the US. It is
headquartered in Long Island City, New York and employed 11,021 full-time employees as on
December 31, 2013.
The company recorded revenues of $5,441 million during the financial year ended December 2013
(FY2013), an increase of 9.2% over FY2012. The operating profit of the company was $428 million
in FY2013, an increase of 13.8% over FY2012. Its net profit was $168 million in FY2013, an increase
of 31.3% over FY2012.

KEY FACTS
Head Office

JetBlue Airways Corporation

27-01 Queens Plaza North
Long Island City
New York 11101
USA

Phone

1 718 286 7900

Fax
Web Address

http://www.jetblue.com

Revenue / turnover 5,441.0

(USD Mn)
Financial Year End

December

Employees

11,021

NASDAQ Ticker

JBLU

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SWOT Analysis

SWOT ANALYSIS
JetBlue is a low-cost passenger airline that provides customer service primarily on point-to-point
routes. The companys strong brand recognition and service offerings enhance the companys
competitive advantage, increase its customer base and make markets entry easier. However, rising
aircraft fuel costs could negatively impact the companys operations which in turn put a downward
pressure on its margins and profitability.
Strengths

Weaknesses

Strong brand recognition and competitive

service offerings increase margins
High aircraft utilization helps to maintain low
cost structure

High fixed obligations limits the ability to

service current or future obligations
High dependence on the New York
metropolitan market could impact the cost
structure

Opportunities

Threats

Growing global tourism industry could help

to increase market position
Growing US airlines industry would boost
up market share and revenues
Commercial partnerships to drive
incremental traffic and revenue

Fluctuating fuel prices could adversely

impact operations and margins
Stringent government regulation could
increase operating costs
Intense competition could negatively impact
margins

Strengths

Strong brand recognition and competitive service offerings increase margins

JetBlue is widely recognized global brand. It is the fifth largest passenger carrier in the US based
on revenue passenger miles. In addition, the company received several prestigious awards in the
past year. For instance, in March 2013, JetBlue was named "Airline of the Year" at the annual Skytrax
World Airline Awards in 2011 and again in 2012 for its inflight product and operational excellence.
In 2012, the company was voted Highest in Airline Customer Satisfaction among Low-Cost Carriers
by J.D. Power and Associates for the eighth consecutive year.
Furthermore, JetBlue is also the first and only airline in the US to offer its own Customer Bill of Rights,
with meaningful and specific compensation for customers inconvenienced by service disruptions
within JetBlue's control. The company has further enhanced its service offerings by providing all of
its aircraft with leather seats in a single class layout. JetBlues Airbus A320 aircraft, with 150 seats,
has a wider cabin than both the Boeing 737 and 757 aircraft operated by many of its competitors on

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SWOT Analysis

their domestic routes. The companys Embraer 190 aircraft each have 100 seats arranged in a space
friendly two-by-two seating configuration and are wider than industry average for this type of aircraft.
The company offers the most legroom in the main cabin of all US airlines (based on average fleet-wide
seat pitch). JetBlue has aircraft with roomy seats and more legroom than other domestic airlines.
Additionally, the companys in-flight entertainment systems include 36 channels of free DirecTV,
100 channels of free SiriusXM satellite radio and premium movie channel offerings from JetBlue
Features, its source of first run films. Moreover, JetBlue introduced Even More Speed, which offers
customers the option to enjoy an expedited security experience. The company also introduced a
new tier within its TrueBlue frequent flyer program called TrueBlue Mosaic to better recognize and
reward its most loyal and highest-value customers.
Hence, the strong brand recognition and service offerings enhance the companys competitive
advantage, increase its customer base and make markets entry easier. Additionally, it enables the
company to charge premium prices than its competitors and thus register relatively higher margins.
High aircraft utilization helps to maintain low cost structure
JetBlue, that operates worlds largest fleet of Airbus A321, Airbus A320 aircraft and the Embraer
190, utilizes its aircraft efficiently to spread its fixed costs over a greater number of flights and
available seat miles. For FY2013, the companys aircraft operated an average of 11.9 hours per
day, which is the highest among all major US airlines. The companys airport operations allow it to
schedule aircraft with minimum ground time. In addition, the average age of the companys fleet is
7.1 years, which is one of the youngest of any major US airline. Operating young fleet and
incorporating latest technologies resulted in aircrafts being more efficient and dependable than older
aircraft.
Moreover, operating only three types of newer aircraft, the Airbus A321, Airbus A320 and the Embraer
190, results in cost savings for JetBlue as maintenance processes are simplified, spare parts inventory
requirements are reduced, scheduling is simplified and training costs are lower. Moreover, in FY2013,
JetBlues cost per available seat mile, excluding fuel, of 11.7 cents is among the lowest reported by
all other major US airlines.
Therefore, effective utilization of aircraft allows JetBlue to spread its aircraft related costs strategically
which in turn helps the company to maintain its low cost structure advantage relative to its competitors.

Weaknesses

High fixed obligations limits the ability to service current or future obligations
The company is highly indebted due to high fixed obligations. In FY2013, JetBlue's debt of $2.59
billion, accounted for 55% of the total capitalization. In addition to long-term debt, the company has
a significant amount of other fixed obligations under leases related to aircraft, airport terminal space,

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other airport facilities and office space. As of December 31, 2013, future minimum payments under
non-cancelable leases and other financing obligations were approximately $2.1 billion for 2014
through 2018 and an aggregate of $1.6 billion for the years thereafter.
Moreover, JetBlue will incur additional debt and other fixed obligations as it takes delivery of new
aircraft and other equipment and continue to expand into new markets. Therefore, JetBlue's high
level of fixed obligations could impact its ability to obtain additional financing to support its expansion
plans. In addition, it could also lead to the diversion of its cash flows from operations and expansion
plans to service its fixed obligations. This in turn places the company at a possible competitive
disadvantage compared to competitors that have better access to capital resources.
High dependence on the New York metropolitan market could impact the cost structure
JetBlue is highly dependent on the New York metropolitan market. It maintains a large presence in
this market with approximately one-half of the companys daily flights having JFK, LaGuardia, Newark,
Westchester County Airport or Newburghs Stewart International Airport as either their origin or
destination. Recently, the company has experienced an increase in flight delays and cancellations
at JFK due to airport congestion which has adversely affected JetBlues operating performance and
results of operations.
In addition, the companys business could be further harmed by an increase in the amount of direct
competition it faces in the New York metropolitan market or by continued or increased congestion,
delays or cancellations. The companys business would also be harmed by any circumstances
causing a reduction in demand for air transportation in the New York metropolitan area, such as
adverse changes in local economic conditions, negative public perception of New York City, or
significant price increases linked to increases in airport access costs and fees imposed on passengers.
Hence, such dependence on single or few markets for majority of its revenues would increase the
operating costs of the company in certain circumstances which are beyond the companys control
and would ultimately impact its cost structure.

Opportunities

Growing global tourism industry could help to increase market position

The tourism industry in the world has witnessed a strong recovery since its downfall due to recession
in 2008. The recovery is primarily boosted by improved economic conditions worldwide. According
to the World Tourism Organization (UNWTO), international tourist arrivals grew by 5% in 2013 to a
total 1,087 million, up from 1,035 million in 2012. In terms of regions, Central and Eastern Europe
was the best performer with a 7% growth in arrivals.
Furthermore, UNWTO forecasts international tourism to continue growing in 2014. Arrivals are
expected to increase by 4% to 4.5% globally. In terms of region, prospects are stronger for Asia and

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SWOT Analysis

the Pacific (+5% to +6%) and Africa (+4% to +6%), followed by Europe and the Americas (both +3%
to +4%). In the Middle East (0% to +5%) prospects are positive yet volatile.
With the anticipated growth, business and consumer confidence has picked up. This growth in world
tourism industry will enhance airline business.Thus, a growing end market auger well for the company
as it is well positioned to capitalize on the growing global tourism industry.
Growing US airlines industry would boost up market share and revenues
The US airlines industry showed healthy growth over last couple of years with the exception of 2009.
The industry is expected to continue to grow till in the forthcoming years up to 2016. According to
MarketLine (a unit of Informa plc), the US airlines industry recorded revenues of $195.9 billion in
2013, an increase of 2.1% over 2012. MarketLine expects that the industry growth will accelerate
further and reach a value of $214.3 billion by the end of 2018, an increase of 9.4% over 2013.
JetBlue generates approximately 71.4% of its revenues from the US market. Hence, the growing
US airlines industry would provide immense opportunities to the company to boost up its market
share and revenues.
Commercial partnerships to drive incremental traffic and revenue
JetBlue frequently participate in marketing alliances which, provides code-sharing, frequent flyer
program reciprocity, coordinated flight schedules and other joint marketing activities. For instance,
in May 2014, JetBlue, New York's Hometown Airline, and Turkish Airlines launched a unilateral
codeshare to provide expanded travel options for customers worldwide. This agreement allows
customers to purchase tickets combining flights on both carriers and enjoy one-stop ticketing and
baggage check-in on their day of departure. Similarly, in December 2013, the company, New York's
Hometown Airline, and SAA, launched a bilateral codeshare, making it easier for travelers to connect
between the two carriers' networks via New York or Washington.
Moreover, in October 2013, JetBlue started bilateral codeshare with Emirates, the Dubai-based
international carrier and one of the world's fastest growing airlines. Under the agreement, JetBlue
will place its "B6" code on all Emirates flights to and from the US, including the newly inaugurated
non-stop Emirates route between New York/JFK and Milan, Italy. Through this arrangement, JetBlue
and Emirates will now be able to offer U.S. government employees and contractors a competitive
choice of destinations and itineraries throughout the Emirates network. The partnership is expected
to deliver considerable benefit to communities across the JetBlue network. Similarly, in July 2013,
JetBlue and SAA announced a bilateral codeshare agreement to seamlessly connect the carriers'
networks via New York's John F. Kennedy International Airport and Washington's Dulles International
Airport. Additionally during January 2013, JetBlue and Asiana Airlines launched an interline agreement
to connect each other's networks and bring new flight options to travelers between Asia and the
Americas.
As of December 2013, JetBlue had 31 partners, which offers its customers the opportunity to book
travel to hundreds of destinations in six continents. Thus, JetBlues commercial partnerships with

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various other airline companies allow the company to leverage its strong network and drive incremental
traffic and revenue while improving its off-peak periods.

Threats

Fluctuating fuel prices could adversely impact operations and margins

Jet fuel forms the main raw material used in the airline industry. The demand for petroleum and
related products has historically been cyclical and sensitive to the availability and prices of oil and
related feedstock. Historically, international prices of crude oil and refined products have fluctuated
widely due to many factors that are beyond the control of companies like JetBlue. Fuel prices and
availability are subject to wide price fluctuations based on geopolitical issues and supply and demand,
which can neither be controlled nor accurately predicted. According to IATA (International Air Transport
Association), in May 2014, average price of jet fuel in North America increased by about 6.7% to
$122.2 per barrel as compared to average fuel price in May 2013. However, the average fuel price
was $123.3 per barrel in 2014 which impacted the overall fuel bill of the airline industry by $6.3
billion.
In FY2013, fuel costs represented nearly 38% of JetBlues total operating costs. Significant changes
in fuel prices can therefore have a considerable effect on the company's result. The increase in
global and regional oil prices exposes the company to extreme fluctuations in earnings, which is
likely to have an adverse consequence on its growth initiatives. Thus, any increase in aircraft fuel
costs could negatively impact the companys operations which in turn would put a downward pressure
on its margins and profitability.
Stringent government regulation could increase operating costs
Airlines are subject to extensive regulatory and legal compliance requirements that result in significant
costs. The operations of JetBlue are subject to regulation by the Department of Transportation (DOT),
the Federal Aviation Administration (FAA) and other governmental agencies. The FAA requires
operating, air worthiness and other certificates; approval of personnel who may engage in flight,
maintenance or operation activities; record keeping procedures in accordance with FAA requirements;
and FAA approval of flight training and retraining programs. A decision by the FAA to ground, or
require time-consuming inspections of or maintenance on, all or any of its aircraft for any reason
may increase significant additional costs to the company. In addition to state and federal regulation,
airports and municipalities enact rules and regulations that affect the companys operations. Additional
laws, regulations, taxes and airport rates and charges have been proposed from time to time that
could significantly increase the cost of airline operations or reduce the demand for air travel. If
adopted or materially amended, these measures could have the effect of raising ticket prices, reducing
air travel demand and/or revenue and increasing costs.
Hence, complying with such laws and regulations could increase the operating costs of JetBlue
which would have a significant impact on its revenues, profitability and margins.

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Intense competition could negatively impact margins

The US airline industry is characterized by intense competition. Traditionally, the industry has been
dominated by the major US airlines, the largest of which are United Continental Holdings, Delta Air
Lines, SkyWest Airlines, and Southwest Airlines, among others. Furthermore, some of the companys
competitors have substantially greater financial resources, including more favorable hedges against
fuel price increases and lower cost structures than JetBlue. While JetBlues costs remain lower than
those of its largest competitors, the difference in the cost structures and the competitive advantage
previously enjoyed by it and other low-cost airlines has diminished. The extremely competitive nature
of the airline industry could prevent JetBlue from attaining the level of passenger traffic or maintaining
the level of fares required to maintain profitable operations in new and existing markets and could
impede the companys profitable growth strategy, which would harm its business. Additionally, if a
traditional network airline were to fully develop a low cost structure, or if JetBlue were to experience
increased competition from low cost carriers, its business could be materially adversely affected.
Thus, intense competition could lead to price wars, which in turn could negatively impact the cost
structure and profitability of the company.

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