Jet Blue vs Delta

Barrier to entry: - High barriers to entry, to a certain extent help understand the risks involved in operating in the aircraft industry.

JetBlue Airways, based in Forest Hills, New York, was founded in February, 1999, by David Neeleman, the son of Mormon missionaries. He was born in Sao Paolo, Brazil, but raised in a tightly-knit Mormon family (Gajilan, 2003). After serving as a Brazilian missionary during college, Neeleman returned to his family’s base in Salt Lake City and began an enterprising condominium rental business.

The risk of entry into the airline industry by potential competitors is low due to the “liberalization of market access, a result of globalization. According to the IATA (International Air Transport Association), about 1,300 new airlines were established in the last 40 years,” (Cederholm, 2016). The cost structure of businesses in an industry is a determinant of rivalry. In the Airlines Industry, fixed costs are high, because before the organization can make any sales, they must invest in air crafts, fuel and service employees. These items come attached with hefty price tags. Industries that require such enormous amounts of start-up capital as predicted by many analysts

American airline industry is steadily growing at an extremely strong rate. This growth comes with a number economic and social advantage. This contributes a great deal to the international inventory. The US airline industry is a major economic aspect in both the outcome on other related industries like tourism and manufacturing of aircraft and its own terms of operation. The airline industry is receiving massive media attention unlike other industries through participating and making of government policies. As Hoffman and Bateson (2011) show the major competitors include Southwest Airlines, Delta Airline, and United Airline.

The airline industry has always been a fiercely competitive sector. Since the invention of low-cost carriers, also known as no-frills or

JetBlue has been recognized for offering cheap flights to business travelers, in the same way that other airlines come up with similar offers for different types of travelers. In 2009, (case study) JetBlue was on top of the list of the low-cost carriers. The airline is classified as a major carrier, which means their annual revenue starts at $1 billion, JetBlue has a $3 billion revenue, still and all it is mentioned that JetBlue is smaller in comparison to other major airlines.

The Airline Industry is in an interesting situation. Simply adding a low cost alternative is not enough in the industry. The Internet has made the power of buyers grow with the transparency of ticket prices. This is not something that will change any time soon. Because of this profitability is predominately reserved for low-cost yet distinctive carriers. No consumer wants to ride what they consider a “lesser” airline. Airlines need a way to distinguish themselves from one another while also acknowledging the increased power of buyers.

The airline industry can be considered an imperfect oligopoly. There are several large carriers that dominate long distance flights, and many small carriers that compete for short distance flights. Competition is fierce, and the return for most carriers is very low. Some airlines are trying to differentiate themselves, like JetBlue for example, by offering superior services at low prices. Other low cost airlines, like Southwest, offer low costs with no frills. Most airlines offer a frequent flyer programs in order to develop brand loyalty. In recent years there has also been several alliances formed between airlines. These alliances enable

Barriers to Entry – High cost of entry and market domination limits entrants into the industry. The upfront cost for new airlines is capital intensive. In addition, it’s difficult for new airlines to obtain airport slots for takeoff and landing which are determined by the airports. Established airlines already hold the monopoly over slots at certain airports, making it harder for new airlines to infiltrate (Airlines Industry Profile, 2014). The industry is also dominated by five key airlines; American, United, Delta, Southwest and JetBlue which make it difficult for new airlines to gain market share. At 40 of the 100 largest U.S. airports, a single airline controls a majority of the market. At 93 of the top 100, one or two airlines control a majority of the seats (Koenig & Mayerowitz, 2015). In addition, with fuel being the number one cost for airlines, the volatile fuel prices make it hard for new airlines to make a profit. Domestic airlines in the U.S. spend a combined $2 to $5 billion on jet fuel every month. As a stat up airlines, the price paid for fuel is the same weather planes are full or empty which could stop new airlines from entering the industry. Lastly, the FAA has strict regulations which discourage new airlines from entering the industry. All new entrants must abide by Federal Aviation Authority regulations on airworthiness, pilot competence, and related issues (Airline Industry Profile, 2014). Overall, entry into the airline industry is high and there is

* First of all people who go to an airline are because they have the need to travel, which the main feature is. Inducing the consumer or person, as their main need.

In this paper I will be analyzing the airline industry using Porter’s Five Forces. Porter’s Five Forces is a business management tool that allows firms to possess a clearer perception of the forces that shape the competitive environment of an industry, and to better understand what these forces indicate about profitability with regard to the microenvironment. The forces include Competitors, Threat of Entry, Substitutes, Suppliers, and Customers. When firms are able to widen their conception of competition beyond their direct competitors, and consider the broader economic fundamentals of their industry, they are able to form better strategy to better optimize their profitability. The airline industry is one characterized by low

It may be lower risk in in the aviation markets because of entry regulations that a high level of governmental barriers to open the freedom of flights, also the industry needs high fixed costs and assets of airline operation, but based on the increasing demand of travelers by air, it's given the high intensity of rivalry.

Air has become the most preferred method of transportation for many people around the world and more travelers are looking for affordable ways to travel between destinations. Consequently, the increase in customer’s demand for cheaper fares has created an excellent business opportunity for low cost airlines to emerge. Low cost carriers have been successful satisfying customer’s demand for cheaper fares and reducing labor cost. “A high quality low-price entry strategy may seem very attractive at first glance. Obviously, an airline, or any startup firm for that matter, is likely to win a market if it can indeed provide a better product for a

If the airlines want to cope with the competitors, they need to invest large financial resources to build the

The brand loyalty is another very important barrier to entry. When choosing the airlines, customers, especially “the high profile” ones, are being very careful about health and safety, comfort and other details, therefore tend to choose companies with the brand they trust. Overall, the threat of new entrants is low, because there is a number of very hard to overcome barriers to entry, and if the small company appears on the market, it tends to be absorbed by one of the major players in the industry.