Tuesday, May 13, 2014

JetBlue: Stuck in the Middle?

Let me start by acknowledging that, as a customer, I love JetBlue.  Their service stands out in an industry known for, quite frankly, a pretty awful customer experience.  Having said that, I've always worried that they run the risk of being "stuck in the middle" in terms of their strategic position.  They are not a low cost player in the industry, but on the other hand, they cannot command a premium price either as a truly differentiated player.   Now the Wall Street Journal reports that CEO Dave Barger is under fire, as financial performance has been subpar.  The paper notes, "Meanwhile, excluding fuel and profit-sharing, unit cost—the cost to fly a seat a mile—rose by 6.3%, and labor expenses were up about 15% on a unit-cost basis, the biggest jump ever year over year."  

What's the diagnosis in this article?  Wall Street Journal writer Susan Carey explains, "But many analysts and investors believe that JetBlue is marooned in an industry middle ground, between much larger, full-service carriers like Delta Air Lines Inc. that are improving their service and profitability, and successful ultra-discounters like Spirit Airlines Inc. that go after passengers who don't want perks—just rock-bottom fares. JetBlue has been profitable since 2009, but only marginally so and it often disappoints on quarterly profits."   That sure sounds like a company stuck in the middle, doesn't it?  

No comments: