JetBlue: “Stuck in the Middle”?
Entrepreneur David Neeleman, at the age of 25, co-founded
Morris Air, a charter air service that in 1993 was purchased
by Southwest Airlines (SWA). Morris Air was a low-fare airline
that pioneered many cost-saving practices that later
became standard in the industry, such as e-ticketing. After
working as an airline executive for SWA, Neeleman founded
another airline, JetBlue Airways, in 1998. When Neeleman
established JetBlue, his strategy was to provide air travel
at even lower costs than SWA. At the same time, he wanted
to offer better service and more amenities.
JetBlue copied and improved upon many of SWA’s
cost-reducing activities. For example, it started out by
using just one type of airplane (the Airbus A320) to lower
the costs of aircraft maintenance and pilot training. It also
chose to fly point to point, directly connecting highly trafficked
city pairs. In contrast, legacy airlines such as Delta,
United, or American use a hub-and-spoke system; such
systems connect many different locations via layovers at
airport hubs. The point-to-point business model focuses
on directly connecting fewer but more highly trafficked
city pairs. The point-to-point system lowers costs by not
offering baggage transfers and schedule coordination with
other airlines. In addition, JetBlue flew longer distances
JetBlue: “Stuck in the Middle”?Entrepreneur David Neeleman, at the age of 25, co-foundedMorris Air, a charter air service that in 1993 was purchasedby Southwest Airlines (SWA). Morris Air was a low-fare airlinethat pioneered many cost-saving practices that laterbecame standard in the industry, such as e-ticketing. Afterworking as an airline executive for SWA, Neeleman foundedanother airline, JetBlue Airways, in 1998. When Neelemanestablished JetBlue, his strategy was to provide air travelat even lower costs than SWA. At the same time, he wantedto offer better service and more amenities.JetBlue copied and improved upon many of SWA’scost-reducing activities. For example, it started out byusing just one type of airplane (the Airbus A320) to lowerthe costs of aircraft maintenance and pilot training. It alsochose to fly point to point, directly connecting highly traffickedcity pairs. In contrast, legacy airlines such as Delta,United, or American use a hub-and-spoke system; suchsystems connect many different locations via layovers atairport hubs. The point-to-point business model focuseson directly connecting fewer but more highly traffickedcity pairs. The point-to-point system lowers costs by notoffering baggage transfers and schedule coordination withother airlines. In addition, JetBlue flew longer distances
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