Early in its history JetBlue achieved a competitive advantage based on value innovation. In particular, JetBlue was able to drive up perceived costumer value while lowering costs. This allowed it to carve out a strong strategic position and move to a non-contested market space. This implies that no other competitors in the U.S. domestic airline industry were able to provide such value innovation at that point in time. Rather than directly competing with other airlines, JetBlue created a blue ocean.
Although JetBlue was able to create an initial competitive advantage, it was unable to sustain it over time. Because JetBlue failed in reconciling the strategic trade-offs inherent in combing differentiation and cost leadership, it was unable to continue its blue ocean strategy, despite initial success. Since 2007 JetBlue experienced a sustained competitive disadvantage, at one point in 2014 lagging the S&P 500 index by more than 100 percentage points.
A new leadership team CEO Robin Hayes put in place in early 2015 is attempting to reverse this trend. The new team made quick changes to improve the airline’s flagging profitability. It decided to start charging $50 per checked bag instead of offering it as a free service. Moreover, it also removed the additional legroom JetBlue was famous for in the industry, adding 10 percent more seats on its airplanes. It remains to be seen if JetBlue’s strategic repositioning will be successful.
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