The Battle For Logan Airport: American Airlines Vs Jetblue (A) Case Study Solution
- What should Joe Smith do? Should AA respond to JB’s entry into Logan Airport? Why or why not?
Responding to the entrance of JetBlue in Logan has been of great importance because Logan has represented 22nd airport where the American airline industry is likely to compete with a new entrant - JetBlue in the Low-cost carrier (LCC) market. For Americans, Boston’s airline market is considered critical in terms of driving healthy revenue growth. Due to the long-standing history of American Airlines offering its services at Logan, the failure to respond to the entry of JetBlue in Logan would badly influence its internal operations and reputation in the market.
Initially, American Airlines adapted acquisition as the strategic approach in terms of business growth. However, the roots of American Airlines were mainly associated with Aviation Corporation since its establishment which later expanded to wide-ranging services. The competition has significantly increased at both the regional and national level after the Airline Deregulation Act of 1978. Thus, failure to respond to such competitive threats would result in adverse consequences associated with operational and financial performance. The possible consequences include taking over the substantial customer base through LLC service offerings by JetBlue resulted in loss of market and the presence of many LLC service providers in the airline industry.
Therefore, Joe Smith is required to respond adequately to the entrance of JetBlue such as the launch of LCC service in the Boston market, and run an effective marketing campaign - an approach to communicate about the importance of its success. Similarly, American Airlines is recommended to expand its business operations and enter in the LCC service segment to remain competitive in Boston. The other strategic approach used by AA to achieve competitive advantage included cost reduction by around $2 billion, and cost restructuring due to a significant decline in stock price i.e. more than 60 percent. (Chen, et al., 2004, )
- If AA responds what considerations should be taken into account? Specifically, what should its response look like?
Considering the response of American Airline against the entrance of JetBlue, the two crucial factors that mainly differentiated the business models of airlines were based on the breadth of its geographic coverage and the use of the hub-and-spoke system. Before the making of a response plan, AA must analyze if it has the capability to implement the plan successfully which is known to be in relation to the management actions. Similarly, steps should be taken for the determination of the resources and core competencies that can be efficiently used for the execution of the plan in order to adopt a cost reduction approach aimed to offer cheaper LCC services to customers.
Because the approach to launch LCC services in Boston would require heavy investment and sufficient operational resources which might turn out to be a challenge for AA. Due to this reason, Joe Smith and the senior management of the organization must estimate the amount of time that would be required for the launch of the LCC service. This would bring improvement in liquidity, customer focus, culture, and financials of the organization. Additionally, there is a requirement to circulate the main response plan. The implementation is a bit challenging and requires a substantial amount of time mainly due to operational legal requirements and complex business models.
For this reason, the management of AA would have to take permission from the specified regulatory authority as it is considered one of the most time-consuming business activities. Similarly, the offering of LCC services must be similar or improved as compared to the services offered by JetBlue. The preference of the services is primarily on high-quality services i.e. no compromise on service quality to improve the experience of customers. Because American passengers represented the highest market share of the total passenger service i.e. around 13 percent. In particular, the focus of JetBlue was to improve the customer experience by the provision of quality services coupled with other amenities like more leg room, leather seats, ticket less travel, and free satellite TV at every seat. Thus, the need to focus on consumer loyalty is essential............
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