Operating a Lean Machine..

Knowing the industry in which you operate and charting a path from there is a good plan. Some companies like JetBlue operate in a market controlled by a few players doing business independently. The airline industry is oligopolistic even though the traditional operators such as American Airlines have been forced to adapt to a changing environment forced upon them by smaller, leaner low budget carriers. By offering leaner service modules, forgoing the idea of a huge airline hub, and utilizing the internet as an additional agent, JetBlue has managed to remain afloat in an industry awash with failures and bailouts. Post September 11 2001 travel numbers nosedived but has since rebounded. The fear of another attack coupled with ever increasing oil prices has squeezed the industry into submission. JetBlue and other smaller operators benefited from deregulation admonished by the Civil Aeronautics Board that allowed airlines to operate as market forces allow. This along with the Airline Deregulation Act of 1978 allowed them to set fares, chose routes and tempt supply and demand forces like other businesses. The airline industry today is based on low cost, efficient service with a few opting for employee ownership. 


Jet fuel is now the single largest expense an airline faces. In 2000, the airlines fuel bill was $14 billion. It is now pushing $80 billion and climbing. Southwest, the most profitable carrier, recently announced that this year’s fuel bill will be $500 million more than last year and equal to 2007 profits. During the first quarter of 2008 everyone lost money. fast-forward to today, and some airlines are resorting to buying refineries, opting to control supply vertically. We have not seen the last word on this...keep listening..