So welcome, this is our debrief on Jet Blue versus American Airlines.
Once again, as we've said in each of these debriefs to remind you that the purpose of
this debrief video is to provide you with some thoughts and insights as you've gone
through these questions that we ask about the case Once again,
if you have not read the case and have not answered those questions on your own,
I ask that you pause the video and do that right now.
Again, I will not be providing necessarily answers to the questions that we raise,
rather some things to think about as you go through your analysis and
thoughts on the case.
So let's dive in.
So for JetBlue, the first question we ask is
Do you agree with the decision by JetBlue to enter the Logan market?
Important thing here is to recognize there's really two elements to this
question.
The first is about market attractiveness.
And this is where often we think when we think about entry into different markets.
Is there sufficient demand to justify operating some flights out of
the Boston market However there's a second very important question which is,
how will your competitor's likely react?
It's really that combination that is really important when thinking about
growth through entry.
So this leads us to our second question here.
What will be the likely response by American Airlines, and
anticipating American Airlines' potential response,
what should you as Jet Blue do to prepare for this?
So, this is really the crux of the case here,
these competitive dynamics between Jet Blue and American Airlines.
And trying to foresee in Jet Blue's case How American Airlines might respond.
So we can think of a lot of specific tactics that American Airlines
might use in response to Jet Blue's announced entry.
Perhaps they engage in pricing, where they lower prices.
and induce a price war.
Perhaps engage in aggressive advertising to maintain their market share.
Perhaps they engage in rivalist behavior in other markets where they compete.
It spells over to other places and markets that American Airlines and
Jet Blue both fly.
Perhaps they pursue what we often call non-market strategies.
These are things where you might involve public officials and unions and the like.
Maybe you lobby to try to make things more difficult for JetBlue.
Blue to operate out of the [INAUDIBLE] market with local officials.
So again, if you're Jet Blue and
you can foresee that these are potential strategic actions, American Airlines might
take, then that gives you an opportunity to maybe think of ways Is to deter or
accommodate those strategies that American Airlines might pursue.
So again, this reasoning back and forth.
Now, of course,
we've simplified things by framing this as Jet Blue versus American Airlines.
The fact of the matter is,
there's a number of other operators within that environment, and
we ask in question number three, how will these other airlines react?
In particular, Delta, U.S. Air, Southwest and others So it's important to recognize
that each of these different carriers might have slightly different incentives.
They might have slightly different capabilities that they bring
to this competitive environment.
So take Southwest Airlines, for example.
Southwest Airlines is similar to JetBlue in that they're a low-cost
carrier in terms of how they position themselves.
However, an interesting question would be Who actually has the lower cost structure.
And, in fact, if Southwest has a lower cost structure than JetBlue,
they might not be as concerned as you might think about their entry there.
Take another player, Virgin Atlantic.
Now, Virgin Atlantic positioned themselves more as a premier carrier.
Especially doing transatlantic flights.
It may very well be the case that they don't see JetBlue as a threat at all.
They're not flying the same routes,
they position themselves differently in the market.
And in fact, they might be glad to see their entry to the extent that
their entry might hurt American Airlines,
who does compete with Virgin Atlantic on some of their flights.
So, this is kind of creating competition for their rivals here,
might be actually a good thing.
So again, it's important to recognize that each of these different
players has a different set of incentives and capabilities That might impact
the way they respond to the entry of JetBlue in the industry.
Michael LenoxSenior Associate Dean and Chief Strategy Officer
Jared HarrisSamuel L. Slover Research Chair in Business Administration
