How JetBlue Does It

Recorded on February 14, 2017 CEO Robin Hayes and Hoover Institution board member Joel Peterson talk to Peter Robinson about how JetBlue has remained successful, despite all the regulations, competition, and pitfalls of running an airline. Peterson and Hayes argue that consolidation and the limited number of airlines in the United States have allowed for sustainable operating margins. JetBlue continues to have double-digit operating margins and great customer loyalty by focusing on safety, culture, and delighting customers. JetBlue has been voted best airline for customer satisfaction by JD Power for twelve years in a row. Hayes and Peterson support the Federal Aviation Administration’s (FAA) managing the safety aspect of regulations, but they prefer that another independent entity run the operations aspect of the airline industry. Although the Airline Deregulation Act in 1978 deregulated the airline industry, the airlines are still one of the most regulated industries in the United States, with more than 13,000 pages of FAA regulations. Additionally, 21 percent of the cost of the air ticket goes to the government via taxes. Legacy airlines, like United, American, and Delta, will charge high fares until a new airline comes in; then the legacy airlines will lower their fares to try to drive out the new airline/entrant. You need a low-cost structure to compete, which JetBlue has; JetBlue has not had to go into debt to fund its airplanes. They discuss how JetBlue has become synonymous with innovation and its decision to bring JetBlue’s investment arm to the Silicon Valley to further integrate disruptive technology into their airline. JetBlue, which wants to use technology to improve customer relations and track equipment, has invested in FLYR to study how the pricing method can be disruptive and thus improve ticketing. JetBlue’s keys to success and longevity are a great culture, innovation, great products, and maintaining cost advantages. JetBlue seeks to create a culture in which all employees are empowered to improve customers’ experiences, from the time they check-in to the time they pick up their bags. (Playing time: 40:54)