JetBlue Airlines 2004 Annual Report Download - page 11

Download and view the complete annual report

Please find page 11 of the 2004 JetBlue Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

enables more customers to enjoy the convenience of non-stop travel and limits connecting flight delays
and lost baggage.
Differentiate Our Product and Service. We believe that a key to our initial and long-term success is
that we offer customers a better alternative for air travel and a distinctive flying experience that
includes new aircraft, leather seats, simple and low fares, free LiveTV at every seat, pre-assigned
seating and reliable performance. We place a very high emphasis on customer service. We strive to
communicate openly and honestly with customers about delays, especially when weather or mechanical
problems disrupt service. Unlike most other airlines, we have a policy of not overbooking our flights.
Based on customer feedback, we believe our high-quality service is an important reason why our
customers choose us over other airlines. In 2004, we continued to improve our customers’ flying
experience by increasing the total number of LiveTV channels from 24 to 36 and by adding movie
channel offerings from News Corporation’s Fox Entertainment Group, both of which are scheduled to
be available on all of our aircraft in early 2005. Later in 2005, we plan to further expand our in-flight
entertainment offerings across our fleet with the addition of free XM Satellite Radio.
Our Competitive Strengths
Low Operating Costs. For the year ended December 31, 2004, our airline cost per available seat
mile of 6.03 cents was lower than any of the other major U.S. airlines, which reported an average cost
per available seat mile of 10.91 cents. Low unit costs allow us to offer fares low enough to stimulate
new demand and to attract customers away from higher-priced competitors.
The key to our low unit costs is the high productivity of our assets and our employees. Some of
the factors that contribute to our low unit costs are:
•We utilize our aircraft efficiently. For the year ended December 31, 2004, each of our aircraft
operated an average of 13.4 hours per day, which we believe was higher than any other major
U.S. airline. By using our aircraft more efficiently than other airlines, we are able to spread our
fixed costs over a greater number of flights and available seat miles. We achieve high aircraft
utilization in several ways. We operate a number of ‘‘red eye’’ flights, which enable a portion of
our fleet to remain productive through the night. In addition, our aircraft are scheduled with
minimum ground time to avoid unnecessary time spent at airport gates. Quick, efficient airport
turns increase the number of daily flights per aircraft.
•Our workforce is productive. We take great care to hire and train employees who are enthusiastic
and committed to serving our customers and we incentivize them to be productive. Our
employee productivity is created by greater fleet commonality, fewer unproductive labor work
rules, use of part-time employees and the effective use of advanced technology. For example,
most of our reservation sales agents work from their homes, providing us better scheduling
flexibility and allowing employees to customize their desired schedules. Our compensation
packages are designed to align the interests of our employees with our stockholders.
•We have low distribution costs. Our distribution costs are low for several reasons. Direct bookings
by our customers save computer reservation systems fees. For the year ended December 31,
2004, 75.4% of our sales were booked on www.jetblue.com, our least expensive form of
distribution, and 22.9% were booked through our reservation agents.
•We currently operate only one type of aircraft, with a single class of service. Operating a fleet of
identical aircraft leads to increased cost savings as maintenance issues are simplified, spare parts
inventory requirements are reduced, scheduling is more efficient and training costs are lower. A
single class of service simplifies our operations, enhances productivity, increases our capacity and
offers an operating cost advantage. We consider the addition of the Embraer E190 aircraft in
late 2005, although a second fleet type, to be an extension of our business strategy. With a
3