Jet Blue Airlines Cost Control
The Jet Blue Airlines is a flight company, which forms a major low cost mode of flight in America. It has over more than 50 destination world wide, with a fleet of around 132 cabin crews. It was founded in 1999 by David Neeleman, who also acted as the Chief Executive Officer. Its initial name was ‘New Air’. The company had also other executives, who were formerly working for Southwest Airlines. Its foundation was focused on offering high class but low price flight services. Understanding the high competition in the market, the company sought to offer a higher class service which could however be purchased at a low cost.
Since its establishment JetBlue has been listed among the world’s most popular airlines with close to two billion of its total capital market. The company is under the ownership of JetBlue Airways Corporation and its headquarters are in Forest Hills in New York City. It operates from John F. Kennedy International Airport as the home country airport. A market survey and analysis shows that, the JetBlue airline had a steady growth in its financial income. However, the company was struck by a draw back in 2005 due to the world high cost of fuel prices and other requirements for its operations which consumed much of its income.
Its biggest draw back was in 2006 when it faced the challenges of a quarter losses in its capital investment. (Naufville, 2006) With this draw back, its president and the CEO however announced the airlines profitability plan which could only be secured through control of cost and possibly improving its state of revenue. This attempt could however been realized through a reduction in $50 million of its costs per year. However, in its entire attempt to achieve this it had to ensure standard cost control system that would imply cost saving methods to the airline.
Much of its cost controls are operational and have since then helped the airline meet its goal. Firstly, it employs a lot of optimality and cost saving procedures that help to lower cost. Entirely, it has sought optimal allocation in its resources. Due to its loss in 2006, the company decided to use varied operational cost saving methods that has since helped the airline to reduce its operational cost. (Lee, Prado, 2005). It exercises cost control through optimal cost on its human resources capital. In all cases, human resources capital is an important factor to consider in every business undertaking.
The efficiency and productivity of human capital can highly determine the cost expenditure on employees through diversified ways. For example, in 2006, it took an operational management undertaking by removing one row of the A320s seats. With such a move, then one attendant to the flight could adequately be allocated to serve 50 seats. Before this development, there was an inequality that led the company not to adequately allocate attendance to a maximum number of seats. This led to a decrease in cost of payments to the attendants through the employment of fewer attendants.
Like any operational management, the removal of the seats had also other cost saving implications. Firstly, the company spends less on fuel costs to the A320’s which can now use less fuel due to their lighter weight after the removal of the one row seats. After an analysis, it revealed that it was economical in terms of the fuel costs and attendant cost to one A320 flight with one row seat less than the previous situation The company uses a system of online booking in which the customers can buy traveling tickets through its website.
This system was developed as a remedy to the problem of personal booking which was seen to have many inconsistencies. The system was slow, high labour consuming and required many infrastructural facilities. To minimize the problem, the company therefore improvised online booking which was efficient in terms of time saving and costs of operation. (Lewinsohn, 2005) In its broad operational structure and system, the JetBlue airlines is composed of cost control system that looks for such least cost operations
It has a well built maximum resource allocation which seeks to cater a least cost at the most optimal benefits. Optimal allocation of resources to the JetBlue airlines starts right from the operational system of its facilities. It has a scheduled operational system, which ensures that all its resources are fully utilized. The JetBlue is comprised of a high developed operational system where structures, airlines, human resource capital and administrative regulation are organized to ensure the most optimal operations.
(Mark, 2006) To cater for this, highly technical, structural and administrative systems have been developed to ensure efficiency in use of its resources. It has well developed physical structures, such as runways, and customer lading facilities that ensures efficiency in its operations. To cater for this, the airline has maintained high standard airlines operations, which are economical in their maintenance cost and to other operational requirements. (Neufville, 2006) In all its performances, the airline performs its activities at an efficiency status where customer services are provided in a first manner at a lower cost.
It has developed many customer servicing structures that even provide customer efficiency and fulfillment to their flight requirements. Perhaps, the biggest boost to the airlines has been through its high development in technology system. Technology is an important tool in cost control and improvement in incomes. In the short run, high technology is expensive but develops in been cheaper in the long run business cycles. Such a development in the long run will therefore out weigh the short run cost in technological development.
In the current developing technological world, technology has helped to improve efficiency and hence lower cost of performing duties. To JetBlue it is not an exception to this rule. The company has well developed technological structures that have helped to reduce efficiency through lower cost of operation. Due to the technology, customer services and operations have been to an optimal level, which has led to a cheap operational system. It has maintained a highly computerized database system where operational system comprises of highly efficient strategies.
Customer’s service in booking and other flight arrangement are done in a highly technical methodology, which implies faster and efficient customer services. (Lee, Prado, 2005). Else where, airline flight operations comprise of highly developed technological system which ensures quicker and safer operation systems. For example, the company maintains high radar and other of flight monitoring services that ensures control and safety in the flights. It has structured high security detective devices for proper security within its system.
(Mark 2006)Such technological advancements help to ensure efficiency and low operational costing system that are economical to the company. In all its activities, the company involves operational systems, which are geared towards reduced cost. Its diversity in operation structural both physical and non-physical constitutes a system that seeks to regulate its cost variables. The company sources material inputs on a cost saving bases. Operational systems, varies adversely form sourcing of material requirements like, fuel, electronic gadgets, airlines, flight services and consultants.
In all cases, JetBlue maintains servicing of its operational equipments from low costing suppliers. (Sundem, Stratton, 2006, p. 135) However, such low costing sources are doubled with high quality sourcing of products. Its operational system and structure is organized in a manner that seeks to increased efficiency. This has been achieved through its broad range of departmental structures that work under coordination to one another. In all aspects, the great efficiency in the company’s operation system helps to control its costing system.
They employ cost efficiency operation system in organization structure through which a cordial exchange of coordination helps the company to reduce cost of its operation. (Neufuille, 2006) To achieve economies in its operations, the company has employed high technical and professional human capital for efficiency and lower cost of activities. Either, it has undergone a serious attempt to train its workforce in work performance of different operational activities. As a rule, human capital is an important consideration in cost minimization.
Professional and efficiency in the workers have helped the company to reduce its costs of operations through labour cost saving scheme in services efficiency. It has employed different professionals who undergo training after joining the company. (Lewinsohn, 2005) Such workers like the pilots, system management persons, engineers, strategy managers, accountants and other professionals provide the company with a high efficiency in its operations therefore reducing its cost variable. For JetBlue, costing system involves a highly optimal system where sourcing of material and services is through use of optimal standards.
It has ensured sourcing of high quality and the right quantity material input that help to reduce any wastage and unwanted expenditure. Elsewhere, the company has employed proper application of material and inputs, which includes even service costing saving systems. This has been ensured through an outstanding costing system to monitor on cost of source inputs and services.
Sundem, J & Stratton (2006) Introduction to Management Accounting London: Prentice Hall. Lee, D & Prado, M (2005) The impact of Passenger Mix on Report “Hub Premium” in the US Airline Industry Southern Economic Journal, Vol. 72Sample Essay of 7essays