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Jet Blue Airways Corporation’s Managerial Accounting

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Jet Blue Airways Corporation’s Managerial Accounting

JetBlue is an airline that operates at a low cost while providing high-quality service to its passengers. The focus of this airline is to serve markets that have not been properly served as well as a number of metropolitan areas that charge customers high fares. The airline intends to pursue a growth strategy through increased operations in existing routes as well as ensuring new markets are explored.

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Despite having experienced a number of challenges since 2004, it has maintained averagely high profits of approximately $103.9 million for the year ended December 2003. This article explains the strategies of the airline that it uses to ensure a high level of service delivery, challenges faced by the airlines in its operations and the ways in which it has attempted to cope with them, and the applications of some concepts that can be useful in effective operations of the airline (Maher, 2011).

The airline depends on customer intimacy as one of its excellent strategies by ensuring quality customer services are provided. This has been emphasized through continued training and implementation of policies designed to be customer-friendly. Some of the customer service areas that are emphasized are the provision of ticketless services, no overbooking of flights, and charging fares based on the distance of travel.

Operational excellence has been accomplished by improving the infrastructure of the airports by increasing the number of runways, provision of direct-link rail transport to New York terminus as well as provision of enough access roads that are regarded as the factors behind the profitability of the airline. More customers have also been reached by seeking the assistance of other airports such as LaGuardia Airport which carries passengers to Ft. Lauderdale and Florida (Warren, 1997).

The airline also intends to differentiate products and service delivery by providing customers with other means of air travel and comfortable travel at a low cost. Customers are also provided with free live TV at every seat. Stewards are also trained to communicate effectively with customers concerning delays in flight or mechanical problems. Furthermore, customer flight experience has been improved by increasing the number of live TV channels and there are plans to expand in-flight entertainment by adding free XM Satellite Radio.

One of the risks faced by JetBlue airline is competition from other airlines that have high financial capabilities and name recognition than Jet Blue. These competitors have also started operating in the same routes as JetBlue and attracted more travelers compared with JetBlue. To cope with this challenge, the airline has ensured that it charges its customers fair prices compared with other airline. This has been done through price discounting, fare matching or frequent flyer travel initiatives.

The other challenge is the possibility of an increase in maintenance costs as the fleet ages. The average age for JetBlue aircraft is 2.2 years. The parts need to be replaced regularly and there is a possibility of increasing maintenance costs due to the high costs of spare parts. To cope with this challenge, the airline ensures highly trained professionals are employed to use and maintain the aircraft as well as obtaining spare parts of high quality that are durable throughout the life of the aircraft.

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It is possible to use the concept of unit-level activities in an airline (Weygandt, 2009). Examples of unit costs in an airplane are costs of fuel when the plane is in flight or the salaries paid to employees when they serve passengers. JetBlue has ensured that it manages its fuel costs by the provision of cheaper transport charges for travelers with few heavy luggage’s while labor costs have been reduced by minimizing the turnaround time for the aircraft.

JetBlue airline can also apply the concept of batch-level activities. These include training of flight crew and maintenance of the aircrafts. In order to ensure the fleets are managed and training is done, fleet has been improved to ensure that it uniform types of aircrafts are managed to ensure maintenance and crew training is not complicated. When there is uniform type of aircraft, the airline only trains crews in flights of a particular type of aircraft.

An instance of customer level activity for an airline such as JetBlue is ensuring customer loyalty for the company is maintained whereas organization-sustaining activity for an airline of this kind is compliance with regulations in the Aviation industry and other regulations from the government.

As a result of difficulties in obtaining fuel at the correct price, the number of departures can be used as the determining variable for JetBlue departures whereas the number of miles covered by the aircraft can be used as duration for the flight. It is reasonable to use the number of miles flown and the time taken as a measure between two drivers because the number of flights is a factor contributing to fuel consumption.

In this case, the higher the number of flights, the higher the amount of fuel consumed. It I also observable that the number of miles covered is directly proportional to the amount of fuel consumed compared with the number of departures or cost of fuel.

References

Maher, W. &. (2011). Managerial Accounting: An Introduction to Concepts, Methods and Uses. London: Cengage Learning.

Warren, G. &. (1997). University of Michigan Business Journals. Journal of cost management, Volume 11 , 15-23.

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Weygandt, J. &. (2009). Managerial Accounting: Tools for Business Decision Making. New Jersey: John Wiley & Sons.

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