From: Team 4 - Brad Buske, Kim La, Mary Ann Rainey, John Wright

To: Mr. James Reinnoldt

Section: Bus 480A
Date: April 15, 2009
Subject: Which Country Next for JetBlue Airways:
A Market Screening Exercise

Introduction
JetBlue Airways was launched in 2000 as a “low cost” airline that uses its
price and convienence as competitive advantages against other airlines. It
currently has 118 aircrafts and goes to 50 destinations within the United
States and Caribbean.

JetBlue’s key competitive advantages points are: the new fleet of air craft
they own, friendly and responsive service representatives, in-seat
televisions, convenient scheduling and low fares. These advantages are used
to target price conscious corporate and business travelers and leisure
travelers, which make up their main target market. Similar to other
competitors, JetBlue prides themselves as being a ‘fun’ corporation and
service provider in the airline industry, which has won them many awards.

Due to the decreases in deregulation in domestic markets abroad and their

success within the United States and the Caribbean, many foreign
governments have invited them to consider a joint venture and to expand.

There are currently three governments that JetBlue is considering to be

expanding into: Thailand, Czech Republic and Australia. This paper will go
into an in-depth analysis of the three countries to assist JetBlue’s decision of
which market would be best fitting for business as well as their company.
Purpose and Scope
The popular U.S. airline company, JetBlue Airways, specializes in providing low-cost
and convenient air travel to consumers in major markets. As their business model
focuses on major points of travel and the desire to continue to expand the company,
JetBlue has decided to pursue international expansion through a possible joint-venture
with foreign investors or foreign governments. The intent of this paper is to determine
the best potential market for expansion. Through JetBlue’s own analysis, the list of
potential countries has been narrowed to Thailand, Czech Republic, and Australia. The
purpose of this report is to eliminate two of the aforementioned countries and determine
the best potential market for expansion. Five indicators will be chosen for each country
and weighted according to importance to produce a ranking of the three potential
markets.

The report is presented in the format of a market screening report, as previously

described. The geographical scope of the report is limited to the previous mentioned
countries of Thailand, Czech Republic, and Australia, in addition to the home country of
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JetBlue, the United States. The data for each indicator will be from 2008; the scope of
the report is limited to the decision-making process going on presently and would not be
as useful in the future as the data would change and could impact the resulting choice
of country.

Executive Summary
JetBlue Airlines is attempting to determine the viability of expansion of their domestic
airline into one of three potential countries: Australia, Czech Republic, or Thailand. This
report determines five key indicators to establish the viability of each individual market
and weights them according to their importance. Secondary sources provided data
points regarding general country and market development, per capita income,
population growth rate, size and depth of current domestic airlines and the ease of
doing business for each potential target market. One country rose to the top in all five
categories; the resulting ranking indicates JetBlue’s most viable potential market. It is
the recommendation of this report that Australia provides the best target market for
expansion and potential profit.
Research Methodology
Research for these markets was derived from various secondary sources available via
the Internet. Data sources include governmental and commercial market readiness
reports as well as the World Bank and the UN. While most of the data presented is
from 2008, uniform time frames for all five indicators were difficult to obtain. Data for
GNI per capita divided by PPP is from 2007 as research indicates this information would
be relatively stable over the span of one year.

The data point for Number and Size of Competing Domestic Airlines is a combination of
those two separate data points. Available Seat Kilometers per week was divided by the
number of airlines operating within each target country to provide a general indication of
the depth and breadth of the current market.

Difficulties in compiling the most relevant information across a single year were very
apparent. Many sources had time gaps that prevented easy access to a uniform
analysis from one year. Due to unavailability of 2008 GNI data provided from World
Bank, data from the most recent year of 2007 had to be used; this information was most
recently updated October of 2008. A similar issue occurred with the United Nations data
concerning the Human Development Indicators ranking. The information provided was
stated as 2008 data, yet further research gave suspect indicating that it referred to
2006.

Despite the certain obstacles of finding completely congruent data from the same year,
it was deemed more relevant to have the crucial data rather than have different and less
relevant data all from the same year. Explanation of the justification for the selection of
each key indicator follows.

II. Presentation of Key Data

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Key Indicators for Analysis
Much data is relevant to analyzing the opportunity for development and success to
domestic airline travel in a new market. The critical aspect found when limited to using
only five sources of data is to cover major categories that are independent of each
other. The most crucial categories must cover the potential for development of an
industry, the economy of a nation, the sustainability with population, the competition and
need of the service in the new market, and bureaucracy and government imposed laws
and customs. Each category alone can leave little insight to the market, yet when they
are considered as a whole, a greater understanding can be grasped.

The 5 key indicators selected are:

• HDI Ranking according to the U.N.

• GNI per capita adjusted to Purchasing Price Parity
• Population Growth
• Seat km per week/ # of domestic airlines
• Ease of Business Ranking according to The World Bank Group

To cover the potential for continuous development and sustainability of an economy,the

national HDI ranking will address such issues. Included in the United Nations
Development Programme are the national statistics for literacy rate, life expectancy,
GDP per capita, and educational attainment. The countries are ranked by using the
quantifiable statistics in each category and are then listed as developed, developing, or
underdeveloped. A higher ranking signifies greater stability and sustainability for an
airline industry. There is less demand for domestic air travel in nations that are
struggling at the international level for higher skilled jobs that often require domestic air
travel. The nations were ranked from one to 179; the best being firstand worst being
179. The numbers were then inverted to ensure the more desirable market would be
assigneda greater weight in the weighted data tables. There is an issue with less
developed countries that do not have large enough customer bases that have the
income to pay for pleasure domestic travel, which lead to the key indicator of Gross
National Income (GNI) per capita adjusted by purchase power parity (PPP).

To understand the economic position of a nation and to determine if there will be a large
enough customer base to sustain operations, GNI adjusted byPPP is used. The GNI of
a country divided by the population gives a general understanding of the average
income of the market’s citizens. When the figure is adjusted by PPP, an understanding
of the cost of living in the target market can be attained. This can help Jet Blue Airlines
to determine if there is a potential demand for domestic travel that can be afforded by
the population. The higher the GNI per capita adjusted by PPP, the better the outlook
for demand of domestic air travel for business and pleasure. The next key indicator
addresses the sustainability of the industry through population growth.

Population growth can be an indicator of multiple issues for Jet Blue; sustainability,
increasing revenue potential, a declining market, economy, and immigration are each
affected by population growth. The most significant aspect of population growth
Market Screening Project for JBA –April 15, 2009 Page 3
relatable to Jet Blue is the immigration factor. With higher growth and immigration, it
can be assumed that there is higher demand for business and a pleasant environment
in which to live. This will usually lead to an increase in domestic routes and need for air
travel.

Seat kilometer per week divided by the number of domestic airlines is a converted
analysis of the number and size of competing airlines. This statistic gives clear
understanding of the infrastructure that is already in place in the market. The demand
for the domestic air travel is equally addressed. With a higher figure that takes the total
number of seats and the total kilometers traveled divided by the total number of
domestic airlines, greater understanding of the market is attained. Jet Blue would like
there to be higher numbers to signify a higher demand and greater revenue. One thing
that can be controlled to minimize the impact of fixed costs is the maximum amount of
flights flown which will be executed according to maximize efficiency. If there is a lack
of customers, which is signaled by low travel distances, little can be done to minimize
the impact of fixed costs.

The ease of business ranking is the final key indicator for Jet Blue Airlines. This will
address the ease of entry into the market, acquisition of permits, any potential tariffs or
taxes that will be accrued, employment potential, and protection of investors. With a
higher ranking according to The World Bank, there is better outlook for potential
revenue by thecompany. The rankings were out of 181 nations and were inverted to
give the best qualifying nations a higher weighting in the indicators comparison. This
information is significant because it allows for insight to potential future obstacles that
Jet Blue could face in the new market when it comes to returning revenues to the
investors of the company.

The next step in the analysis is to interpret the data and understand the weighting
process. This was carefully done to give the most significant data the most importance
in the final decision.

Key Indicators Data Tables

Moving from the description of the key indicators that have been chosen to the actual
tables presenting the data, it is important to understand the weighting that was applied
to distinguish the importance of each data set. The most important groupings were
those that directly qualified the airline industry and the demand for the service of
domestic air travel. Subsequently, seat kilometersper week divided by the number of
domestic airlines got a 30% weighting and the ease of business ranking was weighted
with 25% of the significance to the decision. The HDI ranking by the United Nations
determined the level of development in the nation by educational and economic
standards. This once again got a higher weighting of 20% due to the significance of the
need for a developed nation to provide a growing and sustainable market that includes
customers and employees. The GNI per capita adjusted by PPP was weighted with
15% significance to the overall decision because it gave strong understanding of the
potential for domestic ticket purchase and insight to the cost of living in a country which
is relatable to the disposable income of a nation’s population. It was deemed not as
Market Screening Project for JBA –April 15, 2009 Page 4
significant to the ultimate decision much like the 10% weighting that was given to
population growth. This is due to the impact that both categories have with native
inhabitant domestic air travel, but can be subsidized if there is a large number of foreign
tourism.
Table 1

Indicator1 Weights
HDI Ranking 20%
GNI per capita adjusted to PPP 15%
Population Growth 10%
Seat km per week/# domestic airlines (in
millions) 30%
Ease of Business Ranking 25%

Table 2
Czech
Key Indicator Thailand Republic Australia Totals
HDI Ranking 99 145 176 420
GNI per capita adjusted to PPP
(USD) $7,880 $22,020 $33,340 $63,240
Population Growth 0.64% -0.08% 1.22% 1.78%
Seat km per week (in millions) /
number of domestic airlines 2.242 0.0263 23.134 25.396
Ease of Business Ranking 169 107 173 449

Table 3
Key Indicator Thailand Czech Republic Australia Total
HDI Ranking 0.236 0.345 0.419 1
GNI per capita adjusted to PPP 0.1246 0.3482 0.5272 1
Population Growth 0.36 -0.045 0.685 1
Seat km per week/number of
domestic airlines (in millions) 0.0882 0.001 0.9108 1
Ease of Business Ranking 0.377 0.238 0.385 1

Table 4
Key Indicator Thailand Czech Republic Australia

1
All key indicators refer to 2008 data except GNI per capita adjusted by PPP; 2007 data was the most
recent data available.
2
205.9 million seat km per week/ 92 airlines
3
1.4 million km seat km per week/ 54.5 airlines
4
1388 million km seat km per week / 60 airlines

Market Screening Project for JBA –April 15, 2009 Page 5

HDI Ranking 0.0472 0.069 0.0838
GNI per capita adjusted to PPP 0.01869 0.05223 0.07908
Population Growth 0.036 -0.0045 0.0685
Seat km per week/number of domestic
airlines (in millions) 0.02646 0.0003 0.27324
Ease of Business Ranking 0.09425 0.0595 0.09625

Total Composite Scores 0.2226 0.17653 0.60087

III. Analysis of Data and Key Recommendation

Market Elimination Process

Using the five indicators, it is possible to get an idea of which country provides the best
location for expansion for Jet Blue airlines. Looking at the indicator of GNI, we see that
Australia leads both the Czech Republic and Thailand by more than 50%. With a GNI of
$33,340 Australia seems to have a much wealthier population base that is anticipated to
be able to afford plane tickets over other forms of transportation within their country.
Thailand on the other hand has a GNI 25% that of Australia which means far fewer of
the Thai population would likely be able to purchase plane tickets. The Czech Republic
falls closer to Australia than Thailand relative to GNI; on an affordability basis it seems
that Australia is the better choice.

Next, there is the indicator of seat kilometers per week divided by number of domestic
airlines. This indicator carries the heaviest weight because it ties directly into Jet Blue’s
industry and any would have a great effect on any business they did in these countries.
Again it can be seen that Australia is way ahead of the pack in this indicator. In the table
it can be seen that existing domestic airlines in Australia already average 23 million seat
kilometers per week. This number dwarfs Thailand’s average of 2.2 million per week
and the Czech Republic’s of .026 million per week. This hints that not only are
Australians making a lot more domestic flights and are accustomed to domestic flights,
but that the infrastructure and geographic layout of Australia is much more conducive to
domestic air travel. The cause of this may be Australia’s large land mass which forces
people to fly from city to city rather than turn to alternative routes. The Czech Republic
and Thailand on the other hand are much smaller countries in terms of geographic size,
which may make alternative forms of transportation like bus and trains more of an
option. This indicator and its weight hints again that Australia may be the better choice.

The third indicator is population growth. It is necessary to pinpoint a country with a

growing population base which would signal increasing demand for goods and services
as well as a growing economy. Again, Australia led the way. Their annual population
growth of 1.2% is twice that of Thailand’s and in the opposite direction of the Czech
Republic’s negative growth. Even though this category carried the lowest weight in the
evaluation, it still gives an important view into the population trends of each country. At
this point it begins to look like both the Czech Republic and Thailand are going to be

Market Screening Project for JBA –April 15, 2009 Page 6

eliminated from the country list because of their poor performance in the first three
indicators.

HDI (Human Development Indicator) is an indicator that carries a “middle of the road”
weighting in the analysis. Australia scored towards the very top of the HDI ranking
internationally, up there with countries like the U.S. and the U.K. The Czech Republic
scored about thirty places behind Australia and Thailand scored another forty five
places behind that. Airline travel is better suited for developed countries and affluent
individuals due to the costs and the booking and traveling process. It is understood that
countries with higher HDI scores will provide a better market for Jet Blue’s growth. It has
been found that both the Czech Republic and Thailand scored below Australia falling
farther behind in the combined weighting.

The final indicator is the ease of doing business ranking with a weight of 25%. It was a
tight race between Australia and Thailand in this indicator but Australia achieves the
clean sweep with a ranking two places better than of Thailand. Both countries scored
relatively high on the ease of doing business ranking. This means that both would likely
provide a favorable business environment for Jet Blue. On the other hand, the Czech
Republic scored in the middle of the pack with an average international score. After all
the weights were factored in, Australia finished with a score of .60 nearly three times
that of Thailand and almost four times that of the Czech Republic, so the final analysis
makes Australia the obvious choice.

Recommendation of Final Market

IV. Lessons Learned

The key to this assignment would have been to start early enough to assure that all data
could have been sought and compiled in a timely fashion to assure the assignment
could have been completed without stress. Data provided was also a key lesson in
eliminating our companies. Using the sites that were provided we were able to use five
indicators we felt helped our elimination process more than others.

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