JetBlue Founder Starts Azul in Brazil and Seeks Another Blue Ocean Airliner

Azul Like JetBlue – Seeks Blue Ocean Space
David Neeleman, founder of JetBlue Airways, has launched his fourth low-cost airline in Brazil, called Azul. According to The Wall Street Journal’s December 16th issue, it started service Monday with four jetliners and plans to acquire four more by next month. Azul is a lot like JetBlue; even its name means blue in Portuguese, and it offers low fares with two-by-two leather seats in all economy cabins. Planning for Azul began early this year with $150 million from investors in the U.S. and Brazil, and firm orders totaling $1.4 billion for 36 118-seat E-195 jetliners from Brazil’s Embraer. Azul’s competitors are TAM Linhas Aereas SA and Gol Linhas Aereas Inteligentes SA, which combined have a 90% share of the local market. Given this coverage already, it would seem that Azul is headed into a red ocean – but given their strategy, this is not true. As Neeleman did with JetBlue, he is creating Blue Ocean space, and moving away from Brazil’s current red ocean airlines marketspace.

Emulating Southwest’s Blue Ocean Strategy
Azul Airlines is seeking to create Blue Ocean marketspace by emulating Southwest’s Blue Ocean strategy. Azul is not attempting to compete directly for Brazil’s TAN and Gol Airlines’ customers. It’s emulating Southwest’s strategy of competing with the car and long distance buses in Brazil. For example, the bus ride from Campinas to Salvador de Bahia is 33 hours compared to a two-hour flight for 209 reals or $87. This is a classic Blue Ocean strategy of offering differentiation along the key dimension of time savings/speed of travel, while offering relatively low costs. It also is a Blue Ocean strategy by creating a new marketspace of travelers trading up performance with a slight shift in price.

Another Uncrowded Marketspace: Brazilians Who Don’t Travel
David Neeleman is creating a new dual marketspace by offering an affordable price point for air travel to Brazilians who don’t normally travel! Azul is enabling Brazilians to travel the country at low price points, thus creating a huge market which did not previously exist – and more importantly, creating a space which competitors will find hard to follow. While this is not a classic Blue Ocean strategy “create” factor, it accomplishes the same objective – competitors can not effectively follow them into this lowest price point space for air travel in Brazil. The essence of what Neeleman is doing with Azul is raising the speed dimension, while lowering the cost dimension for the Blue Ocean Strategy Value Canvas.

Dual Focus of Accessing Two Ripe Marketspaces
Azul is pursuing a dual focus to fully access both these marketspaces. They are both relatively close to each other in that they are low-cost-oriented. Neeleman has identified two types of buyers in Brazil’s domestic market. To synergize resources in a duality strategy, map the utility of both buyer profiles along key airline and industry offering dimensions. Azul should maximize resources along the dimensions which converge toward high feature/benefit desirability for both these types of customers.