Operational Meltdown of Jet Blue

Company Background

JetBlue Airways took to the air on February 11, 2000 with the inauguration of service between New York City's John F. Kennedy International Airport and Fort Lauderdale, FL. The airline now serves 32 cities around the country and the Caribbean with a fleet of 68 new, environmentally friendly, Airbus A320 aircraft. Every JetBlue aircraft is outfitted with roomy all-leather seats, each equipped with the DIRECTV® System offering up to 36 channels of DIRECTV® programming.

JetBlue's origins date back to 1993, when CEO David Neeleman sold his first airline, Salt-Lake City based Morris Air, to Southwest Airlines. It was as a founder and President of Morris Air that Neeleman proved that innovative, high-quality airline service coupled with low fares will attract a strong and loyal market.

Following the sale of Morris Air, Neeleman went on to help launch WestJet, a successful Canadian low-fare carrier, and to develop the e-ticketing system he had implemented at Morris Air into Open Skies, the world's simplest airline reservation system. Neeleman sold Open Skies to Hewlett Packard in 1999.

With three successful aviation businesses under his belt, Neeleman decided the time was right to bring his airline formula to the world's largest aviation market, New York City. In July 1999, having secured a hand-picked management team and $130 million in capital funding from investors such as Weston Presidio Capital, George Soros and Chase Capital, Neeleman surprised the aviation industry with the announcement of his plan to launch a new airline that would bring "humanity back to air travel."

The Group's principal activity is to provide passenger air transportation service with focus on underserved markets and large metropolitan areas that have high average fares. The revenue of the Group is earned from Passenger transportation and Other components. The Passenger air transportation segment provides low-fare passenger air transportation service. The Other component derives its revenues from mails, excess baggage charges, commissions from website travel sales, sale of liquor in-flight, concessions and change in customer's reservations. The Group operates 575 daily flights serving 54 destinations in 21 states throughout the United States, Puerto Rico, the Dominican Republic and The Bahamas.

The Operational Meltdown

The crisis began Wednesday, 14th of February, 2007, when an ice storm hit the Eastern United States. Most airlines responded by canceling more flights earlier, sending passengers home and resuming their schedules within a day or two. But JetBlue thought the weather would break and it would be able to fly, keeping its revenue flowing and its customers happy.

On the contrary, JetBlue’s woes dragged on day after day. On Saturday night, for instance, the airline said that the 23 percent of flights it had canceled on Saturday and Sunday would also be canceled Monday. The confusion led to angry exchanges between customers and employees, prompting the airline to call out security personnel.

The reservation system was also overwhelmed, with customers unable to get through to human agents to check on a flight

Online, Mr. Neeleman and JetBlue were losing the war. While CEO Neeleman was cranking out his own blog, emailing JetBlue's current customer list (Exhibit 1) and replaying his video apology, angry passengers were feeding sites such as JetBlueHostages.com with its own posting on MySpace. The news was so filled with passenger-generated horror stories that the poorly optimized JetBlue press releases were nearly invisible. YouTube was running regular JetBlue segments from the late night comedians and Comedy Central.

Days later when JetBlue had to cancel more flights, the buzz started building again. Although the company survived, it appears much of its hip, customer-friendly brand cache did not. The blogosphere doesn't forget easily. Neither does the mainstream media; as the JetBlue crisis played out, Business Week Magazine dropped the company from its list of "25 Client Pleasing Brands." JetBlue had been number four on the list.

The management said…

The founder and chief executive of JetBlue Airways, his voice cracking at times, called himself “humiliated and mortified” by a huge breakdown in the airline’s operations that dragged on for nearly a week, and promised that in the future JetBlue would pay penalties to customers if they were stranded on a plane for too long.

David G. Neeleman said in an interview that his company’s management was not strong enough. And he said the current crisis, which has led to about 1,000 canceled flights in five days, was the result of a shoestring communications system that left pilots and flight attendants in the dark, and an undersize reservation system
Founded in 1999 as a low-fare airline, JetBlue was often cited as a favorite among passengers and expanded rapidly, but its systems to deal with the consequences of bad weather did not keep up with the growth, Mr. Neeleman said.
“We had so many people in the company who wanted to help who weren’t trained to help,” he said. “We had an emergency control center full of people who didn’t know what to do. I had flight attendants sitting in hotel rooms for three days who couldn’t get a hold of us. I had pilots e-mailing me saying, ‘I’m available, what do I do?’ ”
The part of the company that locates pilots and flight attendants and directs them to their next flight assignment is far too small for an airline JetBlue’s size, Mr. Neeleman said. He vowed to train 100 existing corporate office employees to work in that area when needed. Within two weeks, the area can be better backstopped, he said, and within 30 days, “flawless.”
Then again, Mr. Neeleman had been wrong before. On Friday, he told The New York Times that operations would be mostly back to normal on Saturday. That morning the company canceled 23 percent of its flights and shut service to 11 cities entirely.
Mr. Neeleman said that throughout the chain of events, he had overestimated JetBlue’s ability to find people and get them into position.
The basic problem, he said, was JetBlue’s communication system: the ice storm had left a large portion of the airline’s 11,000 pilots and flight attendants far from where they needed to be to operate the planes, and JetBlue lacked the trained staff to find them and tell them where to go. Prior to last week, JetBlue had never had so many people out of position.
Neeleman has frankly admitted that due to the "low cost" operating structure of his discount airline, they did not have nearly enough resources trained and available to handle the communications required to locate pilots and flight attendants and to get them to the proper locations.  I addition, because they rely on part-time reservations agents working out of their homes (in Salt Lake City) they did not have enough staff on hand to re-route passengers, refund tickets or answer angry customer calls.
Mr. Neeleman said he would announce a compensation system for passengers tomorrow. He is hoping to win quick forgiveness from customers and to demonstrate that he takes the airline’s failings seriously.
Mr. Neeleman said JetBlue certainly erred in not canceling more flights and in not doing so earlier on Wednesday, and added that his company’s management lacked depth in operations. “We need to beef it up,” he said. “I’ll address that as well.”
Mr. Neeleman said he would enact what he called a customer bill of rights that would financially penalize JetBlue — and reward passengers — for any repeat of the current upheaval. He said he would propose a plan to pay customers, after some amount of time, by the hour for being stranded on a plane.

The critiques said...

Not a bad public relations comeback. Maybe to mollified customers, but to professional masters of disaster, who specialize in bailing out companies in crisis, JetBlue is emblematic of a new model of calamity, one that is instantly visible, viral and capable of inflicting business-busting damage. And one that demands a fresh kind of crisis-management approach.

"Saying you're sorry might be O.K. for a love-story script, but it's not enough to assure consumers that they should continue using your product," says Mike Sitrick, who has advised such p.r.-challenged celebrities as Rush Limbaugh, Tommy Lee and Halle Berry. He gives JetBlue a B--.

Eric Dezenhall, co-author of a new book on crisis management, gives Neeleman an A for taking responsibility for the mess but says JetBlue could have done better in helping the trapped passengers. These tough critics are the "trauma surgeons of public relations," as Dezenhall puts it--the people whom companies call in when lawsuits, recalls, boycotts, federal investigations or just plain bad luck hits.
"Most CEOs run away," says Richard Levick, president and CEO of Levick Strategic Communications. "Neeleman took control. He's everywhere apologizing, and he's doing more than promised. He's putting the company's money where its mouth is.” Levick went even further. "JetBlue has run to the crisis, taking responsibility not just for itself but for the entire industry."
"People see through it when the typical CEO hides behind the podium or the press release," said Bernstein Crisis Management president Jonathan Bernstein. "(Neeleman) gave the public ample face time and did so with passion in his voice. He talks the talk of everyman, which is exactly what he needed to do." Jonathan Bernstein said JetBlue has already built up a good enough reputation to survive the fallout.
"If they do any advertising at all about this, it should be in the form of an advertorial, a CEO letter in publications that are well-read by their consumer base," Mr. Bernstein said. "TV ads have worked before; say for restaurants touched by the E. coli scare, for instance. But I believe editorial copy will be better-received than a plain TV ad."
Fellow Californian Alex Anolik, a San Francisco attorney who represents travel agents and tour operators, agreed. He called JetBlue's Passenger Bill of Rights "a good PR move."
"I can't imagine that this is not going to cost them some bookings," said Dean Headley, a professor of marketing and entrepreneurship at Wichita State University in Kansas and co-author of the Airline Quality Review. "JetBlue flies into markets where people have other choices. Anytime you make a big promise on a service base like that and then not deliver, or at least violate that promise rather publicly, the fallout on that is so difficult to completely know. It's difficult from a PR standpoint to even control it."

Lessons learned…

“This is going to be a different company because of this,” Mr. Neeleman said. “It’s going to be expensive. But what’s more important is to win back people’s confidence.” He did not say if higher fares might be in the offing.
When JetBlue Corporate Communications Vice President Todd Burke introduced a conference call with reporters Tuesday, he said it's an "exciting day" at JetBlue because of the new initiatives. Neeleman didn't let that PR jibber-jabber go. When he came on the phone line, he politely corrected Burke. "The only thing I disagree with is that it isn't an exciting day here," he said. "It's been a somber week for us, a week of hard-learned lessons. We made a mistake. We should have had contingency plans. We should have called the Port Authority quicker."
He didn't call in Bernstein Crisis Management or any other crisis consultant. Neeleman said everything he did for public relations came from his "gut."
"What I've learned about these situations is you come out and explain what happened ... and what you're doing to make sure it never happens again," he said. "That's the right thing to do. If you try to hide stuff and twist the truth, you don't come across as credible. I decided to do this, and no one is telling me what to do."
He says he knows he has to deliver. “I can flap my lips all I want,” he said. “Talk is cheap. Watch us.”

Exhibit 1

Neeleman wrote the following letter of apology to all existing customers of JetBlue

Dear JetBlue Customers,
We are sorry and embarrassed. But most of all, we are deeply sorry.
Last week was the worst operational week in JetBlue’s seven year history. Following the severe winter ice storm in the Northeast, we subjected our customers to unacceptable delays, flight cancellations, lost baggage, and other major inconveniences. The storm disrupted the movement of aircraft, and, more importantly, disrupted the movement of JetBlue’s pilot and inflight crewmembers who were depending on those planes to get them to the airports where they were scheduled to serve you. With the busy President’s Day weekend upon us, rebooking opportunities were scarce and hold times at 1-800-JETBLUE were unacceptably long or not even available, further hindering our recovery efforts.
Words cannot express how truly sorry we are for the anxiety, frustration and inconvenience that we caused. This is especially saddening because JetBlue was founded on the promise of bringing humanity back to air travel and making the experience of flying happier and easier for everyone who chooses to fly with us. We know we failed to deliver on this promise last week.
We are committed to you, our valued customers, and are taking immediate corrective steps to regain your confidence in us. We have begun putting a comprehensive plan in place to provide better and more timely information to you, more tools and resources for our crewmembers and improved procedures for handling operational difficulties in the future. We are confident, as a result of these actions, that JetBlue will emerge as a more reliable and even more customer responsive airline than ever before.
Most importantly, we have published the JetBlue Airways Customer Bill of Rights—our official commitment to you of how we will handle operational interruptions going forward—including details of compensation. I have a video message to share with you about this industry leading action.
You deserved better—a lot better—from us last week. Nothing is more important than regaining your trust and all of us here hope you will give us the opportunity to welcome you onboard again soon and provide you the positive JetBlue Experience you have come to expect from us.
David Neeleman Founder and CEO JetBlue Airways

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