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JetBlue: High-Flying Airline Melts Down In Ice Storm

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by

Elfan Triawan

on 27 November 2014

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Transcript of JetBlue: High-Flying Airline Melts Down In Ice Storm

CASE STUDY
JetBlue: High-Flying Airline Melts Down In Ice Storm

1992
Neeleman sells his airline Morris Air to Southwest
Neeleman worked for executive VP for only 6 months before leaving because his fast paced style did not suit the more cautious corporate culture
1992-1998
Neeleman co founds WestJet (canadian regional airline)
Also helps develop Open Skies (E ticket)
Officially founded in February 1999 by David Neeleman under the name "New Air Corporation" as an Airline that would "
bring humanity back to air travel
"
First flight: Feb, 2000 with the majority of early flights plan to run through JFK Airport
JetBlue HISTORY
In 1984, David Neeleman partnered with June & Mitch Morris at Morris Air

Increased Morris Air value from $59 to $130 Million in a single year after, raising $20 Million in VC

In 1993, Morris Air was sold to Southwest airlines and joined the top management team
DAVID NEELEMAN
Neeleman establishes New Air Corporation
1998
1999
New Air Corporation named as :
JET BLUE
Low Cost
High Quality Service
luxury amenities
One innovation jet Blue offered:
TOUCH SCREEN CHECK-IN
2000
JET BLUE- BEGAN FLYING
2001
Economy goes downhill
Rising fuel prices
heavy debt loads
Increasing pension liabilities
2006
#1 best domestic airline
#1 best low cost/no frills
#1 best US airline
#2 lowest rate for customer complaints among the 10 largest US airlines

2007
#1 In customer satisfaction
#3 Most admired airline
Employees are seen as "Crew members"
- Supervisors attend "Jet blue University"
There is no 'they' here. Its 'we' or 'us'.
We succeed together or we fail together
- Dave Barger
2004
Warning Lights In The Cockpit
Fast company warned Neeleman saying that whats distinctive about JetBlue might not work for small companies but it would be increasing hard to maintain as JetBlue got bigger.
2005 - ISSUES
Delta & United launch song and TED
(low cost/high frills offer)
Jet blue labor and maintenance expenses rise
(unexpected glitches with the Embraer 190)
Important markets :Florida & gulf coast
(Ravaged by hurricanes- Rita, Wilma , katrina)
Demand for air travel fell
(Petroleum refineries closed- Fuel cost soared
END OF 2006
Annual report plan seemed to be working
Revenues rose 39% to $2.36 Billion

Feb. 11. 2007
JetBlue celebrates their 7Th anniversary
Operating 500 flights a day
50 cities in the USA, Mexico and caribbean
Feb. 14. 2007- JFK AIRPORT
1/10Th of an inch if snow arrived overnight
Ice pellets & freezing rain with temps in the 20's
By lunch, winds custom up to 40 m.p.h
Planes and runways covered in ice
JetBlue loaded passengers onto SIX planes.
FOUR more planes arrived and remained on the tarmac since they were unable to reach the terminal

As the hours crept on....
The storm showed signs of relenting by afternoon so JetBlue held passengers in place
......But by 3 Pm, they admitted defeat and asked Port Authority of New York and New Jersey for help in rescuing the stranded passengers
Passengers were finally in the terminal by 7 PM
Sat on board for 6-10.5 hours
TV crews swarmed at the terminal for interviews
FEB 17, 2007
Feb.17 ,2007
Internal communication and coordination between airlines staff seem to be a problem.
JetBlue's system- Overloaded
Staff had no clue
Lack of pilots
Lack of staff
No response from crew
FEB 15-17, 2007
Cancelled 23% of all flights in order to reposition planes & allow pilots and crew to reset
FEB 20, 2007
JET BLUE- Running back to normal
FEB.20 ,2007
CEO David Neeleman- New conference stating his intention to not step down out of his post

"I'm the founder of company, I'm the CEO and i think I'm uniquely qualified to deal with these issues."
March 8 ,2007
John Owen, EVP supply chain and info. technology resigns, but agrees to remain with the company as "Senior adviser" through the end of 2008
MARCH 14,2007-One month after ice-storm
Market seems to have lost confidence in JetBlue
Stock price fallen to $11.75

11% below the Feb 14 price of $13.23
1. Describe the “JetBlue Experience.” How is it related to the company’s overall business strategy?
2. What challenges did David Neeleman and his executive team face in managing the customer experience as the airline grew rapidly? How did they respond to those challenges?
3. What exactly went wrong? Why did it go wrong? Who, or what, is responsible?
4. Did the airline handle the crisis well? Why or why not? What else could JetBlue have done to improve the situation?
5. What are the potential negative consequences for JetBlue resulting from the situation?
6. What do you think of the Customers’ Bill of Rights as a service guarantee? Do you think it will help the company regain customer loyalty?
7. What further strategic and/or leadership actions should JetBlue take to ensure the company’s viability and future success?
With the JetBlue Airways experience, passengers enjoyed free amenities such as watching live satellite TV, listening to XM satellite radio, brand name snacks, coffee and drink. Passengers can also experience paperless ticketing, assigned seating with more legroom.
These experiences have helped to streamline JetBlue’s business strategy as being the best customer service in the airline industry.
The challenges-
Spent millions on refunds & vouchers, employee overtime & other storm related costs
Executive spent hours practicing "Visible leadership"
Neeleman accepted responsibility & expressed remorse repeatedly & promised to never let it happen again
Demand for air travel also fell
Fuel cost increased
The responses were to grow revenue by fare increases, using their resources wore effectively and increase service to areas with fewer competitions. Promise was also
made to improve workforce productivity through better training, no pay increases and a more extensive use of automation.
Builds emergency policy & standrads
Continue to improve service
Capacity management
Provide outlets for various complainers
High customer expectations
Gap 3: Service Performance Gap
Failure to match supply & demand

Two Strategies
Shifting demand to match capacity
Adjusting capacity to match demand

why? who or what?
Weather
Excessive Demand & a Supply Constraint
Services can't be inventoried
Jetblue's Reliability policy :"operating flights even with a delay rather than canceling the flights for the schedule's convenience"
Aviation Laws & regulations
Do's
Acknowledge the problem
Explain the causes
Apologize
Compensate/upgrade
Lay out options
Take responsiblities
Don't
Ignore customers
Blame Customers
Leave Customers to fend for themselves
Downgrade
Act as if nothing is wrong
Pass the buck
Improvements
Canceled flights sooner
Internal & External communications
Given the customers options
Empowering employees
Potential Negative Consequences
Customer trust & perceived differentiation decrease
Investors expectations are decreased
Escalation of commitment & cost
Customer Bill of Rights as a SERVICE GUARANTEE
Unconditional
Meaningful
Easy to Understand
Easy to Invoke & Collect
Regain Customer Loyalty
Existing service quality is high
Guarantee fits the Jetblue's image
Customers preceive high variablity in service quality among competitors
Customers perceive high risk in the service

Too many uncontrollable external variables
Fear of cheating or abuse by customers
Costs og the guarantee outweigh the benefits
Presented by:
Elfan Triawan - 122130032
Adiyat Iqtal
Noprijon Hutagalung
Marhendra Airlangga
Rizki
Full transcript