Case Study #10-002

2010

JetBlue: Bringing Humanity Back to Air Travel By Susan Fournier and Concetta Rini

“It is hard to remember such a popular American company undergoing such a spectacular crisis.”i

-Brian Williams, NBC Nightly News on February 19th, 2007

On February 14, 2007, a Northeastern ice storm left more than 1,000 JetBlue passengers stranded in nine aircraft for up to 10 hours on the tarmac at New York’s John F. Kennedy airport. Over the next five days, which included the President’s Day holiday weekend, JetBlue canceled more than 1,000 flights as it struggled to reset operations and bring planes, customers, and personnel back into scheduled positions. The crisis flew in the face of JetBlue’s brand mantra—“Bringing Humanity Back to Air Travel”—and threatened the reputation for outstanding customer service that underscored its brand.

JetBlue History

In July of 1999, David Neeleman announced JetBlue: a low-fare airline with unique amenities, including leather seats, more legroom than competitors, and 24 channels of live satellite TV in every seat. CEO Neeleman pledged that JetBlue would “bring humanity back to air travel,”ii and offered a service guarantee to back up the promise in his brand. Every JetBlue flight would be completed; passengers would never have to wait in line to check-in or receive their bags. JetBlue would service approximately 500 flights daily from 50 destinations. With over $130 million dollars raised prior to launch, JetBlue was the most richly capitalized airline in aviation history. Within its first six years of operations, JetBlue had won over 90 awards for customer satisfaction, innovation and creation of customer value. In a February 2007 Consumer Reports survey, JetBlue was ranked Number 1 in customer satisfaction among all

  

airlines, with a score of 87 out of a possible 100.iii As of end December 2006, the company boasted a market capitalization of $3.6 billion; stock traded at $14.24 a share.

The Perfect Storm

On February 14, 2007 a severe winter storm was predicted to hit the northeast. Delta, American, and other major carriers cancelled flights into and out of the New York metropolitan area as a precautionary measure. But JetBlue, with its policy that every flight would be completed, did not follow suit. The company opted to continue operations, expecting the ice would turn to rain. Temperatures continued to drop and conditions worsened. Four arriving flights, five departing flights, and the equipment used to move them and de-plane passengers froze solidly in place. With their gates blocked by other planes that sat awaiting boarding, more than 1,000 JetBlue passengers were left stranded on the tarmac. As the storm continued, FAA regulations forced JetBlue to cancel over 250 of its flights.

As JetBlue management assessed the situation, flight attendants aboard the stranded planes tried to calm passengers while distributing snacks and soft drinks. But as the hours ticked by, the trapped passengers became increasingly frustrated. A female passenger described the conditions onboard her plane. “It was hot. There was no air. They kept having to open the actual plane doors so we could breathe.” A male passenger commented that things were, “disorganized. No one knows anything. Maybe one person cares.” Another frustrated woman explained her experience. “Boarded the plane around 8:00. Taxied out, and that was basically it. We were left here.”iv Sarah Greenberg called CNN from her plane on the tarmac and said. “One of the pilots or managers should get out here and have a mini-press conference. The longer they wait, the more people are going to get upset. It's Psychology 101.”v

Approximately five hours into the crisis, JetBlue called The Port Authority of New York and New Jersey, the organization responsible for maintaining the region’s transportation centers, to request they send buses onto the runway to evacuate trapped passengers. By the time the last plane was emptied, passengers had been trapped for an average of eight and a half hours; some endured over 10 hours in the ordeal. (Exhibit 1)

Customer reactions varied according to their experience with the airline. Passengers’ trapped onboard planes were most critical, with comments such as,

“Based on my experience today, I’d never flight JetBlue again”

“If the CEO of JetBlue is watching, I’d like to say, either your resignation should be tenured or you should implement a new dynamic within JetBlue.”vi

Greg Fila, age 28, who sat for nine hours on a plane initially bound for Cancun, Mexico, eventually left JFK after spending the night sleeping on the floor of the airport. “They had been promising us another flight, so we slept here. But it was all lies. We are still here. We are all screwed – and the worst part of it

  

is, nobody cares.”vii Bill Shorter, age 62, who was headed with his wife to Baltimore for his mother's funeral, agreed. “They are right on the edge of human-rights violations. They have no contingency plan at all. When they say no frills, I guess they really mean it.”viii Bill eventually took Amtrak.

Passengers who were inconvenienced to a lesser degree remained positive about the airline. Mary Rogelio, age 53, was returning to upstate Fayetteville after being stuck for eight hours at Syracuse's airport on her way to New York. “I'm still a JetBlue groupie. Everybody messes up once in a while. I can't wait to sit in the blue leather seats, put the headphones on and watch television.” ix

Later that evening, JetBlue announced that customers stranded on-board for more than three hours would be issued a full fare refund and a free round-trip ticket to any U.S. destination served. In addition, the company stated it would waive change fees and fare differences for customers whose travel plans were affected by the storms. Late-night comedians reveled in the event:

“JetBlue Airlines is experiencing more flight delays and cancellations because of another winter storm. In their defense, JetBlue says, ‘we’re really more of a May through August airline.’”x (Conan O’Brien)

“Passengers on six Jet Blue airplanes were trapped on the runway on the tarmac inside the airplanes for 10 hours. But Jet Blue is pretty good and they're very PR savvy. So to make it up to the passengers, here's what they're going to do: each passenger gets a free voucher to sit on a runway for 10 hours in Miami.”xi (David Letterman)

The next day, Thursday February 15, JetBlue CEO David Neeleman reached out in multiple press interviews to detail the situation and to extend his apologies to inconvenienced JetBlue customers. In an interview on CNBC’s Closing Bell, Neeleman explained:

“We had other planes arrive and they blocked the gates. So our pathway back to the gates was blocked. It was ice all over. We were concerned that people would fall. And you know, basically we didn’t do a good job. I mean we did a horrible job, actually, of getting our customers off those planes. So, you know, it was something that we are sorry for, feel embarrassed about, and regret. This situation was totally unacceptable. We are sorry. And we’re going to work really hard to make sure that never happens again….This is going to be a different company because of this. It's going to be expensive. But what's more important is to win back people's confidence.”xii

With the storm finally subsiding, Neeleman promised that normal operations would resume the next day, February 16th.

“It Ain’t Over Until the Fat Lady Sings”

Full operations were not restored at JetBlue until Tuesday, February 20th; six days after the ice storm gripped the Northeast. The crisis hit on the cusp of the President’s Day weekend, which brought with it increased air travel bookings from the February school vacation week that bookended the long holiday

  

weekend. JetBlue worked diligently to reset operations, but demands were overwhelming. Operational issues included a lack of trained personnel, displaced pilots and flight attendants, and planes out of position. JetBlue information systems and reservation agents were unable to handle the spike in call volume from passengers trying to rebook their flights; as a result, passengers had to wait an hour or more to get through to Reservations. Returning baggage from stranded planes piled up in the terminals; many did not receive their luggage until three days after the initial crisis. Over 20% of JetBlue flights were cancelled in the wake of the crisis—1,104 in total—as the company struggled to bring passengers, planes, and personnel back into scheduled positions and recover lost ground.

In a February 20th interview, Matt Lauer questioned David Neeleman. When asking how an ice storm that hit on a Wednesday could still have an impact on operations five days later, Neeleman offered the following explanation:

“On Friday night (February 17th) we made a decision to put some flights on the ground, the 23% of the 190s, just to try to reset the airline. It was probably an overreaction, probably in hindsight we didn’t need to go that far. But we had put our customers and our crew members through so much over the last three days we needed to give time to get back to normal.”xiii

The crisis fueled preexisting sentiment for a federal government-mandated Passenger Bill of Rights. The proposed regulations would effectively mandate how airlines treated passengers. News reports speculated that regardless of whether federal standards were implemented, this incident could compel all airlines to set a new standard for customer service. xiv

Complications from the ice storm were costly. JetBlue company officials said they expected to issue over $10 million in refunds and $16 million worth of vouchers for future travel. Additional crew expenses were anticipated to be in excess of $30 million. When asked whether the crisis called into question his ability to lead the company he founded, Neeleman said he was “uniquely qualified”xv to run JetBlue. He said he was focused on returning to normal operations and restoring the carrier's reputation. Later that same week, JetBlue reduced its first quarter earnings forecasts, anticipating a $37 million reduction in its first quarter results.

JetBlue’s Recovery Plan

On February 20th, Neeleman held a press conference in which he announced the JetBlue Customer Bill of Rights (Exhibit 2). Neeleman described to the document as way of holding the company accountable to its customers; a way of saying that the company was fully committed to its consumer base. According to the Bill of Rights, JetBlue promised to promptly notify customers of any delays or cancellations. If a customer was bumped from a flight, JetBlue promised to pay them $1,000 as reimbursement. Also, customers would be financially compensated if their flights were delayed due to circumstances within JetBlue’s control. “We made a mistake,” Neeleman admitted in the conference call. “We should have had contingency plans. We should have called the Port Authority quicker. I am sorry and embarrassed for that.”xvi

  

In an early morning appearance on NBC’s The Today Show, Neeleman discussed the reasons behind the Customer Bill of Rights and the possibility of federal government involvement with Matt Lauerxvii:

Lauer: “Is your “Bill of Rights a preemptive strike, so that Congress doesn’t get involved and impose a Bill of Rights that’s being talked about? Congress might say, ‘wait, we’ll pass a Bill of Rights for passengers?’ As the CEO of a major airline, how would you feel if Congress got involved?”

Neeleman: “Well, I’ve been to Washington a lot and I’ve listened to a lot of people down there, and basically I want to take care of our own customers. I know what’s right for our customers. We don’t set out to not take care of our customers. Why should Congress tell us how to treat our people? We should be able to do that. And we want to do that because it’s the right thing to do. And it keeps up focused on the future and that’s the most important thing. Our customers understand a one day event. Okay, we had a snow storm, we cancel our flights and you know that’s just a bad luck thing. But then the next day, and the day after, they don’t understand, and that’s why, that type of situation we will not tolerate in the future and we have lots of contingency plans and we’re going to be communicating that with our customers as we go forward.

Lauer: “And yet no one loses their job?”

Neeleman: “No.”

That same day, Neeleman also apologized in a video posted on YouTube entitled, “Our Promise to You” (Exhibit 3). In his statement, Neeleman apologized for the crisis and outlined steps the company was taking to ensure a crisis of this magnitude would not be repeated. He alluded to the JetBlue Customer Bill of Rights and the fact that the company would hold itself accountable in the event that operations were adversely. That evening, Neeleman appeared on Late Night with David Letterman where he again addressed the public and accepted responsibility for the crisis.

In their efforts to apologize to the passengers who were trapped on planes during the crisis, JetBlue customer service representatives also made phone calls to all affected customers. When the customer could not be reached, the representative emailed to schedule a time for a call. In these conversations, the representative apologized for the customer’s bad experiences and asked for their opinions regarding what went wrong. Customers were probed for what the company might do to fix things. They were asked for feedback on the steps the company was planning to take to remedy the situation, and asked whether they thought the company was doing enough to make amends. The representative thanked the customer for their help and patience, and, in closing, asked that they give JetBlue a second chance.

Additional company communications included a newspaper advertising campaign targeted at 15 market cities and 20 major newspapers on Wednesday February 21st. The print ad consisted of a full-page letter of apology that began: “We are sorry and embarrassed, but most of all, we are deeply sorry” (Exhibit 4).

  

An email apology was also sent from Neeleman to all customers whose addresses were in the company database (Exhibit 5) on Thursday February 22nd. The CEO’s blog on the JetBlue website was also used as a vehicle to address the crisis starting February 22nd, at which point the text of the letter from Neeleman was posted to the blog.

In a Business Week “Reader’s Report”, passengers involved in the Valentine’s Day crisis applauded JetBlue’s recovery strategy. One passenger said: “Many companies, faced with a consumer crisis, first deny the problem, then promise to study the issue, and ultimately resolve it with some personnel changes. In stark contrast, JetBlue moved swiftly to own up to its failures, honestly explained why it happened, and worked to both fix the problem and mend fences with consumers who were harmed.”xviii

When asked how he formulated his crisis management strategy, Neeleman said his reactions came from his “gut”xix. “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. 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.”xx

Brand Equity Reverberations

In the wake of the crisis, public relations and crisis management experts weighed in on the likelihood of recovery of the JetBlue brand.

“There's a lot of talk that people are going to shy away from the airline, but JetBlue is still head and shoulders above competitors in price and customer service. But it's going to be a big transient hit. The company seems like they are doing a good job of self-flagellation in response to the crisis, which may appeal to customers. But they have to be careful they don't set themselves up by announcing customer initiatives that may be unsustainable to win back disgruntled travelers.”xxi (Stuart Klaskin, financial analyst with KKC Aviation Consulting in Miami)

“JetBlue will fly through this. They will be with us for many, many years to come. This was a very painful learning experience for them. Sure, some of the mystique has been taken away, much to the delight of their competitors. Everybody knows now that these guys are mortal. The crisis just levels the playing field a notch.xxii”(Virginia airline industry consultant Darryl Jenkins)

“Most airlines don't try to operate when there is an ice storm problem – they've learned that it's better to cancel all flights at the outset and then try to get back to normal operations as quickly as possible. JetBlue tried to do their best – tried to keep the system rolling. Their heart was in the right place, but their head was not.”xxiii (David Stempler, president of the Washington-based, member-supported Air Travelers Association)

  

“I can't imagine that this is not going to cost them some bookings. 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.”xxiv (Dean Headley, a professor of marketing and entrepreneurship at Wichita State University in Kansas and co-author of the Airline Quality Review)

“They blew it. Now it affects their brand. The cost they would have incurred to unload the planes, while high, they could have written off as goodwill. Now they have no goodwill.”xxv (Steve Danishek, a Seattle travel-industry analyst)

“For people who weren’t directly affected but just heard the story, the lure of low fares will largely counteract any anecdotal stories. For people who were directly affected, the effect will last longer.”xxvi (Robert Mann, a Long Island, NY-based aviation consultant)

Business Week weighed in on the side of damaged equity resulting from the crisis that befell the brand. The March 2007 issue of the business magazine offered its first-ever ranking of the best customer service providers; what the publication called “The World’s Customer Service Champs.” JetBlue had been awarded the number four ranking in the inaugural list, but the February ice storms forced judges to “take a wait-and-see approach” to their evaluation.xxvii The Business Week cover that finally went to press dramatically conveyed the judges’ sentiments (Exhibit 6). While the inaugural top five service champions were registered, JetBlue’s name was crossed out in the list. An accompanying side note appeared next to its entry: “…and one extraordinary stumble,” it said.

On April 20th David Neeleman testified before the Congressional Committee on Transportation and Infrastructure Subcommittee on Aviation to discuss aviation consumer issues. In his testimony, Neeleman outlined the issues the led to the Valentine’s Day crisis. He explained the company’s lifelong commitment to customer service and highlighted the Bill of Rights as the company’s means of holding itself to the highest standards in the industry. Neeleman also clarified details previously reported in the media:

“At no point on any of these stranded flights did JetBlue run out of drinking water, other beverages and snacks, or lose functionality of all of the lavatories on board. At no point were customers without the ability to have emergency medical care sought as JetBlue maintains a med-link connection on each aircraft. While these minimal benefits pale in comparison to the suffering of those customers on board these impacted aircraft, establishing the facts and not solely relying on media reports is important.”xxviii

On May 10th, approximately 90 days after the Valentine’s Day ice storm, JetBlue announced David Neeleman was stepping down at the urging of the company’s board. Neeleman would stay on as the

  

company’s non-executive chairman as Dave Barger, the current COO, assumed the CEO position. Official company statements reported that the Board of Directors had been focused on succession planning for a long time and that the move was not a direct result of the February cancellations. When asked about the crisis, Neeleman offered, “I take it so personally. It’s not healthy for me. It’s not healthy for the company. The February storm kind of convinced me that this operation can consume you. I don’t want to repeat that for a lot of reasons, including my personal health.”xxix

In June of 2007, for the third consecutive year, J.D. Power and Associates ranked JetBlue highest in customer satisfaction among low-cost airline carriers, posting an overall satisfaction score of 810 out of a possible 1,000 points (compared to 820 the year before). In the official press release announcing the award, Linda Hirneise, executive director of the travel practice at J.D. Power commented: “Although the airline fell prey to severe weather delays in February 2007, they have been able to retain feelings of goodwill among their passenger base. However, other low-cost carriers are working to close the gap. Certainly, no carrier can rest on its laurels in this competitive and constantly evolving industry. In this industry, everything counts.” xxx

Exhibit 7 contains a stock price chart for JetBlue Airlines tracking the crisis event.

  

Exhibit 1: Video of JetBlue Customers De-plane-ing

http://youtube.com/watch?v=eZkQYjciGzc

Exhibit 2: JetBlue Airways Customer Bill of Rights

 

Source: Public company communications

  

Exhibit 3: JetBlue CEO David Neeleman’s YouTube Apology Video

 

“Our dear JetBlue customers, I just wanted to introduce myself, I’m David Neeleman, I’m the Chief Executive Office and founder of

JetBlue, and I have a quick message for you.

Obviously the events of the past week have been well documented in the press…obviously this is the most difficult time in our history.

As with all challenges that come your way, there are a couple things you can do.

You can ignore it, and pretend that it was an aberration.

You can do an examination and determine if there is something you can do internally to make sure that it never happens. And I want to assure you, as the CEO of this company, that the events that transpired last week and the way that they transpired will never happen again.

I just want to outline a few things that we’re doing within the next 7 days and over the next 30 days. Number 1, all non-airport crew members of JetBlue will be badged and ready and trained to go to the airport in the case to help out our crewmembers to turn airplanes and to get things going during these very difficult times. Number two, we are making provisions with our reservations and being able to spool them up quickly so that if you have a problem it will be much easier for you to get through on the phones and talk to us so that we can change your reservation in the event that your flight is cancelled or changed. And number three, we are beefing up the organization that is in our headquarters building, and this really got to the heart of what our challenges were, when all those flights were cancelled, that organization, to be able to pair the pilots and the flight attendants with the airplanes was overwhelmed. And so we’re beefing that up. We’re being able to triple the size of that organization in an irregular operation so that we can quickly pair everybody up, so that event doesn’t go to Day 2 or Day 3. And if it does, there are consequences for us based on our new JetBlue Customer Bill of Rights…”

Source: http://www.youtube.com/watch?v=-r_PIg7EAUw

  

Exhibit 4: JetBlue Print Advertisement Communication

Source: Public company communications 

  

Exhibit 5: JetBlue CEO Neeleman’s Apology Email

 

Source: Public company communications

  

Exhibit 6: Business Week Cover Story, March 2007

  

Exhibit 7: JetBlue Airways Stock Price Chart

  

Endnotes

                                                            i Brian Williams, NBC Nightly News, 19 February 2007 ii JetBlue Airways 2002 Annual Report iii USA Today, 5 June 2007, “What Meltdown? JetBlue named Top U.S. Airline,” http://www.usatoday.com/travel/flights/2007-06-05-jetblule-survey_N.htm iv Bill O’Reilly: JetBlue Airline-trash Abuses Customers 16 February 2007; http://youtube.com/watch?v=CAvsQNYVvi4 v CNN.com, 15 February 2007, “Passengers trapped on runway for 8 hours” vi CNN 20 February 2007 vii New York Post, 16 February 2007, “Air ‘Refugees’ in New JFK AOS” viii New York Post, 16 February 2007, “Air ‘Refugees’ in New JFK AOS” ix New York Daily News, 21 February 2007, “Beleaguered JetBlue Says It’s ‘Much Better’ Because of Catastrophic Blunders” x The New York Times, 4 March 2007, “Laugh Lines” xi ibid xii CNBC, 15 February 2007, “JetBlue CEO Tells CNBC: ‘We Didn’t Handle it Well’” xiii NBC The Today Show 20 February 2007; http://youtube.com/watch?v=1V2ff3easYc xiv Ibid xv Forbes.com; 20 February 2007, “JetBlue’s Survival School” xvi Ibid xvii NBC The Today Show 20 February 2007; http://youtube.com/watch?v=1V2ff3easYc xviii Business Week, 26 March 2007, “Reader’s Report: JetBlue Customers Stand by their Carrier.” xix Forbes.com, 20 February 2007, “JetBlue’s Survival School” xx Ibid xxi Reuters News, 19 February 2007, “Chastened JetBlue to unveil reforms Tuesday” xxii Pittsburgh Post-Gazette, 20 February 2007, “Humiliated JetBlue Should Survive Passenger Outrage, But Has Work To Do” xxiii MSNBC.com, 20 February 2007, “JetBlue Snafu Could Cost $30 Million or More” xxiv Advertising Age, 19 February 2007, “Management's Misjudgment Gives JetBlue a Black Eye” xxv Ibid xxvi Associated Press, 15 February 2007, “Runway debacle and JetBlue Stock Goes…Up?” xxvii Business Week 5 March 2007 “ xxviii Statement of David Neeleman, Chief Executive Officer, JetBlue Corporation before the Committee on Transportation and Infrastructure Subcommittee on Aviation 20 April 2007 xxix The New York Times, 11 May 2007, “JetBlue’s Leader is Giving Up Chief Executive Title” xxx J.D. Power and Associates Press Release, 19 June 2007, “JetBlue and Continental Continue to Rank Highest in Airline Customer Satisfaction”