JetBlue Running head: JETBLUE

JetBlue Hits Turbulence Case Study Chapter 2 (p. 72) Cynthia Steffen Cardinal Stritch University

Walter A. Swiger Jr. MGT 540 Managing Technology for Organizations April 19, 2010

JetBlue

Abstract JetBlue built a successful airline over a short period of time. An ice storm in New York on Valentines Day 2007, lead to a customer service crisis. The situation was complicated further by the airlines business strategy of lean staffing and low-cost IT infrastructure. The company responded to the situation successfully, putting the airline back into a competitive position in the marketplace.

JetBlue JetBlue Hits Turbulence

If anyone ever doubted that a customer service crisis can suck the life out of your brand in a heartbeat, examine the Presidents Day Jet Blue fiasco. Hundreds of customers were forgotten on the tarmac. Millions clamor for Jet Blues contrition. Consumer groups, attorneys, representatives and senators all joined the fray (Hornstein, 2007, para.1). JetBlue is a discount airline that began service in February 2000. The airline was able to offer a luxury flying experience and excellent customer service at budget prices through use of information technology (Laudon & Laudon, 2010). As president and chief operating officer Dave Barger put it, Some people say airlines are powered by fuel, but this airline is powered by its IT infrastructure (Laudon & Laudon, 2010, p. 72). A number of factors came together on February 14, 2007 that set in motion a crisis situation for JetBlue. The airline industry has low profit margins and high fixed costs. JetBlue was able to operate at 70 percent of the cost of larger airlines. The company was able to accomplish this by initially flying to two destinations, filling a higher percentage of seats, using non-union workers, flying one type of plane to standardize flight operations and maintenance procedures, and using information systems to automate processes, enabling them to operate with a lean staff. The company used a simple is better strategy in all areas of the business (Laudon & Laudon, 2010). JetBlue used Microsoft software products almost exclusively for their network of information systems because that allowed them to operate with a small staff that could develop systems internally, saving the expense of outsourcing and consultant fees

JetBlue (Laudon & Laudon, 2010). As mentioned previously, key processes were automated in their sales and production areas. Specifically, JetBlue was using transaction processing systems for their airline reservation and ticket sales function (mostly done online with paperless tickets) and baggage handling (electronic tags) (Laudon & Laudon, 2010).

Using this strategy the business grew quickly to the point of operating 500 flights daily in 50 cities and $2.4 billion in annual revenue by the end of 2006. The airline committed to buying a new plane every five weeks through 2007 (Laudon & Laudon, 2010). On February 14, 2007, an ice storm hit New York City. JetBlue decided not to cancel flights believing the weather would improve enough to allow passengers to arrive at their destinations with some delays. Nine planes left the gates and ended up stranded on the tarmac stranding passengers in the planes for up to ten and one-half hours (Laudon & Laudon, 2010). The situation escalated further because the business had grown too quickly for the low-cost IT infrastructure and lean staffing to keep up. Navitaire, the reservation system, could not meet the volume of customers trying to reschedule cancelled or delayed flights. The company reservation agents work from their homes and link to the Navitaire Open Skies reservation system using an Internet-based voice communication. The company did not have enough reservation agents due to the lean staffing philosophy, causing the phone lines to be jammed. The JetBlue web site stopped responding due to so many people logging on to check on flights. The company did not have a system developed for recording and tracking lost bags because management didnt feel there was a need for the system. JetBlue used Sabre Airline Solutions FliteTrac application to provide flight status, fuel, passenger lists, and arrival times to management. The CrewTrac application

JetBlue tracked crew assignments and allowed pilots and flight attendants to access their schedule. A Navitaire application called SkySolver was used to determine how to redeploy planes and crew in case of disruption. JetBlue found out during the emergency that Skysolver and the Sabre applications did not work together properly. Finally, the airline did not have a system to keep track of off-duty crew and the jammed phone lines prevented them from calling into headquarters (Laudon & Laudon, 2010). The combination of technology, organizational structure, and management decisions lead to flight cancellations continuing for almost a week coming into the Presidents Day holiday weekend. By the end of the crisis more than 1,100 flights were cancelled and the airline lost $30 million. The CEO, David Neeleman, was very visible and apologized many times. He admitted the management was not strong and the communication systems were inadequate. The company had been saving money from streamlined information systems and lean staffing. Neeleman was removed as CEO in May 2007 (Laudon & Laudon, 2010).

The company responded to the crisis in several ways. Regarding technology, new software was implemented to contact pilots and flight attendants to inquire about availability. Regarding staffing, 100 employees from the corporate office were trained as back-ups for departments needing help. Regarding customer relations, a customer bill of rights was created to outline how passengers who received poor service would be treated. Regarding operations, the company would make more accommodations for bad weather and drastically scaled back their planned growth (Laudon & Laudon, 2010). The company response to crisis was put to the test a month later with a snow storm. This time

JetBlue the management made the decision to begin canceling flights early and the company faired much better. The customer bill of rights the company instituted addresses delays and cancellations but I dont believe passengers will book a flight on JetBlue because the company has a bill of rights. Passengers arent likely to read the document unless they encounter a service problem. I feel additional changes should also be considered. Management did not address

the need to track lost baggage which can pile up when flights are canceled, turning into a customer service nightmare. The company should review and test their emergency preparedness using decision-support systems and confirm all software applications work together. In addition, the company could expand their communications with customers and employees through tools like Twitter and Facebook which offer quick communication possibilities. During the first few days of JetBlues crisis, as the ice iced and deiced on New Yorks runways, the airlines corporate communications department seemingly sat idle. But their customers did not. Dpstyles was sending photos from his phone to Flickr.com, DadLabs was uploading video to YouTube, Matt Linderman was posting lessons from a JetBlue meltdown on 37 Signals, and Genevieve McCaw bought herself the domain name JetBlueHostage.com (Schiller, 2007, para. 2). The 2009 annual report addresses steps the company has taken recently. JetBlue operates two types of aircraft that are newer thereby simplifying maintenance. As of December 31, 2009, the airline was flying to 60 cities in 20 states and Puerto Rico, and eleven Caribbean and Latin American countries averaging 600 daily flights

JetBlue (www.jetblue.com). Most flights start or end at one of four focus cities. All workers are non-union employees. The company states they try to communicate openly and honestly with customers and continue to promote the customer bill of rights introduced in 2007 in response to the Valentines Day crisis. Management keeps costs low through use of technology. They continually look for ways to automate systems; reservation agents still

work from home and connect through technology, and electronic tickets are the only form of ticket available. On January 29, 2010, the company began the implementation of a new integrated customer service system, which includes a reservations system, website, revenue management system, revenue accounting system, and a customer loyalty management system among others. Once fully implemented they believe the new system will allow them to grow the business and attract more business customers (JetBlue Airways Corporation, 2009). JetBlue has strengthened their management with experienced people and continues to maximize their use of technology in a responsible manner. The company has learned some important customer service lessons along the way, making them a strong player in the competitive airline market.

JetBlue References

Hornstein, S. (2007). Dont be the next jet blue. Sales & Marketing Management, 159(4), 13. Retrieved April 11, 2010, from Business Source Complete database. JetBlue Airways Corporation. (2009). JetBlue Airways Corporation [Annual Report]. Forest Hills, NY: Author. Laudon, K. C., & Laudon, J. P. (2010). Management information systems: Managing the digital firm (11th ed.). Upper Saddle River, NJ: Pearson Prentice Hall. Schiller, M. (2007). Crisis on the web. Adweek, 48(10), 16. Retrieved April 11, 2010, from Business Source Complete database.